Major TV Deal Highlights Urgency for European Networks
Recent developments in the European television landscape, notably ITV Studios acquiring a majority stake in Moonage Pictures and MediaForEurope’s (MFE) proposed takeover of Pro7Sat.1, underscore a pressing reality for traditional broadcasters: the survival of the fittest.
Pressure from Streaming Giants
Legacy TV networks across Europe are pressed to expand their reach and scale to combat the growing threats posed by global streaming platforms. These digital giants are not only capturing audience attention but also constricting the profit margins of traditional broadcasters, leaving once-dominant regional players exposed and vulnerable.
Pro7Sat.1: A Case Study
Take for instance Pro7Sat.1. The German broadcaster reported impressive operating profits exceeding $600 million (€557 million) last year, along with a slight revenue increase to over $4.2 billion (€3.9 billion). However, a concerning trend looms as their television advertising revenue declined for the third consecutive year, dropping approximately 5% to $1.6 billion (€1.47 billion). As a result, MFE’s takeover bid for the nearly 70 percent stake it doesn’t already own was a strategic lowball, valued at around $1.4 billion (€1.3 billion) — the minimum permissible under German law.
Market Analysis and Strategic Intent
François Godard, a market analyst at Enders Analysis, asserts that MFE’s bid is unlikely to succeed as it appears to be a tactical move. MFE likely intends to wait until Pro7 divests non-core assets, such as its e-commerce and online dating segments, before pursuing complete ownership. Godard predicts, “Eventually, MFE will take control of Pro7. Consolidation at the European level is inevitable.”
Building Scale to Compete
MFE, chaired by Pier Silvio Berlusconi, aims to acquire TV networks throughout Europe to create economies of scale in advertising. The broader strategy hinges on the premise that a sufficiently large entity can compete effectively for advertising revenue against giants like Netflix, Amazon, and YouTube.
Already, MFE has significant stakes in Mediaset, Italy’s largest TV network, and Telecinco, Spain’s leading commercial channel. Incorporating Pro7 would position MFE as Europe’s third-largest commercial TV entity, trailing only RTL, owned by Bertelsmann, and the UK’s ITV.
Future Expansion Plans
Reports indicate that MFE is also eyeing TVN, a Polish broadcaster that Warner Bros. Discovery intends to sell. According to sources, MFE has secured €3.4 billion ($3.6 billion) in funding to facilitate its expansion, with ambitions extending to TV assets in Portugal and the Netherlands.
Strategies Beyond Borders
Since 2019, MFE has pursued an ambitious cross-border growth strategy, moving away from attempts at national consolidation, which face scrutiny from regulators. Past merger proposals by competitors like RTL were blocked by antitrust authorities, compelling these firms to seek alternative avenues for growth.
Investments in In-House Streaming
Both RTL and ITV are channeling resources from their existing profitable free TV operations into the development of their streaming services — RTL+ and ITVX. ITV’s acquisition of Moonage Pictures exemplifies this focus, as the broadcaster has strategically acquired multiple smaller production companies to bolster its content library and production capabilities.
Ongoing Mergers and Future Speculation
RTL, through Fremantle, is similarly expanding, acquiring notable production companies like Ireland’s Element Pictures and the Italian Lux Vide. Despite delaying its target for Fremantle’s annual revenue growth, ambition remains high as the company strives to scale rapidly.
Additionally, ITV is reportedly in preliminary discussions with Abu Dhabi-based RedBird IMI regarding a potential merger of ITV Studios and RedBird’s All3Media, which would establish a formidable $4 billion production entity. There are also rumors about Fremantle making an approach for ITV Studios, indicating a flurry of activity in the industry.
Conclusion: The Path Forward
During a recent earnings call, ITV CEO Carolyn McCall refrained from commenting on the m&a rumors but acknowledged a consensus in the industry regarding the inevitability of further consolidation.
As European television networks confront an era of transformation driven by streaming services, their strategic maneuvers, acquisitions, and adaptations will be critical in determining who survives in this rapidly changing media environment.