Market Insight

Banijay completes Endemol Shine acquisition to become Europe's largest production group

July 03, 2020  | Subscribers Only

Aled Evans Aled Evans Senior Research Analyst, Media
This product is included in:

Want to learn more?
Have an expert contact you.

Banijay Group has completed the acquisition of Endemol Shine Group from co-owners Walt Disney Company and US investment fund Apollo Global Management, after receiving approval from the European Commission this week.The price for the deal was not disclosed, but is widely reported to be $2.2 billion. 

The combined group will include around 200 production labels across 22 countries. The deal will see Banijay’s distribution division, Banijay Rights, control a combined catalogue of over 88,000 hours of content. Majority owneres with 67.1% are LDH, the holding company controlled by Stephane Courbit's LOV Group, and Vivendi (32.9%). The group will be headquartered in France.

With combined revenues in 2019 of approximately €2.7 billion the enlarged Banijay Group will be the largest production group based in Europe. The other leading Europe-based production groups are ITV Studios (2019 revenues €2.0 billion) and RTL-owned Fremantle (€1.6 billion). 

Our analysis

When the acquisition was first announced in October 2019, our analysis highlighted the natural fit of Banijay and Endemol Shine: the new group expands Banijay’s international network as many Endemol Shine production labels were established in territories where Banijay was weaker. Endemol Shine also has an extensive catalogue of finished programmes and formats (such as MasterChef and Deal or No Deal) to significantly boost Banijay’s distribution division. Additionally, Endemol Shine also produces a number of successful scripted productions (including Peaky Blinders and Black Mirror) which will give Banijay greater strength in scripted production at a time when leading subscription VoD platforms are investing heavily premium scripted content.

All of these positives remain. However, the production sector is having a problematic 2020 and the outlook for TV production is troubled on several fronts. Firstly, the production sector has been severely impacted in the first half of 2020 with the impact of the COVID-19 pandemic. A large number of productions have been put on pause during lockdown restrictions. There is also the longer-term impact of pandemic: the decline in TV advertising revenues limiting how much broadcasters can invest in new programming. Omdia forecasts a 14% decline in 2020 for TV advertising revenues in Western Europe.

It is unclear how long it will take for TV advertising revenues to recover and this will impact future commissioning budgets. However, this might be to the advantage of companies like Banijay as they control a large number of formats. This type of unscripted programming is cheaper and many broadcasters may be seeking lower cost content to make up for a shortfall of new productions. Formats might also be in demand in the coming years if advertising revenues take a long time to recover and broadcasters opt to schedule cheaper programming.

Secondly, there is the launch of direct-to-consumer platforms by major studios such as Disney+ and the upcoming Peacock and HBO Max. It is not clear if these new platforms are planning to acquire a significant amount of content from third party production groups. These new platforms may decide to focus on content from their own in-house studio. This silo effect could see production groups such as Banijay being limited in their ability to sell content to these new platforms. On the plus side, if major studios hold back content for their own direct-to-consumer platforms this should see the leading production groups face less competition when selling to rival platforms and broadcasters. It is unclear if this upside will be significant for the production groups: the downside of market silos is a risk for Banijay and other producers such as ITV Studios and Fremantle.

These negative factors are also likely to impact mergers and acquisitions activity in the sector. One of the other leading European production groups, Red Arrow, has been up for sale and has struggled to find a buyer. The ProSiebenSat.1 Group, owners of Red Arrow, suspended the search for a buyer in March 2020 and this week announced a restructure that did not indicate that a fresh search for a buyer was being considered. The apparent lack of interest in acquiring Red Arrow is an indicator of the underlying problems for the production sector: the advantages of owning a network of producers are proving less attractive for the largest players in global entertainment in these uncertain market conditions.

Research by Market
Media & Advertising
Share facebook Twitter Google Plus Linked In Add This Contact Us