German broadcaster hit by ad revenue drop

Hit hard by the advertising downturn and saddled with enormous debt, European broadcasting group ProSiebenSat.1 is considering turning its free-to-air TV channels in Germany into pay outlets.

ProSiebenSat.1 topper Thomas Ebeling wants the group to generate up to 30% of its revenue from nonadvertising activities, double the current percentage garnered from businesses such as pay TV and video-on-demand.

The company plans to expand inhouse production and develop into new fields such as event promotion, talent agencies, ticketing and merchandising.

In September, the broadcaster inked an exclusive multiyear development deal with former Endemol producer Dick de Rijk, maker of the hit format “Deal or No Deal,” which has sold in some 150 countries around the world.

The group has had success with its pay webs in Denmark and thus may expand the strategy into Germany.

But a revamp of ProSiebenSat.1’s free-to-air channels, including Sat.1, ProSieben and Kabel Eins, won’t come soon. Ebeling said the group’s move away from traditional TV advertising will take time and many small steps.

“For the sustainability of the group, it is enormously important that we develop relationships with end customers, either through pay TV, video-on-demand or other business models,” Ebeling said.

ProSiebenSat.1, which is owned by equity investment groups KKR and Permira, reported a E129 million ($191 million) net loss last year on revenue of $4.6 billion. Ebeling expects ad spend in Germany to drop this year by as much as 15%, well above global estimates.

In addition, the group is saddled with debt of $5 billion, which it took on in 2007 to buy SBS Broadcasting, creating a pan-European broadcasting group to rival RTL.

Rupert Murdoch’s Sky, formerly known as Premiere, is currently the only major pay TV operator in Germany, and it has always faced an uphill battle to attract subscribers and turn a profit in a country where there are nearly 40 free-to-air channels and where TV viewers are already forced to pay $26.50 a month in mandatory pubcaster fees.

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