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Has Netflix Killed Off Linear TV? This CEO is About to Find Out

(Bloomberg) -- Max Conze’s predecessor running ProSiebenSat.1 Media SE was shown the door after he called the German broadcaster’s viewers “slightly obese, slightly poor.” One of Conze’s first steps after accepting the job: Spending the day with viewers such as a father and daughter who watch a top model competition and a couple who like the morning show.

“I believe that it’s important to always put our viewers and customers first,” Conze said at a May 16 shareholder meeting. “If the customer is happy, we are as well.”

Conze, the former chief executive officer of vacuum-maker Dyson Ltd., inherits some big challenges as he takes the helm at ProSiebensat.1 on June 1. The company has lost several top managers and nearly half its value since 2015, the share slide leading to its ouster from Germany’s DAX index. To do that, he’ll have to shape a clearer vision for the unwieldy web of businesses assembled by former CEO Thomas Ebeling.

ProSiebenSat.1 owns TV channels, produces scripted shows, and sells stuff ranging from skydiving tickets to sex toys -- the legacy of a strategy of investing in e-commerce startups embraced by Ebeling. Analysts question whether that path makes sense as Netflix Inc. and Amazon.com Inc. expand in Europe, winning viewers with ambitious lineups of original programming.

“ProSiebenSat.1’s last 12 to 18 months have been shaky,” said Conor O’Shea, an analyst at Kepler Cheuvreux who has a hold rating on ProSiebenSat.1. “There’s a lot of trust to be rebuilt among investors.”

Conze’s time with viewers shows that the linear TV is among his top priorities. Here are four areas that will consume his attention as he looks to revive the ailing German broadcaster, which has been led by interim CEO Conrad Albert since Feb. 23:

Rejig Linear TV

ProSiebenSat.1 has focused on long-term output deals with U.S. studios to fill its schedule with sitcoms such as “How I Met Your Mother” and “The Big Bang Theory.” Those shows still perform OK, and linear TV ratings are in better shape in Germany than in the U.S. or the U.K., but it’s quality local content -- something rival RTL Group SA has focused on -- that can help set broadcasters apart from larger competitors, said Annick Maas, an analyst at Liberum Capital.

“If you just show U.S. content, why would you not go with Netflix or Amazon rather than ProSieben?” Maas said. “Local content also tends to be cheaper.”

Fend Off Netflix

It’s a question Conze has to answer eventually. Local content may be a solution, says Maas, and so is a well-working online strategy. ProSiebenSat.1 has teamed with Discovery Inc. to set up an ad-financed streaming platform called 7TV, and also runs the subscription-based Netflix clone Maxdome. Unless both of those can gain major scale, they may be fleeting attempts to win over younger viewers, given that Netflix is doubling its budget for original programming in Europe this year to a staggering $1 billion.

The broadcaster could sell Maxdome to avoid direct competition with the U.S. streaming giants and focus on providing viewers with easy access to its content wherever they are -- at home on the couch or on smartphones, said Kepler Cheuvreux’s O’Shea.

Conze said he wants to expand ProSiebenSat.1’s reach across all channels -- whether it’s on linear TV or online and not wait for U.S. internet giants to fully shape the future of its entertainment.

Define E-Commerce Strategy

In theory, ProSiebenSat.1 is among Europe’s most diversified broadcasters. The company generated nearly half of its sales online last year and wants to grow its $2.1 billion e-commerce business of 10 startups with partner General Atlantic LLC through international acquisitions. Ebeling’s strategy of offering free TV ads in return for equity stakes worked to turn those startups into well-known brands in Germany, but further growth has so far been elusive.

There’s hope Conze has a more concrete vision for how ProSiebenSat.1 can grow its e-commerce activities abroad. The German national appears to have gotten the job because he’s an entrepreneur, and because he knows marketing and advertising, said Karin von Abrams, an analyst at researcher EMarketer Inc.

“Dyson’s involvement in various e-commerce channels grew while he was there -- and he will likely try to answer the question of whether e-commerce can be even more important to ProSiebenSat.1 than it already is,’’ von Abrams said.

At the shareholders meeting he pointed to Dyson, a seemingly boring vacuum cleaner business that he helped transform by expanding in Asia, adding new products and “aggressively using the opportunities of digitalization.”

Win Shareholder Trust

ProSiebenSat.1 shareholders have been burned over the last few years. Conze needs to convince investors to give him a chance. To start, he’s asking for a bit of patience, as he tries to deliver on a goal to clearly boost the stock within three years.

“Please don’t only evaluate us from quarter to quarter, because shaping a future isn’t a sprint but a marathon,” Conze said.

©2018 Bloomberg L.P.

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