Digital Diversification Case Study
Digital Diversification Case Study
Digital Diversification Case Study
December 2012
Contents
Executive Summary
ProSiebenSat.1 Case Study
Keshet Case Study
Executive Summary
TV at
Core
Adjacent
Online Video
Executive Summary
EBITDA
Positive Return
Year 1
Year 2
Year 3
Year 4
Video Portal
Germany
Year 5
Year 6
Web/Video Portal
Israel
Year 7
TVOD Service
Germany
Contents
Executive Summary
ProSiebenSat.1 Case Study
Keshet Case Study
422
170
344
160
475
FTA International
150
+12%
140
1,937
1,867
1,698
FTA German
+7%
130
120
+59%
Share price growth fuelled
by advertising market
recovery and strong
performance in digital
diversification
ProSiebenSat.1
312
379
CAGR
2,756
2,601
180
+6%
+10%
2,372
295
ITV
110
2009
2010
100
2011
90
70
+8%
+34%
847
82
98
CAGR
Digital / Production +19%
FTA International
60
50
+15%
40
30
631
666
458
FTA German
+21%
20
10
0
2009
2010
Antena 3
590
58
74
787
70
86
TF1 MTG M6
80
2011
1/01/2008
29.4%
1/01/2009
28.8%
28.5%
1/01/2010
28.9%
1/01/2011
1/01/2012
Content Production
2%
11%
31.0%
Digital Diversification
Teleshopping / Online
Marketplace
66%
FTA German
19.9%
23.0%
11.6%
11.0%
15%
8.6%
6.8%
FTA International
6.1%
5.3%
5.3%
14%
2.2%
8.0%
6.3%
4.9%
M6 (2005) M6 (2010)
76%
P7S1
(2005)
P7S1
(2011)
TF1 (2011)
CBS
(2009)*
7 (2011)
FTA German
Realising revenue growth will not exceed GDP growth, P7S1 starts to consider digital diversification from as early as 2000
The current goal for ProSiebensat.1 is to generate approximately 50% of total revenues independently of the traditional TV
advertising industry in Germany by 2015
Music
Leverage on TV Media
Content
Promotion
40%
Estimated
Digital
Revenue
Split
39%
Media for
Equity
22%
Promotion
Online Video
Games
150,000
170,000
Fully Acquired
Maxdome in
FY10
200,000
Music
Games
Launched a JV with
broadband company
United Internet
Paid VOD
800,000
200,000
Alice Other
PSN
8%
Kabel Deutschland
2%
Unity Media
1%
6%
1%
Media Market
1%
Maxdome
27%
Sky 10%
2006
2007
2008
2009
2010
2011
2012
50,000
45,000
Tmobile
26%
iTunes
35,000
25,000
18,000
3,500
4,000
2006
2007
2008
2009
2010
Note: Active User is defined as users that stream at least 1 video per week
Source: Prosiebensat.1 media releases, GfK Panel Service Germany
8
2011
2012
Music
Games
Service Launch
Maxdome was launched in 2006 as a joint
venture between ProSiebenSat.1 and
Germanys second largest ISP, 1&1 (part of
United Internet AG)
Paid VOD
In December 2010,
ProsiebenSat.1 acquired
the remaining 50% of
Maxdome from United
Internet for 16.5 million,
6 million in cash in FY10,
the rest deferred to FY14
( 8.2million if discounted)
Early Mover
Advantage
2006
Large Content
Library Backed
by Own
Production
2010
2011
2012
P7S1 Network
Music
Games
AVOD
External Mandates
Other
23%
Positioned as the
aggregated video
portal for premium
video content in
German
29%
Branded TV catch up
portal for individual
channel / video online
on online verticals
IP Deutschland
ad sales agency for RTL
(100% owned by RTL)
The three pillars of online video assets have an
aggregated audience base of 26 million unique
users and achieved 920m website video views
in 1H2012 and 101m mobile video views
AVOD
Music
Games
6.6
5.8
7.9
8.3
8.3
Push premium
content
3.6
3.8
2006
2007
2008
2009
2010
2011
3.5
3.3
2.9
2012
MyVideo
Spiegel.de
Videos
Blid.de
Videos
tape.tv
Dailymotion
+129%
31
440
192
2006
2011
Note: Active User is defined as users that stream at least 1 video per week
Source: Prosiebensat.1 media releases, GfK Panel Service Germany
11
2012
Music
Games
2009
2010
Building popularity
2011
Transformation
2012
TV Anywhere
Building popularity
Mostly UGC
content
With best of
UGC, music
and TV
Extending
professional content
