The Walking Dead of European TV

There are signs of life at ProSieben.
Updated on

As you may have heard, television is dying. The only thing dying faster (if it's not already a zombie) is print media. The culprit: all the youngs who prefer to fiddle with smartphones rather than watch the tube.

So it may come as a surprise that in Germany, the big commercial broadcaster ProSiebenSat.1 Media SE is faring worse among investors than leading publisher Axel Springer SE.

ProSieben shares have fallen 20 percent this year, compared to a 15 percent decline at Axel Springer, the owner of tabloid Bild and website Business Insider. On a total return basis this year, ProSieben is the third-worst performer among free-to-air broadcasters in Europe, with a 14.2 percent decline, according to Bloomberg data. Britain's ITV Plc is down 46 percent because of Brexit anxiety, while Italy's perennial basket case Mediaset Spa has fallen 35 percent. The slide at ProSieben stems from weak advertising.

German Pair

ProSieben is trading at a lower 24 month forward price-to-earnings ratio than Axel Springer.

Source: Bloomberg

This seems harsh. The German TV market should fare better than most in Europe given GDP growth forecasts of 1.4 percent growth for each of the next two years, while unemployment is at a 6 percent low not seen since reunification. ProSieben revenue rose 15 percent to 857 million euro in the third quarter because of acquisitions. Ebitda was slightly ahead of consensus.

Plus Germany is an oddity among European media markets: advertisers there still spend a lot on print compared to television. Yet that should start to come more into line with other countries, which will help ProSieben.

Print Rut

German advertisers spend more on print versus TV ads compared to those in other countries.

Source: Kepler Cheuvreux

Data is for 2015

Investors seem worried that ProSieben is spending too much on acquisitions to fuel growth. But both it and Axel Springer are doing deals to diversify away from mature media to e-commerce and online. It's the right approach if done sensibly. 

ProSieben's canny system of trading commercial airtime for stakes in promising German start-ups mitigates some risk, compared with Springer's international expansion that's taken it into the cutthroat U.S. The pair have each spent about 1 billion euros on deals since the start of 2015.

ProSieben's dividend yield of 5.3 percent, compared to 4.2 percent for Axel Springer, mitigates some risk. German television isn't yet the land of the Walking Dead.

(Corrects newspaper spelling in third paragraph.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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