ProSiebenSat.1 to end long-term output deals with US studios

(Source: ProSiebenSat.1)

Germany’s ProSiebenSat.1 plans to put a halt to long-term output deals with Hollywood studios and is to take an impairment charge of up to €250 million on existing programming assets and a provision for up to a further €90 million in the fourth quarter on “onerous contracts” for future acquisitions as it moves away from US content to focus on local programming.

At the same time, the broadcaster is to up its investment in local content next year as it pivots towards positioning streaming service Joyn as its leading platform.

ProSiebenSat.1 said that it was ending the long-standing practice of acquiring US licensed content to the basis of extensive long-term output deals with Hollywood studios ends, and would, in the future, only acquire US licensed content on a selective basis.

The broadcaster said that neither the impairment charge nor the provision would have an impact on its adjusted key figures for the year 2023, including adjusted EBITDA.

It said the move would not lead to cash outflows in the current financial year and there would be no changes to net financial debt as a result.

The future cash outflows for programming still to be completed, resulting primarily from the contracts it has, will amount, in the financial years 2024 and 2025, taking into account offsetting tax effects, to around €50 million, which ProSiebenSat.1 said would not have a negative impact on earnings.  

The broadcaster said it planned to invest an additional €80 million in local programming next year, taking its total programming spend to €1.05 billion.

In addition to the expansion of Joyn’s content offering, the group is also aiming to up the appeal of its TV channel offering, with additional content penciled for primetime on flagship channels SAT.1 and ProSieben.

ProSiebenSat.1 said that more content would be available simultaneously live and on-demand.

The broadcaster said local programmes on TV and especially on the streaming platform had achieved above-average audiences over the last year.

The latest moves follow less-than-stellar results for the broadcaster in Q3, after which it said it expected full-year earnings to be at the lower end of the range forecast.

Advertising revenues declined by about 5% in the third quarter, with overall revenues dropping 3% to €888 million, a smaller decline than that experienced in the first half thanks in large part to growth in digital from Joyn. Digital advertising was up by 16%, boosted mostly by Joyn

Advertising recovery

ProSiebenSat.1 said that the additional programming investments next year will have a negative impact on adjusted EBITDA in the entertainment segment in 2024, but will strengthen growth in the long-term. However, it expects a slight recovery in advertising revenues to help overall revenues to increase in 2024 and  adjusted EBITDA to remain stable compared to the current financial year.

For 2023, ProSiebenSat.1 expects group adjusted EBITDA at the lower end of the range of €600 million plus or minus €50 million forecast at the beginning of the year. Group revenues will be slightly below the target range of €4.10 billion plus or minus €150 million.

Bert Habets (Source: ProSiebenSat.1)

Bert Habets, Group CEO of ProSiebenSat.1 Media SE: “In March, we presented a clear strategic plan: Entertainment as the core of ProSiebenSat.1, attractive local and live content to further strengthen our channels and Joyn as well as an improved and more diversified monetization. Since then, we have set the right course. The success of our programs in recent months clearly shows that our local programming offensive is paying off: our viewers are watching more local content on all our channels and especially on Joyn. We are now taking the next strategic step and will invest significantly more in local content from 2024, offering our viewers a unique programming experience to serve very different media usage interests and, above all, to differentiate ourselves from the competitors of Joyn.

“We are absolutely convinced that we can offer our advertising customers the best and highest-reach environment for their products, also in the digital world. With this strategy, we want to shape the future and the success of our company.” 

Martin Mildner, Group CFO said: “We have aligned ourselves more effectively in the recent months and are confidentthat we will close 2023 with growth in the important fourth quarter. We are now consistently pursuing our strategy and will increase our programming expenses by EUR 80 million to EUR 1.05 billion from next year in order to significantly expand our offering on Joyn but and to differentiate our TV stations even more strongly than before from US streaming platforms with live and local content. Due to the high demand for advertising on Joyn, we are convinced that we will be able to increasingly capitalize on our additional investments. At the same time, we are continuing to work resolutely on improving our cost base in order to strengthen the company’s profitability despite higher programming investments.”