Short clips and full
episodes
Accessible on all
Internet channels
and devices
AVOD
Music
Games
Music Videos
Movies
Exclusive previews of
current box office
movies
Web Channels
Web-only premium
channels (>800) for
most famous artists
and brands
Genre channels:
games, comedy,
sports, entertainment
etc
2.8m monthly video
views
Live Shows
To date, MyVideo has a library of >165,000 premium quality videos. ProSiebenSat.1 differentiates itself from global video
portals such as YouTube and Dailymotion by positioning itself as the go-to destination for premium online content. As a result,
MyVideo is able to win the more valuable video views for advertising
13
Online Video
Music
Games
Media Investments
2010
2011
2012
2011
2012e
65.0
42.0
2011
65.0
42.0
2012e
2011
2012e
2012/2013
2013
Games
Market Place
Digital Commerce
Media Investments
Lifestyle Commerce
Majority Media
Investments
ProSiebenSat.1 have identified seven target segments most responsive and adjacent to TV
media. In particular, its investment in travel verticals and online market places has proved
to be very successful
15
Lifestyle Commerce
Sell services
Creative Agency
Start: 2010/2011
Music
Beauty &
Perfumes
Health
Fashion &
Accessories
Online Marketing
Strategic Roadmap
Online Video
Digital Ecosystem
Digital
Commerce
Online Video
Music
Games
2007
2008-09
2010-12
New Direction
New Partners
Growth Period
Synergy from
The Beginning
16
Starwatch Music
was created under
MM Merchandising
Media
Became a music
label and partnered
with Warner Music
Strong growth
Became 2nd largest
domestic label in
Germany
Roger Cicero
became the first
artist under
Starwatch to reach
platinum status
Renamed Starwatch
Entertainment
Started a live
ticketing business
and is expanding into
broadcast &
streaming
Created TMA, a
talent management
platform
promoting artists
through TV shows /
TV ad time
Online Video
Music
Games
2009
2010
2011
1H2012
51%
Acting as a
distributor for
other
publishers
Three digit
revenue growth
27%
Double digit
Launched
revenue growth
~13 game
Launched ~20
titles,
titles, started
first social
gaming platform
16%
Sat.1
Non-Germany
kabel eins
Germany
45%
55%
68%
Total Revenues
Note: Active User is defined as users that stream at least 1 video per week
Source: Prosiebensat.1 media releases, GfK Panel Service Germany
17
23%
32%
Paying users
77%
Active Users
Online Video
Music
Games
Licencing
Aggregating
Major Partners
Major Partners
Example Assets
ProSiebenSat has immersed itself in the gaming market. Its initial efforts at collaborating with producers has now
detoured down an alternate route, with the company positioning itself to capture market share both at the
distribution and direct consumer level, particularly in free-to-play online games
Source: ProsiebenSat.1 media releases
18
>250
Digital entertainment
Adjacent
>100
>150
>100
>150
>250
2010
19
ticketing/streaming
baseline
revenue
FTA German
FTA International
Digital &
Adjacent
Content
Production
2015e
Early Mover
Advantage
Digital First
Take Calculated
Risk
Leverage on TV
Synergy
Invest in
Adjacent Digital
Business
20
ProSiebenSat.1 started to position digital as a part of its core growth strategy after
recognising in early 2000 that growth in TV advertising market was slowing
Set a revenue goal ProSiebenSat.1 has a revenue goal: to generate 50% of total revenues
independently of the traditional TV advertising by 2015
By its nature, investment in digital start-ups is deemed to be risky the board needs to be
prepared to accept that, on average, only 1 in 10 will be very successful
Develop deep expertise in digital investment in order to better assess and mitigate risks
Contents
Executive Summary
ProSiebenSat.1 Case Study
