(News Bulletin 247) – The two audiovisual groups fell on the Paris Stock Exchange on Tuesday following the publication of their annual results. Both companies will expand into non-linear television.

After the failure of their merger about six months ago, TF1 and M6 are heckled on the stock market on Tuesday. The two large private audiovisual groups listed in Paris, which have both just published their annual results, lost ground on the Paris Stock Exchange on Tuesday, the One losing 5.8% around 11:20 a.m. while the Six further limited its decline, at -1.4%, at the same time.

“The annual results of M6 are higher than expected while those of TF1 are roughly in line,” said an analyst.

“The market seems to fear the ‘B’ plans that the two channels will put in place after the failure of their merger. The idea would be that the development strategy on non-linear [le visionnage de contenus sur des plateformes numériques, à la demande et non pas en direct, NDLR] risks costing both companies dearly,” he adds.

Heading towards streaming

In its press release accompanying its annual results, M6 explains that after the abandonment of its merger project with TF1, the media group “is finalizing a strategic project, mainly focused on the continuation and acceleration of its streaming projects. (AVOD)”.

“We launched our first catch-up television services in 2008 with M6 Replay, we invested in technology with the technology company Bedrock, we already generate nearly 100 million euros in digital advertising revenue, but we need to step up our efforts” , detailed at Echoes the chairman of the management board of M6, Nicolas de Tavernost. The manager mentions in particular the launch of a soap opera which would represent an investment of 30 million euros per year in 2024.

TF1 for its part warned very early, from the beginning of 2022, that it was working on a plan B, in the event of failure of the merger with M6. On Tuesday, the audiovisual group now headed by Rodolphe Belmer (ex-number one for Atos, Eutelsat and Canal+) declared that it wanted to “accelerate on digital”, “maximize value on linear television” and above all “establish itself as the first French free streaming platform”. Rodolphe Belmer nevertheless clarified to analysts that “this digital expansion” would result in “globally stable” programming costs.

M6’s advertising revenue suffered in the fourth quarter

Beyond the strategic shifts taken by the two audiovisual groups, TF1 and M6 experienced a downturn in their activity at the end of the year. M6’s advertising revenue in television fell by 10% in the fourth quarter and by 5.1% over the whole of 2022. Over the year as a whole, the total turnover of the sixth channel fell fell 2.4% to 1.36 billion euros.

“Faced with an unfavorable base effect, marked by the sustained post-covid recovery in household consumption, the TV advertising market was penalized in 2022 by the deterioration of the economic environment. This weighed on advertising investments several sectors, which suffered in particular from inflation in the price of raw materials.Finally, the group’s TV advertising activity suffered from the broadcast of the Football World Cup on TF1 in the last quarter, which weighed heavily on advertising investments. advertisers on competing channels”, detailed M6 in a press release.

TF1 actually held up better. In the last quarter of 2022, its advertising revenues limited their decline to 1%. The audiovisual group explains that at constant scope, the advertising revenue of the media division even shows an increase of 11 million euros (+2.1%) thanks to the performance of the matches of the Football World Cup. “A great performance,” said an analyst in front of the group’s leaders during the conference call.

Over the whole of 2022, advertising revenue stood at 1.669 billion euros (-1.5% compared to 2021), a figure however slightly lower than the consensus expectations cited by UBS, of 1.677 billion euros. euros. In addition, thanks to other income from Newen Studios, turnover increased by 3.3% over one year to 2.508 billion euros.

M6’s margin has increased

Still, on the operating margin M6 maintains its leadership. Excluding public aid, M6’s current operating margin stood at 24.6% in 2022, compared to 23.5% in 2021. “This increase in the margin rate despite a drop in consolidated turnover notably reflects the flexibility of the group in the management of its costs, the synergies developed between all of its branches and the contribution of Stéphane Plaza Immobilier”, a company in which M6 became the majority shareholder last year, explained the company.

TF1, for its part, saw its current operating margin drop from 14.1% in 2021 to 12.6% in 2022. However, the group had benefited from exceptional tax credits of 29.5 million euros in 2021. restating this exceptional item, the margin would be almost stable (12.6% in 2022 therefore and 12.9% in 2021, according to our calculations).

Salto sinks net profits

On the last line of account, the two groups saw their profits being penalized by the judgment of Salto, the defunct French “Netflix”. TF1 explains that it suffered “liquidating losses” of 46.1 million euros. Net profit thus fell by 22% to 176.1 million euros in 2022. M6 mentioned a total impact of the same magnitude as TF1, i.e. 46.1 million euros. Its profit fell to 166 million euros for 2022, against 281 million euros in 2021.

Both groups will have to show their resilience during a year 2023 which promises to be difficult. In a recent note, Barclays bank explained that French advertisers had informed it of a forecast of a decline in the advertising market of between 5% and 9% in the first quarter of 2023.

Asked by analysts, Rodolphe Belmer explained that the first quarter of 2023 would be “perhaps a little more cautious” than the rest of the year, which would have “a better revenue profile”. This year’s activity will be “focused on the end of the year”, he also judged.