Prisa Financial Turmoil

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  1. 1. The Spanish Media and the financial turmoilThe case of PRISAJuan Luis Manfredi Snchez, Ph.D. IE School of Communication Mechelen UniversityApril 2009Juan Luis Manfredi Snchez, Ph.D.IE School of Communication Email: juan.manfredi@ie.edu
  2. 2. Main characteristics of the Spanish Media Companies (1) There are public and private audiovisual operators There is no more State-owned press, but the weight of the institutional and political advertisement makes it determinant in the growth and decline of media(2) The multimedia groups are consolidated There is an increasing trend into the mergers and acquisitions Lower players, the same market The market moves every 2-3 years in the search of stability The market is dynamic E.g. Telefnica comes in and takes out several times without a clear strategy Juan Luis Manfredi,
  3. 3. Most important examples are:Grupo Correo + Prensa Espaola VocentoVa Digital + Canal Satlite Digital Digital PlusPlaneta buys Antena 3 and Onda Cero RadioUnedisa mergers RecoletosPRISA launches Cuatro TVMediapro launches La Sexta(3) The audiovisual divisions are the heart of the companies and the content providers Print media were the kings, and now they are more reference press than influence pressJuan Luis Manfredi, Ph.D.
  4. 4. (4) New players are changing the face of the Spanish market The lack of transparency Scoop! No limits to IPO and exchanges The DDT challenge (5) The lack of financial strength in comparison to banking, energy or services Most of the print media are family business TV and radio are guided by state-boundaries and indications (licenses, authorizations and certifies) These companies lack of industrial liasons, corporate strategy or marketing (CRM) It means dependency on national financial health (GDP) and certain political friendships (political parties)Juan Luis Manfredi, Ph.D.
  5. 5. Vocento, Antena 3 TV, Tele 5, PRISA, and Recoletos are public owned companies but their financial results are irregularOther projects like Quiero TV or Diario 16 closedNow, the group Zeta is in troublesJuan Luis Manfredi, Ph.D.
  6. 6. PRISA share value declines more than the average in the last five years Juan Luis Manfredi,
  7. 7. Vocentos behavior is similar from the beginning Juan Luis Manfredi,
  8. 8. Crisis, what crisis?
  9. 9. Crisis, what crisis? (1) Less incomes from advertisement (it is related to GDP and real economy) (2) The financial crisis is affecting especially to media companies (3) The inflationary spiral: soccer and F1 racing (4) Less promotional issues but more investments in marketing and promotion (5) Some companies adapt to new times (6) The lack of management: tangible assets, audiovisual rights, and new investmentsJuan Luis Manfredi,
  10. 10. The international trend is based on mergers and acquisitionsThe bigger, the more powerBut the facts are sacred and they confirm that the strategy failsWe can now remember Vivendi and AOL Time Warner and learn numerous lessonsWe foresee no more than 10 big media groups in the international arena, as well as national champions allocated at specific markets/languages Juan Luis Manfredi,
  11. 11. Did Messiers strategy created value for the shareholder? No, it didnt.(1) Decreased value through diversification in unrelated areas (2) Decreased value through re-investing cash into lower return business (3) Decreased return due to investments made chasing after national or personal pride issues (4) Other reasons than profitability: political reasons and the national championsWhat will happen with PRISA? Juan Luis Manfredi,
  12. 12. Who is PRISA?Juan Luis Manfredi, Ph.D.
  13. 13. El Pas It is the reference press in Spain Founded in 1976 The newspaper is leader in the Spanish market: 430,000 (M-F) and 780,000 (weekend) daily sales 29% of the market Sells 100,000 more than the follower 2 million daily readers Javier Moreno (about 40 years old), the current director, is not journalist Two challenges: is not leader at all Global Spanish Press referenceJuan Luis Manfredi, Ph.D.
  14. 14. Unin Radio It is the reference radio stations in Spain Shareholders: PRISA + God (family business) + Grupo Latino de Radio 1,235 stations and 28M audience Where? Spain, USA, Mexico, Colombia, Costa Rica, Panama, Argentina and Chile The current strategy is trying to expand to Portugal and more Latin- American countries Juan Luis Manfredi, Ph.D.