Keshet Case Study
21
slow growth
48.5%
42.1%
348
359
43.4%
43.2%
44.7%
370
348
342
42.1%
37.5%
36.2%
39.8%
49.6%
306
31.4%
31.8%
25.1%
15.8%
1H07
2007
2008
2009
2010
2011
1H08
1H09
19.1%
19.0%
14.0%
1H10
1H11
2012E
Keshet
22
16.8%
Reshet
Channel 10
1H12
Leverage Content
Provide Expertise
2008
Organic
Expansion
2012
JV
2008
Acquisition
Online
Mobile
Promotion
Group
Buy
Online Verticals
Screenz
Recognising the slow growth in the TV sector, Keshet started to establish its digital diversification strategy
from 2006 and launched Mako in 2008. To date, it is estimated that 5% - 10% of Keshets total revenue is
from digital diversification
Source: ProsiebenSat.1
23
91%
68%
64%
63%
Web Portals
Leverage
on video
58%
38%
24
YouTube
Walla!
Ynet
Mako
Walla!
Ynet
Mako
Launched in
1995
Launched in
2000
Launched in
2008
Makos success is
primarily driven by its
ability to leverage its
popular TV content
Mako is ranked the top
destination for long
form video content by
traffic
Video advertising
represents a large
portion of Makos
revenue
Fashion Forward
is Israel's first
online fashion
magazine and
the only Israeli
website devoted
entirely to
fashion
Nine Months is a
dedicated online
resource for
expecting
parents
BIP is a comedy
website with a
dedicated
original content
team
PZM is the
largest soldier
orientated site in
Israel
Estimated Reach of
Mako Mobile Apps
25%
Styleriver is an
eCommerce site
that specialises
in fashion items
Ocheltov is a
leading food and
recipes site
Collection of
strange and
interesting
stories
Shironet is an
Israeli music
lyrics site
Keshet has many online assets that cover a wide range of verticals.
Makos main news site has sections that link directly to these online
assets, helping to promote smaller sub communities.
Note:
Source:
25
The success in promoting its own TV content through inhouse developed mobile apps, prompted Mako to launch an
app development business through joint venture with The
Box, a international content and advertising company, in
2012
Play-Alongs:
Tie-in with quiz TV shows; tailor
made app that allows users to
play TV game shows with their
Facebook friends
Animation Generator:
Tie-in with multiple TV
franchises; app that allows
users to film and record
animation from any existing film
or TV series for the fans to play
with and make their own
Example Clients
x
Music Algorithm:
Tie-in with music channel;
mobile app that creates
audio/video greeting cards
based on one input sound
Note:
Source:
26
Estimated Hebrew
Search Market Share
50%
50%
Netex
25%
Others
Buy2
75%
Note:
Source:
27
Key Takeaways
Be a digital
leader in
domestic space
Closely observe successful overseas digital models and be one of the first in the domestic
market to roll out such models (Buy2)
Provide a high degree of freedom for the digital division to experiment and develop new
business models (Screenz)
Leverage TV
Power
TV content and promotional power are the key to drive diversification growth
Expand upon the core attraction - video content to build multiple verticals
Keshet was able to use both its web portal and TV to promote its other digital businesses
such as Buy2 to gain competitive edge
Leverage
Mobile App
Experiment with using second screen (mobile game tie-ins for example) to promote TV
content
Keshet has achieved success in promoting its TV show through second screen media tieins. According to Mako, for some shows the ratings were boosted by ~10%
28
Contact information
Sydney
Suite 1904, Level 19
Chifley Tower
2 Chifley Place, Sydney
NSW, 2000
Melbourne
Level 50
120 Collins Street
Melbourne
VIC 3000
Singapore
11F, Straits Trading Building
9 Battery Road
Singapore
049910
justin.jameson@ventureconsulting.com