ProSiebenSat.1 Media’s Thomas Ebeling

ProSiebenSat.1 Media is one of the leading media conglomerates in Europe. The group’s seven free-TV stations cumulatively capture the greatest share of the advertising market and viewing audience in Germany. While television was the group’s core focus when it was founded in 2000, Thomas Ebeling, the CEO of ProSiebenSat.1 Media, has spearheaded the diversification of the company’s businesses away from ad-supported TV stations to digital platforms and e-commerce, in addition to the production and international distribution of programming through the Red Arrow Entertainment Group. As Ebeling tells World Screen, the group’s growth opportunities lie in its ability to continue to connect its TV assets with digital businesses.

WS: As viewing habits continue to change, how is ProSiebenSat.1 providing content for all screens and devices?
EBELING: First of all, it is important to remember that in Germany, linear TV still accounts for 86 percent of daily video watching. So the German TV market differs a lot from the U.S., not least because [in Germany there are] considerably fewer commercial breaks and because people are a lot less willing to pay for TV services. Big sports events, high-quality series and films are all available on free TV in Germany.

This being said, it is also true that media usage habits are changing, especially with younger viewers. With our digital offerings, we are in the perfect position to service their demand to watch TV—regardless of time and place. These include our own video-on-demand portal maxdome, our multichannel network Studio71 and the streaming apps of our seven free-TV channels. Maxdome recently launched its first original series called Jerks, which is also the first German-language VOD series. And we have a number of distribution partnerships, especially with mobile platforms and cable and IPTV operators, to enable viewers to access our content everywhere, at all times, and on every device.

WS: What has been driving the positive performance of the TV segment?
EBELING: ProSiebenSat.1 leads in both the audience and TV advertising markets in Germany. In years like 2016, when major sports events such as the summer Olympics and the European soccer championship are airing on public TV stations, we have to ensure we have a strong lineup. In 2016 we had hit formats playing, like The Voice of Germany and Germany’s next Topmodel, as well as new shows with our German power hosts Joko & Klaas. And it paid off again that in past years we had founded new free-TV stations. This allows us to attract both new audience groups and advertising customers. In 2016 alone, we were able to attract more than 260 new clients to our advertising business.

WS: Are there plans to launch more stations or channels?
EBELING: We’ve made full use of the opportunities that have come from the fragmentation of the TV market and launched four new free-TV channels in the last six years: sixx, SAT.1 Gold, ProSieben MAXX and kabel eins Doku. We continue to evaluate the potential for additional channels, but for now, I do not have any concrete announcements to make. However, we are always striving to improve our programming offer. Just recently, we closed a partnership with Scripps Networks Interactive, which provides exclusive U.S. factual entertainment to our channels sixx, ProSieben MAXX and kabel eins Doku. These programs are centered on food, home and gardening, DIY and travel, and offer attractive additional marketing environments for our advertisers and our own commerce businesses.

WS: One of the ways you have diversified ProSiebenSat.1’s revenues is by setting up the Red Arrow Entertainment Group. What strategic moves have contributed to its success?
EBELING: Today, Red Arrow is a global creative network of 19 companies in seven countries, including nine companies in the U.S. alone. Our strategy, to focus on the U.S. and U.K. markets in particular by strengthening our presence there, has proven a success. Today, more than 70 percent of Red Arrow’s revenues are generated in the U.S. In 2016 we made major acquisitions, such as 44 Blue Productions and Dorsey Pictures, in order to further secure access to globally attractive English-language IP. We are very proud that Red Arrow has established the company as a dynamic international production business with popular shows, like Bosch for Amazon and Married at First Sight for A&E.

WS: Do the British and American markets remain key areas for continued growth? Are there other territories that show growth potential?
EBELING: Our focus clearly remains on these key English-speaking TV markets. In the coming years we want to expand further and organically grow our U.S. portfolio, as this TV market remains the most attractive, with the highest broadcaster programming spending.

But Red Arrow has also grown into a strong program supplier for our German-speaking ProSiebenSat.1 stations, and its German production company Redseven Entertainment has been showing strong growth as well. For example, Redseven successfully produced the hit shows Married at First Sight, Kiss Bang Love and The Taste for our channels—formats created by other companies in the Red Arrow group. We will tap further into this synergy potential and leverage the tight connection between Red Arrow and our TV stations. In 2018 around 20 percent of our local commissions are set to come from the Red Arrow production network.

WS: What strategic decisions enabled ProSiebenSat.1 Media to successfully move into digital businesses?
EBELING: Since 2009, our main focus has been developing our business from a classic TV broadcaster to a digital media group. We have transformed ProSiebenSat.1 by identifying new growth areas in all of our business segments and rapidly diversifying our portfolio. For example, we launched new free-TV stations as well as our HD distribution business, founded Red Arrow Entertainment, and, of course, established a portfolio of e-commerce companies.

Two innovative business models have been central to our growth: with “media-for-revenue-share” and “media-for-equity,” we have been able to offer advertising space on our free-TV stations to promising startup companies in exchange for a share of revenues and/or equity, which allowed us to grow our digital business considerably. And we have also made investments in established and successful digital companies.

