New Dynamics in Europe’s Television Landscape: Consolidation is Key
This past week has seen significant developments in the television sector, notably ITV Studios acquiring a majority stake in Moonage Pictures, the producer of *The Gentlemen*, along with MediaForEurope’s (MFE) takeover bid for the German broadcaster Pro7Sat.1. These moves underscore a critical reality for Europe’s established networks: they must grow or face obsolescence.
The Pressure of Global Streaming Competition
As traditional television giants face an uphill battle against global streaming services that are progressively capturing more viewer attention and diminishing profit margins, their need to consolidate has never been more urgent. Once-dominant regional players now find themselves in precarious positions, struggling to maintain their foothold.
Examining Pro7Sat.1’s Dilemma
For instance, Pro7Sat.1, based in Munich, reported EBITDA profits exceeding $600 million (€557 million) last year, with total revenue slightly increasing to over $4.2 billion (€3.9 billion). However, advertisement revenue has been in a downward trend for three consecutive years, dropping about 5% to approximately $1.6 billion (€1.47 billion). This data set the stage for MFE, controlled by Italy’s Berlusconi family, to launch a takeover bid for the 70% of Pro7 it does not already own. The lowball offer estimated the broadcaster’s worth at around $1.4 billion (€1.3 billion), marking the minimum price permissible under German law.
François Godard, a market analyst from Enders Analysis, suggests that the bid appears more of a strategic maneuver. “The bid won’t succeed, it’s not designed to succeed,” he analyzes, indicating MFE might wait until Pro7Streamlines its non-core assets, such as its e-commerce and online dating operations, before proceeding with a full takeover. Godard believes MFE’s control over Pro7 is inevitable, emphasizing that consolidation within the European media landscape is unavoidable.
MFE’s Ambitious Strategy
Under the leadership of Pier Silvio Berlusconi, MFE intends to acquire multiple TV networks across Europe to enhance economies of scale in the competitive advertising market. The rationale is straightforward: by increasing its size, MFE aims to better compete with major players like Netflix, Amazon, and YouTube.
Currently, MFE already owns Mediaset, Italy’s largest television broadcaster, along with Telecinco, the foremost commercial network in Spain. Should Pro7 be incorporated into their portfolio, MFE would rise to become the third-largest commercial television enterprise in Europe, trailing only RTL and the UK’s ITV.
Expansion Plans and Financial Maneuvering
Reports suggest that MFE has also expressed interest in acquiring TVN, Poland’s free-to-air broadcaster, which is currently up for sale by Warner Bros. Discovery. Preparing for this expansion, MFE has secured €3.4 billion ($3.6 billion) in financing, with plans aimed not just at Germany and Poland, but potentially also targeting TV assets in Portugal and the Netherlands.
MFE’s cross-border strategy, initiated in 2019, stems from the belief that consolidations within individual countries—like merging market leaders—would likely face regulatory opposition, as demonstrated by RTL’s failed merger attempts in France and the Netherlands. Consequently, both RTL and ITV have rerouted their revenue from traditional television into developing their own streaming platforms (RTL+ and ITVX) and enhancing content production capabilities.
Growth Through Acquisition
ITV’s recent acquisition of Moonage Pictures is part of a broader buying trend that includes the absorption of various boutique production companies like Hartswood Films and Eagle Eye Drama. Meanwhile, RTL, through Fremantle, has focused on acquiring influential production firms, including Ireland’s Element Pictures and UK-based Dancing Ledge Productions, signaling a commitment to rapid expansion.
Future Consolidation Prospects
In addition, ITV is reportedly in preliminary discussions with Abu Dhabi-backed RedBird IMI to merge ITV Studios with All3Media, which could potentially create a formidable production entity valued at $4 billion. Speculation is also rife that Fremantle might target ITV Studios in the future.
During ITV’s recent earnings call, CEO Carolyn McCall declined to disclose details concerning merger inquiries but strongly affirmed that consolidation within the industry is an imminent reality.