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FINANCIAL STATEMENTS, MANAGEMENT AND CORPORATE GOVERNANCE REPORT.
2011
MEDIASET ESPAÑA: LEADER INTHE CRISIS
As we have explained other years, the adverse economic backdrop caused demand for television adver tising to fall
more in 2008 and 2009 that at any time before. Prices plummeted as public TV benefited from a dual financing model,
not to mention excess supply of TV space, with too many operators vying for the adver tising pie.
RTVE stopped broadcasting commercials in 2010 by law.This was something commercial networks had been lobbying for
and became even more impor tant with the adver tising market contracting sharply since 2008. In 2010, the disappearance
of adver tising from RTVE, which prompted private operators to attempt to push up prices, coupled with a relatively
more propitious economic and business environment, at least in the early par t of the year (e.g. subsidies on automobile
purchases, imminent hike in VAT on 1 July,World Cup in South Africa), boosted TV adver tising sales by 5.2%.This was a
healthy increase considering the state of the economy.
However, in 2011, theTV adver tising market plummeted again, even despite signs early on pointing to a year of moderate
growth, as we suggested in our 2010 management report.
Unfor tunately, the truth was far worse.With final data on the performance of the adver tising market by Kantar Media
still to be released at the date of preparation of these financial statements, estimates point to a decline inTV adver tising
revenue of around 10% in 2011, with far steeper falls in the third and four th quar ter.
The highlight of 2011 for Mediaset España was the integration of Cuatro into the rest of the Group’s operations following
its acquisition on 28 December 2010.This integration boosted the Group’s share of global advertising sales and provided
a target complement to the Group’s commercial strategy. That said, when the market really slumped from the second
quarter, expectations of unlocking the value of the advantages of the integration were pushed back until demand effectively
recovered. Nonetheless, its leadership position on this front (43.5% share in 2011, more than 10 points above its closest
rival and moving up to 44% in the last quarter) leaves the Group poised to benefit when the trend reverses.
Turning to audience, Cuatro’s integration came at the time when specific TDT channels (Divinity, La Siete, FDF, Boing)
were growing and solidifying their positions through a strategy aimed at diversifying and targeting different viewer profiles.
This strategy shored up both overall family and individual audience shares of each, thereby avoiding cannibalisation.
What’s more, TV consumption was at its highest ever, not only due to the economic crisis, but also to the greater
audience diversification and penetration through fragmentation.
To illustrate, data show Mediaset España was the overall leader in 2011, with a 26.4% share, more than 4 points ahead
of RTVE and 9.3 ahead of its main commercial competitor.The Mediaset channel reached a 14.2% share in the year, just
three-tenths below La Primera (RTVE) but 2.7 points above the second operator. Meanwhile, Cuatro’s share was 6.1%,
0.4 points from its main competitor, La Sexta. A new channel, Divinity, began airing in the first quar ter of 2011. Mainly
targeting young, urban women, this channel achieved a highly satisfactory 0.7% average share for the year.
Comparing the Group’s results in 2011 with those of 2010, we see:
• Total operating income increased from EUR 855,061 thousand in 2010 to EUR 1,009,330 thousand in 2011.
• Operating expenses increased from EUR 635,620 thousand to EUR 844,801 thousand due to the acquisition of
Cuatro. In like-for-like terms, however, the Group’s effor ts to reduce costs (mainly programming) were evident,
especially once the downtrend in the adver tising market was clear.The ability to lower costs in a highly operatio-
nally geared industry likeTV stems from Mediaset España’s naturally flexible television model, predicated on having
a greater weight of in-house than outside production. Also helping to lower costs in the year were the absence of
major spor ting events, the extraction of synergies from the integration of Cuatro and the fewer number of films
screened compared to 2010.
• Profit from operations amounted to EUR 164,529 thousand, down from EUR 219,441 thousand in 2010, leaving
an operating margin (profit from operations/operating income) of 16.3% in 2011 compared to 25.7% in 2010.
Given the high operational gearing inherent in the TV business, the decrease relates mainly to the downturn in the
adver tising market in the year despite major effor ts to rein in costs, as explained above.