Above all, we have always concentrated on connecting our TV unit with the digital business. We are proud to say that no other European media company finds and uses synergies between these two types of businesses as consistently as we do.

WS: What factors drove the group’s financial performance in 2016?
EBELING: Our financial performance is directly related to this strategy of combining TV and commerce. Since March 2016, we rank among the 30 most valuable traded companies in Germany.

In 2016 all four of our business segments contributed to our group’s revenue increase, with the Digital Ventures & Commerce segment being the biggest growth driver. Our price comparison portal Verivox and the online travel agency Etraveli have grown dynamically since we acquired them in 2015. Last year, we also invested in the online dating company Parship Elite Group and the fast-growing and TV-friendly health and well-being market. Our commerce portfolio is now clustered around four thematic verticals: online travel, online price comparison, online dating and lifestyle commerce. With all that, we continue to use the reach and advertising power of our successful TV stations in order to accelerate further growth in these business areas.

WS: What is your acquisition strategy and do you have plans to acquire more companies? If so, what type of company would be a good fit for the group?
EBELING: We are always exploring the market and monitoring new developments. Our M&A strategy focuses on acquisitions that add value, especially in the digital space. If we make an investment in a company, we have strong criteria to follow: it is essential that the company’s business model is robust, highly TV-responsive and synergistic with our existing business. And, of course, we need to see clear growth potential. This strategy has strengthened the group’s profit growth sustainably; e-commerce investments made in the past five years have increased their revenue level by around 80 percent on average since their integration into our group. At the same time, the earnings contribution of these acquisitions to the group’s recurring EBITDA went up by around 120 percent.

WS: How was the advertising market in Germany in 2016 and what are the forecasts for 2017?
EBELING: The German net TV advertising market saw continued solid growth last year. We are anticipating that the market grew slightly more than 2 percent in 2016. For 2017, we estimate that the ad market will increase by 2 to 3 percent.

WS: How have the group’s stations and channels been working with advertisers in innovative ways?
EBELING: Our advertising clients appreciate the unique strength of TV advertising—building large reach in a short time. They also appreciate our ability to make TV ads ever more effective. For example, we are developing 360-degree concepts that are customized to consumers, and we are pushing innovative advertising forms like addressable TV, which combines the reach of mass-medium TV with the targeting options of the online world. ProSiebenSat.1 was the first German TV broadcaster to launch addressable TV, rolling out TV ad campaigns tailored to specific target audiences or weather conditions. This way, TV advertising is becoming even more relevant for viewers and clients. In 2016 we ran nearly 100 addressable TV campaigns.

WS: What percentage of the group’s revenues comes from advertising and what percentage comes from non-advertising-supported businesses?
EBELING: The group already generates 47 percent of consolidated revenues outside of the TV advertising business; this share is expected to rise to over 50 percent by 2018. At the same time, ProSiebenSat.1’s TV advertising revenues are rising.

WS: Tell us about the Digital Entertainment division. Which businesses are proving to be the most successful and popular?
EBELING: Our Digital Entertainment segment includes our online video business with the video-on-demand service maxdome, the MCN Studio71, as well as our ad-VOD and ad-tech business. maxdome is developing quite positively while the ad-tech area and Studio71 are contributing the biggest growth. Studio71 is the number one multichannel network in Germany and the fourth biggest worldwide. We recently started a strategic partnership between Studio71 and both the TF1 Group in France and Mediaset in Italy. This gives us access to key European markets where the online video market is starting to pick up momentum and is promising significant potential.

WS: How do some of the digital businesses tie in with other segments of the ProSiebenSat.1 Group?
EBELING: Developing synergies between our businesses has always been the core focus of our strategy. We are constantly looking for ways to interlink different business units to create something unique. This is our competitive advantage. I have talked about increasing awareness of our e-commerce brands by using our TV ad inventory, but we also seek opportunities to link digital businesses among each other to create synergies, especially regarding marketing, data and user preferences. And the increasing collaboration between Red Arrow and our TV stations is another great example. We are convinced that we will continue to create further growth by consistently connecting all of our activities.

WS: Looking ahead 12 to 24 months, what opportunities and what challenges do you see for the group?
EBELING: The challenges are the same for all of our competitors: the fragmentation of the media landscape will continue, media usage habits will further change within the young target groups, and global digital giants, like Google and Facebook, will increase their efforts to dominate the media industry. But facing such challenges has always made us stronger, and over the years ProSiebenSat.1 has proven again and again how capable we are, of setting ambitious targets and also achieving them. I am very optimistic that this will continue in the future, especially because our business is made up of a wealth of talented people based in Germany and around the world.

The aim for the end of 2018 is to hit group revenues of €4.5 billion, with more than €1.7 billion in revenues coming out of the digital businesses alone. To achieve this further growth, we will continue to push the intelligent combination of our high-reach TV stations with digital offerings and to look for strong, innovative business models. One major new focus is the implementation of our so-called omnichannel strategy. This means that next to our e-commerce business, we will also develop the retail distribution of physical lifestyle goods and extend our marketing efforts from TV and digital to also include point-of-sale. I am convinced that with this strategy, ProSiebenSat.1 will continue its path of sustainable and profitable growth.