ProSieben hit by advertising downturn

BERLIN — As the economic slowdown engulfs Europe, two of its biggest broadcasters painted somewhat conflicting pictures of the continent’s television markets.

Luxembourg-based RTL Group, which operates 43 TV channels across Europe, including Germany’s market leader RTL Television, M6 in France and Five in the U.K., as well as U.K. production and distribution giant FremantleMedia, offered a cautiously upbeat assessment.

In contrast, Munich-based ProSiebenSat.1, which controls 26 free TV and 24 pay TV channels throughout Europe, said ongoing problems in its German free TV division threatened fourth-quarter earnings.

“It’s hard to tell what impact the crisis in the financial markets will have on the advertising industry internationally,” ProSiebenSat. 1 said in a statement. “But negative factors are likely to prevail, with differing impact on the regions in which the group is active.”

RTL, on the other hand, said it was “bucking” a tough economic climate and generated sound results in the first nine months of the year. While ProSiebenSat.1’s German operations were the main cause behind its lower revenue, RTL’s Teutonic business was cause for cheer.

Particularly strong performances from RTL Germany and FremantleMedia compensated for significant negative effects such as the slowdown in several advertising markets, a major programming investment for the European Football Championship 2008 at Groupe M6 in France and restructuring charges at RTL Netherlands, the company said.

RTL’s revenue from January to September was up three-tenths of 1% (0.3%) to Euros 4.05 billion ($5.2 billion), while operating profit climbed slightly to $744 million. TV advertising market conditions were very mixed, with Germany and the Netherlands reporting positive growth. Elsewhere, net TV ad markets were down year-on-year with Spain and France reporting the most severe declines.

In Germany, RTL continues to enjoy top ratings with “CSI: Miami” and “House,” two of the most watched series on TV here, while FremantleMedia is still enjoying the international success of hit primetime formats such as “Idols,” “Got Talent,” “Hole in the Wall” and “The X Factor,” which had its strongest season debut ever in the U.K.

RTL said its outlook for the full year remained “cautiously optimistic” about achieving its financial targets, despite the economic climate and continued low visibility in the advertising markets.

Execs at ProSiebenSat.1 are gloomier. Outgoing CEO Guillaume de Posch said the group had so far been unable to capitalize on the success of it viewer ratings. “That is now our top priority. We have to adapt to an adverse market environment.”

ProSiebenSat.1’s revenue dropped 3.3% in the third quarter to $833 million, due mainly to the poor revenue performance of its German free TV operations, which has been hampered by difficulties related to a new ad sales model introduced this year as well as growing signs of an economic slowdown.

In German-speaking territories, revenue dropped 9% to $443.6 million. That was partly offset by higher gains from the group’s international free TV business, however, which saw sales increase by 11% to $225 million.

The group expects continued advertising difficulties in Germany and said negative factors stemming from the financial crisis would likely impact overall business.

De Posch said ProSiebenSat.1 would seek further cost cutting in an effort to adapt to the changing environment.

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