In November last year, the head of Germany's ProSiebenSat.1 went cap in hand to his biggest investors looking to raise more than half a billion euros. The cash was to be used to finance the company's further shift away from relying on its television advertising business and create a more broadly based digital powerhouse, ProSieben Chief Executive Thomas Ebeling explained.
More than six months later, shareholders are still waiting for Ebeling to spend the money and are increasingly uneasy about the strategy. The broadcaster says its plan is simple - to encourage viewers of its TV shows to use its online sites as well. Investors said an initial partnership with Zalando some five years ago raised expectations as the online fashion retailer grew into a European leader thanks in part to being promoted on ProSieben's channels.
"Our strategy is to realise synergies from the combination of our entertainment and commerce assets. The underlying idea is: watch, click and buy," said a ProSieben spokeswoman. But critics say the company lacks a clear leader in an e-commerce portfolio which they argue is too diversified, with activities in travel, price comparison, online dating and even sex toys.
Shares in the group, which have been part of the DAX index of leading German companies for more than a year, have underperformed European media sector peers by 17 percent over the past 12 months. "There is a lot of scepticism at the moment," said a top 10 ProSieben shareholder, noting that some investors opted to sell when the shares fell after the capital increase.
"Everyone is now afraid of further value destruction," he added. "It's not clear how they'll grow digital." Defending the strategy, the company spokeswoman pointed to profits of 250 million euros ($282 million) generated by the 40 e-commerce firms ProSieben has bought at a cost of 1.1 billion euros since 2012. ProSieben has just passed the landmark of generating more than half of its revenues outside its traditional TV advertising business and aims to extend this trend in 2018.
POTENTIAL PARTNERS ProSieben, whose programmes include "Germany's Next Top Model", faces familiar challenges to other established broadcasters in European markets. Rival streaming services are disrupting viewing patterns and making it harder to deliver the mass audiences for which advertisers are prepared to pay premium rates.
Faced with this changing landscape, ProSieben has held informal talks with a number of peers about possible tie-ups over the past 12-18 months, according to sources with knowledge of the talks. However, ProSieben's digital business, its strong German focus and still relatively high valuation, have put off all the potential partners. Only Britain's main commercial channel ITV - described by all the sources as the ideal partner in ProSieben's view despite the potential negative impact of Brexit in the short-term - could offer a glimmer of renewed hope after the departure of Chief Executive Adam Crozier at the end of this month. Crozier was seen as being opposed to a merger after successfully turning the British broadcaster around.