Bank: “Worse to come for EU commercial broadcasters”

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An ‘end of year’ assessment report from investment bank Exane/BNPP on Europe’s commercial broadcasters praises some, but warns clients on others.

The problem, says the bank’s report, is that for some broadcasters “the worst is yet to come”. The study says TV – for some broadcasters – is looking bleak this winter; “Audience share is fragmenting and much-needed investment in subscription services and content won’t come cheap.”

Exane/BNPP says that Spain, Italy and Germany might be looking worse than investors think. “While it’s no secret that TV ad revenues are in long-term decline, in our view consensus has not fully reflected how serious the situation is. To us, shrinkage of the European TV ad market of less than 1 per cent in 2020 (vs c.-2.5 per cent in 2019) looks optimistic. While it is true in the past decade that price hikes have offset audience decline, we argue that this dynamic is now coming to an end.”

But the bank says the UK might well escape the downturn, but that’s largely because the UK “has already troughed”. “In the UK, assuming the general election polls hold, we think sponsorship and online advertising will more than offset TV ad decline, which we estimate will only be down 0.5 per cent in 2020 versus consensus at -1.7 per cent. ITV is well on the way to becoming a digital business with multiple touchpoints, and with its production exposure it can capitalise on growing demand for content.”

In France, says the bank, “Market consolidation, audience measurement changes and macro are all supportive. Furthermore, after two years of debate, the largest French audio-visual reform since the 1980s is close to passing. We do not believe share prices reflect the value of this reform.”

In terms of investment advice, the bank says: “We remain Underperform on ProSieben, Mediaset, Mediaset Espana and Atresmedia due to the absence of cyclical tailwinds. We rate RTL Neutral. We upgrade ITV, TF1 and M6 to Outperform, underpinned by a more bullish view on the French and UK TV ad markets. While on FY20e ITV does not screen as particularly cheap we highlight that the valuation differential is much less meaningful on FY2021e. The premium is justified by Studios taking a proportionally higher share in the EV compared to the other broadcasters’ content exposure.”


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