Exclusive Interview: ProSiebenSat.1’s Thomas Ebeling

February 15, 2012 World Screen Top Stories

PREMIUM: Thomas Ebeling, the CEO of ProSiebenSat.1, Germany’s leading broadcast group, talks to TV Europe about building on the strengths of the free-TV business, while successfully launching pay-TV and numerous digital ventures.

Back in 2000, two television companies, ProSieben Media and Sat.1, merged to form the largest broadcasting group in Germany, ProSiebenSat.1 Media. Since then, the company has expanded beyond Germany’s borders and diversified its business. Today, ProSiebenSat.1 Media is led by Ebeling and has 27 channels in ten countries, reaching 67 million households each day. It also owns Germany’s most successful video-on-demand service, maxdome, as well the production entity Red Arrow Entertainment Group and its international distribution arm, SevenOne International. Ebeling talks to TV Europe about the strengths of ProSiebenSat.1 and its potential for further growth.
 
TV EUROPE: Despite the fragmentation of the audience and of the advertising market, do you continue to see broadcasting—advertiser-supported television—as a good and healthy business?
EBELING: Human beings want to be entertained and customers need advertising. TV continues to be the strongest medium for the largest number of people. It is indispensable. It is the most effective and efficient advertising medium because it has fast reach, relatively low cost and emotional impact. I think no other medium can actually match this.
 
TV EUROPE: ProSiebenSat.1 has introduced some interesting new revenue-generating models. Tell us about the media-for-equity and media-for-revenue-share businesses of ProSiebenSat.1.
EBELING: We use our idle media advertising inventory like a venture fund to support young or growing businesses that have an above-average affinity with TV advertising. Very often these companies have attractive business ideas but not sufficient funds to afford a classical TV campaign. We give them a very attractive price for advertising, but in return, we get a percentage of the revenue generated from the products or services they are advertising. With some companies there are also equity options.
 
TV EUROPE: And this has been well received?
EBELING: It has been very well received, mainly by young online businesses, but also by some businesses in the areas of fashion and health and beauty.
 
TV EUROPE: The German-speaking market has long been the main engine of ProSiebenSat.1. I have read that you would like to reduce the company’s dependence on the German-speaking market. How do you plan on doing this?
EBELING: The German market will remain crucial for us, but we want to generate 50 percent of our revenues outside the classical German-TV advertising market. We have developed a so-called Four Pillar Growth Strategy. In addition to the broadcasting business in Germany, we will expand our international broadcasting operations, we will diversify our business into digital and adjacent businesses, like online ventures, online commerce platforms, online gaming, online dating platforms, music and live entertainment, and we will expand our production business Red Arrow Entertainment internationally.
 
TV EUROPE: What does the advertising market look like this year in Germany?
EBELING: I would say this year will be a solid year. We don’t see a crisis, but we don’t see a boom year either. We believe that the market can continue to grow.
 
TV EUROPE: What opportunities for growth do you see in broadcasting outside of Germany, because the ProSiebenSat.1 Group has stations in several countries, correct?
EBELING: Yes. We are still very positive about the opportunities in the Nordic region, because in these countries we have basically two sources of revenue growth, which are advertising and distribution income [subscription fees]. Outside the Nordic region, we believe in opportunities in the Far East and South Asian markets.
 
TV EUROPE: You still have stations in Central and Eastern Europe?
EBELING: Yes. We are positive about continued growth in the Nordic countries, and we are watching the Central and Eastern European markets closely.
 
TV EUROPE: They are still suffering from challenging economies in those countries.
EBELING: Yes, absolutely.
 
TV EUROPE: Are you looking to acquire stations?
EBELING: There are usually steps we go through before buying. We usually enter markets with our international sales operations and start by selling content to local TV stations. We then work at setting up a production business. If we understand the market opportunities better, then we can evaluate buying a station. Obviously, we are very selective about what we look at because we want to enter high-growth markets, but at a reasonable multiple, and that takes a lot of preparation.
 
