Pro7/Sat.1: Interesting times ahead?

This time last week, Permira’s man responsible for its ProSiebenSat.1 investment, Joerg Rockenhaeuser, said the German commercial broadcaster wasn’t up for sale “today or tomorrow”. As readers will fully understand, this doesn’t mean that ‘next week’ a ‘For Sale’ sign won’t appear over the asset.

Perhaps helping galvanise thoughts will be a report from investment bankers Morgan Stanley on June 10, which talks of Pro7 as being “the most attractive broadcaster going into the Q2 [results season].”

The bank’s report says German broadcasting is “stabilising” and while media buyers are staying cautious on back-end-of-the-year budgets, they have not witnessed any new rounds of budget cuts since March/April. The bank sees Q2 results as being ‘flattish’ and similar numbers extending into Q3. But [media buyers and] agencies “think Pro7 will gain share from RTL in 2011 thanks to a more flexible sales model that is allowing media buyers to more easily meet their clients’ financial targets.”

“Agencies are hoping for fresh money to come through in the last four months of the year, however they have not received any signal yet from their clients suggesting that they intend to increase budgets in H2. To describe the current outlook, our contacts used expressions like “not very interesting”, “still wondering”, “no trend”, “not a good year”. Overall, based on current visibility, they forecast TV adspend flat to down minus five per cent for the full year 2011.

However, despite this gloomy picture, the bank states that Pro7 is expected to outperform arch-rival RTL in 2011. “Arguably, the most interesting element which came out of our discussion with media buyers was their strong conviction that Pro7 would take share from RTL this year. Our contacts explained that Pro7’s commercial policy is highly flexible and offers attractive discounts and free space. This is all the more crucial that most agencies have locked-in their clients, especially the large ones, with contracts based on guaranteed yields. In lean times, flexibility and rebates will thus help the agencies deliver their clients the return they promised them. Agencies seem less pleased with RTL’s policy which they describe as more inflexible, offering media buyers less free spots and rebates.”

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