CANNES – Continued activity surrounding mergers and acquisitions has been the dominating conversation at MIPCOM, with Munich-based media conglomerate ProSiebenSat.1 figuring in the speculation on the French Riviera.
In September, news emerged that ProSiebenSat.1 had launched a strategic review of the future of international content production outfit Red Arrow Studios. The review, the company said, will explore a sale or an industry partnership for the global production and distribution outfit.
As a result, Max Conze, CEO of ProSiebenSat.1, gave a keynote presentation and conducted a press roundtable interview on Tuesday (Oct. 15) to elaborate upon the German corporation’s business strategy moving forward.
“The reason I’m strategically looking at [a potential sale] is that the international part doesn’t have a lot of synergy with my German entertainment footprint,” Conze said. “In a world where everything is getting bigger, Red Arrow Studios is meaningfully sizable but is not big, and so I felt it would be good for us to explore options to partner and combine into something bigger.
Conze added that M & A in the production sector remains “quite a hot market” and that, once a sale is firmed up, the company could “use that cash to reinforce our German infrastructure, both on the entertainment and commerce ends. We’ll see where that process takes us by the end of the year.”
Red Arrow Studios is comprised of 20 production companies in seven territories throughout Europe and the U.S., including the likes of U.S. production studios Kinetic Content, Half Yard Productions, Karga Seven Pictures, Left/Right, Dorsey Pictures and 44 Blue Productions. Combined, the companies produce more than 215 series and 1,000 hours a year which span across unscripted and scripted productions.
The exploration of a potential sale, however, would exclude international digital studio Studio71 and the German content production business RedSeven Entertainment.
Should the strong stable of production companies housed within Red Arrow, both in the UK and U.S., be sold off, Conze explained that the company’s library would still be populated with “very specific German content,” including primetime entertainment game show format Beat the Channel, which is the area Conze is keen to focus on going forward.
“Even if Red Arrow Studios possibly ends up in different ownership hands, that doesn’t change the fact that we have good relationships and good use [of] some of the creators,” the executive clarified. “What I need much more of is deep German content, both on the factual and comedy ends, and so forth. There’s only so much money and energy you can deploy, so you have to make choices in where you focus your money and your energy.”
Should ProSieben find in its strategic review that there’s a “great buyer” for Red Arrow Studios, Conze explained that the German firm will be scaling back its efforts throughout North America as the company will have less assets in the region.
“It’s not that we look at the world and say we want more there or less there, it’s more [about] where our businesses are strong and synergistic and we can flow from there,” Conze said.
ProSiebenSat.1, then, is being transformed into a company with a combination of entertainment assets and e-commerce assets. That, Conze said, is “synergistic and value-creating” as the two components feed one another to provide a “more diversified footprint than if you are only a media or commerce company.”
In June, ProSieben kickstarted Joyn, a joint venture with Discovery. The ad-based, video on demand platform delivers 55 free channels and access to 20,000 hours of content, which Conze said is “the broadest free offering in Europe, possibly in the world.”
The AVOD currently has nearly 4.5 million subscribers, but aims to more than double that subscription base to 10 million users in the next two years.
The ProSieben executive expects the lion’s share of subscribers to be free users, and pointed to the Spotify business model which currently boasts a 50/50 split between free and premium users.
“Success is not how many subscribers we get; it’s how many people we get engaged in our content in totality, some of whom who choose to not pay. That’s OK because we make money with advertising. And advertising is a good business model – possibly better than subscription,” Conze explained.
“Fundamentally if I have a bigger pool of high quality ad inventory that runs through a digital signal than of a 25 billion [Euro] advertising market, [of] which five billion is TV, I open up my ability to go after the other 20 billion. That’s very meaningful.”
The ad-supported platform, however, will launch with a premium service “later this winter,” though a price point has not yet been revealed.
Once the premium layer launches, Conze said, Joyn will begin rolling out into international markets.