TV EUROPE: You have also said that by 2015, 50 percent of the group’s revenues will be generated outside traditional TV advertising in Germany. How do you plan on achieving this?
EBELING: In the German market we see the opportunity to generate distribution income [retransmission fees for TV channels]. With the introduction of HD, we have the opportunity now to generate distribution income. Outside Germany we see very dynamic growth opportunities in the Northern region. A very important source of growth will be our digital business, where we are very bullish on the growth potential for the online video, online gaming and online commerce businesses we participate in. And we continue to build our production business.
 
TV EUROPE: The VOD platform maxdome has been very successful. What have you learned about the way consumers want to view content? What are they willing to pay for? What business models are working in the online content world? You provide consumers with different ways of paying for the content you offer.
EBELING: Basically I would say the fundamental attractiveness of maxdome for consumers is the wide range and high quality of the programs it offers. Also very important are the reliability of service and the ease of payment. When you are pursuing those standards people will respond favorably even though they are still very price-conscious. What we are seeing is that some people like to pay a low monthly payment, a subscription fee, in order to have access to a wide library of content. Other consumers prefer to download on occasion, to buy on occasion, these are the so-called “snacking consumers”. Both co-exist and I think the combination of subscription and special offers that people are wiling to pay for is the model for the future.
 
TV EUROPE: Is online viewing becoming more popular than linear viewing?
EBELING: Don’t get me wrong, linear viewing, TV viewing will remain strong, but in addition a lot of people want to have, at any point in time, access to large content libraries of top quality. And that is why maxdome is video on demand, which is more of a competitor to DVD rentals and services like Netflix, than it is of linear TV channels. In addition, you will have nonlinear viewing online, which is more catch-up TV viewing. And for this we have a special platform called MyVideo, there we offer our TV websites, where we know telenovelas and series get very good viewing numbers.
 
TV EUROPE: Do you have plans to take services like maxdome to other countries?
EBELING: If possible, yes.
 
TV EUROPE: You mentioned online gaming and online commerce. Are these the types of digital initiatives that you would like to build upon?
EBELING: Yes, we have had very good experiences using our television marketing power to make online games very successful. We have signed a major deal with Sony Online Entertainment, where we have access to eight of their blockbuster games and we are their exclusive marketing partner in Europe. And we know how to make these games successful because we have a presence both on TV and online. We have other agreements with other content providers and we work very closely with companies like Big Point, and from that perspective I am very bullish about the outlook of online gaming for us.
 
TV EUROPE: High-quality successful programs are the heart of any channel, and certainly SevenOne international has sold many of those around the world. Tell us about some of the successes of your program-sales division and the format-distribution businesses, because formats are quite important today, too, aren’t they?
EBELING: I believe there is a growth potential of more than €100 million in this business and I’m confident the steps we have taken so far lead in the right direction. In 2011, SevenOne International presented more than 1,300 hours of programming in its sales catalogue; 660 hours alone were produced by Red Arrow-owned companies. They closed major deals all over the world and I am especially excited about major deals in key territories like the U.S. Netflix bought the great mobster dramedy Lilyhammer and will air it all over North and South America. Betty White’s Off Their Rockers, a local adaptation of International Emmy Award-winning Benidorm Bastards will air on NBC, after a special preview in January scored number one in its time slot and had NBC’s highest viewership in that slot in 28 months. And Betty White’s Off Their Rockers is only one local version of that show. It has already been adapted in over 30 countries. And we have many more great shows in our portfolio: My Man Can for example, created by a Red Arrow company, debuted in 2011 in Denmark and South Korea and we closed deals in Ukraine, Lithuania and Belgium. And then there’s You Deserve It, developed for Red Arrow by Dick de Rijk, the creator of Deal Or No Deal. It’s the first game show where a contestant plays for someone else—someone who deserves it—and has already been sold to 28 countries.
 
TV EUROPE: Looking ahead 12 to 24 months, what are your priorities for the ProSiebenSat.1 Group, as technology keeps changing the way viewers enjoy their programming?
EBELING: The key priority is really to make our Four Pillar Growth Strategy work. We also want to really make sure that all of our content is available on all platforms and that we capitalize on our content as best we can. Finally, we want to find a way to expand a strong position in a changing environment.
 
TV EUROPE: That is the challenge for all media companies, constantly adapting changing technologies and viewing habits, isn’t it?
EBELING: Yes, and that is why we are really working hard to diversify our business and transform our company into a digital and broadcasting entertainment powerhouse.