  15. 15. The most important one is Cadena SER: 4,59M daily audience 41% of audience0,069 Euskadi Irati 0,163Radio Galega 0,252 Radio Euskadi 0,273 Rac 10,302Canal Sur Radio0,43 Punto Radio0,508Catalunya Radio1,13 RNE R1 1,711OCR 2,107Cope 4,598 SER0 0,5 11,5 2 2,5 3 3,5 4 4,5 5 Juan Luis Manfredi,
  16. 16. Cuatro TV Analogical TV Audience: urban, young people National Spanish team and Euro 2008Localia 100 local stations in 43 big cities 20M audience annually Agreements with NBC, Disney, National Geographic, BBC and Discovery
  17. 17. Digital Plus Mature market 50% of the market and about 2M subscribers The thematic TV reachs the 12% of the total audience How to get finance? Monthly subscription (EUR)
  18. 18. Why did I choose this case? PRISA is (was?) the most important private media group in Spain It has been created from family business (Polanco) and it has become the leader in audiovisual, print, radio and education Indeed, a very good example of multimedia integration The audiovisual division leads the business From 2000 to 2008, it was the wonderful decade: 2000 Sogecable, the audiovisual division, goes public 2003 Digital Plus appears after the merger of Va Digitaland Canal Satlite Digital 2005 Cuatro, new analogical TV license 2004-2008 International expansion: 15% of Le Monde,35% of Media Capital (Pt), and Grupo Latino RadioJuan Luis Manfredi, Ph.D.
  19. 19. Let see how the company was only three years ago.Olympic Games and World Championships mean always cash for media companiesAnd the crisis was neither in NINJAs mindJuan Luis Manfredi, Ph.D.
  20. 20. How were the earnings distributed? Juan Luis Manfredi,
  21. 21. Where did the $$$ come from? Juan Luis Manfredi,
  22. 22. The magic years end, the EBITDA falls and the problems appearThe data are in M EURJuan Luis Manfredi, Ph.D.
  23. 23. The print media division is the worst one The decline of the EBITDA shows the crisis of print media in Europe and USAJuan Luis Manfredi, Ph.D.
  24. 24. And the perfect storm is coming
  25. 25. And it is not this one Juan Luis Manfredi, Ph.D.
  26. 26. PRISA has big financial debts > incomes and tangible assets The current debt ascends to 4,800M EUR 300M EUR are annually financial interests The current stock market price is 600M EUR To compare, in 2007 some operations were made: ZETA group was put for sale for more money and had less tangible assets and brands Unedisa bought Recoletos for 1,100M EUR Vocento bought the free-daily Qu! 139M EUR (and itloses money!)Juan Luis Manfredi,
  27. 27. Other elements to consider: (1) The decrease influence and the lower sales of the print media, especially El Pas(2) The mature market of Digital Plus(3) The shareholders would like to sell the audiovisual division to avoid the total devaluation of the stock The stock loses about the 80% after the launch(4) PRISAs Sogecable takeover bid Juan Luis Manfredi, Ph.D.
  28. 28. PRISAs Sogecable takeover bid Sogecable is the audiovisual company from PRISA groupJuan Luis Manfredi, Ph.D.
  29. 29. And after the takeoverJuan Luis Manfredi, Ph.D.
  30. 30. And after the takeover PRISA 100%Juan Luis Manfredi, Ph.D.
  31. 31. The takeover establishes the initial price: 27,98EUR per shareAccording to Spanish Law, if you obtain more than the 51% (=total control), you have maintain the bid for all the other shareholdersAnd, then, the financial crisis comes and most of the shareholders accept the bidIt increases the difference between the share value (financial economy) and the cash (real economy)Only Telefnicas sell means 650M EUR! Juan Luis Manfredi, Ph.D.
  32. 32. The first measure has been the launch of financial instruments to about 2,000M EUR It is the worst time to ask for help and financial aid in the international markets Why? To avoid the hurry and to try to sell Digital Plus after the turmoil There are 10 candidates to buy assets, but no more than 4-5 are real offers Juan Luis Manfredi, Ph.D.Juan.manfredi@ie.educiberdemocracia.blo