BREAKINGVIEWS-European TV M&A would only delay a gory finale

By Jennifer Johnson

LONDON, May 6 (Reuters Breakingviews) - Usually, it’s Hollywood that can’t resist a remake. But recent M&A chatter shows that Europe’s small-screen bosses love rehashing a familiar plot too. Some of the region’s traditional linear-TV broadcasters are mulling deals, in some cases in the hope that consolidation will help them fight U.S. streaming giants like Netflix NFLX.O. That would be an implausible plot twist: in reality, mergers would only mitigate the industry's pain.

The cast of M&A characters will be familiar to TV-sector watchers. MFE-MediaForEurope MFEB.MI, controlled by Italy’s Berlusconi clan, made a 1.5-billion-euro ($1.6 billion) bid for Germany’s ProSiebenSat.1 Media PSMGn.DE in March. Separately, the German owner of 1.6-billion-euro French broadcaster Metropole Television MMTP.PA indicated last month that it would like to revive merger talks with local rival Television Francaise 1 TFFP.PA, which failed after an initial 2022 attempt because of competition concerns. Various suitors, including production house Banijay and RedBird IMI, have mulled offers for all or parts of Britain’s 3-billion-pound ($4 billion) ITV ITV.L, Reuters reported.

In-country mergers would bring chunky cost savings. And even cross-border deals, while less logical, should at least allow for greater bargaining power with key suppliers or customers. But these virtues won’t change the fact that viewing habits are shifting. Last year, people under the age of 35 devoted half their TV use to streaming services and video sharing platforms like Alphabet’s GOOGL.O YouTube, according to Enders Analysis. That’s a stark contrast to the over-55 cohort, who spend 90% of their TV time with traditional broadcasters.

One theory is that beefed-up local groups with higher production budgets will produce more must-watch shows. But Europeans already outdo U.S. streaming giants when it comes to investment in original shows specifically for the local market. Spending on European original content including movies totalled 22 billion euros in 2023 according to the European Audiovisual Observatory, a members’ body that gathers data on the industry, but only 26% of that sum came from global streaming services. In other words, local production budgets don’t seem to be the problem: it’s more that viewers are happy to watch shows conceived and made for the United States or a global market. Here, Netflix has an insurmountable advantage given its worldwide scale and reach.

Ultimately, there’s little to lose from consolidation. Slashing shared costs and investing the proceeds into marketing or new shows is the best way to stop these companies from going the way of traditional newspaper groups like Reach RCH.L, the Daily Mirror owner which trades at a lowly 3 times its projected earnings for the next 12 months. Still, the broadcasters’ valuation premium to the print press has been shrinking over the past decade. It’s not clear that M&A can move them off this long-term trajectory.

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CONTEXT NEWS

The Financial Times reported on April 27 that French media group Banijay was in early-stage buyout talks with UK broadcaster ITV. The same newspaper reported on April 22 that the CEO of German conglomerate Bertelsmann wanted to revive a merger between its French broadcasting business Metropole Television and local rival Television Francaise 1.

The parties attempted a deal in 2022, but was scrapped after competition authorities said the combined group would need to sell a major channel to win approval.