Numbers down but outlook brighter at Pro7

Cost cuts, new revenue streams offer hope at b'caster

COLOGNE, Germany -- Cutting expenses to the bone helped staunch the red ink hemorrhaging from ProSiebenSat.1, Europe's number two broadcaster. In Q3 figures released Thursday, ProSieben again showed weaker year-on-year sales and profit figures, but things appear to be getting better, not worse.

Revenues for the quarter were down 8% to €559.4 million ($832 million). Net losses at €11.2 million ($16.7 million) were still bad but an improvement over the €14 million the company lost in Q3 2008.

In the nine months to Sept. 30, ProSieben's revenue has dropped €300 million to €1.9 billion ($2.8 billion), in part due to the sale or outsourcing of operations, among them Scandinavian pay TV group CMore. But net profits came in at €35.5 million ($53 million), within shouting distance of the €42 million profit ProSieben booked over the same period last year.

The main reason for this is cost cutting. ProSieben, which is controlled by private equity groups KKR and Permira, has dropped nearly 1,000 employees from its rolls. The broadcaster said it expects to lop €200 million ($297 million) off its expense column this year compared with 2008.

Figures from Nielsen Media Research report a slight (0.1%) increase in gross advertising revenue in Q3 in Germany, ProSiebenSat.1's core market, while revenue for the year was down a slight 0.2%. But the broadcaster predicted that net figures, which take into account the extensive discounting broadcasters give to ad clients, would show a 10% overall decline.

CEO Thomas Ebeling is touting diversification as a solution to ProSieben's ills. Currently 87% of ProSiebenSat.1's sales come from advertising, just 13% from other sources. Ebeling wants to increase the share of non-advertising dependent revenues to 30%.

One of his suggestions has been to create hybrid free/pay TV models, something the broadcaster has tried successfully in Denmark.

ProSieben has also expanded into areas such as music sales, merchandising and event promotion.

The group is also juggling its traditional advertising model. To fill up unsold ad slots in Germany, ProSieben is offering them free of charge to new clients, in exchange for either a share of the company's future revenue or a direct equity stake. ProSieben has already signed deals of this kind with firms ranging from online shoe shop Sneakerloft to pharmaceutical company Kijimea.