Non-Financial Performance Indicators

Organizational advantages, own brands, stable customer relations and creativity are important success factors. These and further so-called non-financial performance indicators of the ProSiebenSat.1 Group are explained below. For the most part, they are not assessed financially. Human resources potential is another important intangible criterion that is not recognized in the statement of financial position. On the other hand, we capitalize certain internally generated intangible assets at a low level. For further information on internally generated intangible assets, see Note 18 “Intangible Assets” in the Notes to the consolidated financial statements.

Competitive Advantages through Integrated Organization with Established Brands

The ProSiebenSat.1 Group manages the majority of its companies as 100% subsidiaries, including its complementary coordinated station portfolios. This distinguishes the Group from its competitors and opens up advantages in selling advertising time or licensing programming rights. At the same time, the Group creates synergies through its integrated organizational form and raises its efficiency. Moreover, the German TV stations are organized in a matrix structure. Thus, the TV pillar has shorter communication channels and avoids the build-up of fixed costs.

In a media market that is becoming steadily more fragmented, the popularity of brands is an important success factor. ProSiebenSat.1 is excellently positioned in this regard. Various studies attest to the popularity of the station family. With a quantitative analysis conducted in 2012, ProSiebenSat.1 TV Deutschland GmbH again investigated the correlation between the range of stations and utilization on the German media market. At the same time, it was examined how many and which TV stations German viewers used. The results show that German households mostly use established brands, despite an extremely extensive range averaging 82 receivable TV stations. Occupying the second and third positions in the so-called “relevant set,” SAT.1 and ProSieben are among the most viewed TV stations in Germany. kabel eins was ranked No. 8. The biggest winner is sixx. The women’s channel moved up 16 places within one year. In 15th place, sixx finds itself in a very good position two-and-a-half years after its launch and achieved the greatest improvement of all the analyzed stations.

The ProSiebenSat.1 Group regularly examines image, popularity and relevance of the free TV stations in Germany. In the current studies which are representative for the general population, the ProSiebenSat.1 stations achieved the following results for 2012:

• ProSieben is the most popular and appealing free TV station among the target group relevant for advertising of 14 to 49 year olds. 52% of those surveyed like to watch ProSieben (very) much. The TV channel is thus ahead of market leader RTL (48%). In the so-called “desert island question”, the participants were asked which station they would select if only one was possible. ProSieben performed best, at 23%, and was thus ahead of ARD and RTL (both 15%). In addition, viewers attested to ProSieben the highest competence in the genres movies, evening series, mystery series, American and British comedy series, entertainment as well as science magazines.
• SAT.1 is rated as an entertaining family station and a station with emotion. The viewers’ emotional connection to the station grew strongly year on year. SAT.1 is leading in the genres breakfast television and investigative documentaries. The station is ranked second for comedy shows, just behind RTL. In addition, the station achieved strong figures for inhouse German TV films and American crime series.
• kabel eins, among the second-generation stations, is viewed as the most entertaining, most exciting, and most reliable TV channel. In response to the question as to the extent the range of programming had developed in comparison to the previous six months, kabel eins was the only station which achieved a significant positive change. The station’s popularity also rose strongly, with an increase of six percentage points to 29%. The majority of those surveyed described kabel eins as an entertainment station for the whole family with the best movie classics.
• sixx increased its popularity considerably again in 2012. Its level of aided awareness rose by 17.6 percentage points compared to fall 2011. The station thus reached an overall figure of 81.4% among the 14 to 49 year old viewers. In comparison, when the women’s channel went on air in 2010 only 43.1% of those surveyed knew the channel. sixx scored particularly well in its target group. For cult series for women, sixx is in first place, ahead of the heavy-weights ProSieben and RTL. Along with series and movies, viewers value formats that generally deal with women’s topics.

As well as the results of regular studies, another indicator of the popularity and quality of our formats is numerous awards. In 2012, ProSiebenSat.1 TV Deutschland again won numerous awards for its programs and artists. The winners included the music show “The Voice of Germany” (SAT.1 and ProSieben) and the comedy format “Knallerfrauen” (SAT.1).

In comparison to the previous year, ProSiebenSat.1 TV Deutschland received a higher number of awards in the most important television competitions.

The ProSiebenSat.1 Group also has a portfolio of well-known brands in the digital sphere. These include the video-on-demandVideo-on-demand Allows the user to stream or download videos at any time. portal maxdome, the internet platform MyVideo, and the social TV application “ProSieben Connect”. Here the close integration of TV and digital activities plays an important role. For alongside TV ratings and click rates, response in social networks is an increasingly important non-financial performance indicator.

Combined, the ProSiebenSat.1 Facebook pages have more than nine million fans and are thus well ahead of its private competitors. The most successful pages are those of the station ProSieben and the science program “Galileo” as well as “TV total”. In 2012, those three sites each surpassed the one million fans threshold. In 2011, ProSiebenSat.1 developed the interactive online application “The Voice Connect” for the hit show “The Voice of Germany.” Alongside a live stream of the TV show, the application integrates the social networks Twitter and Facebook. Thus, users can exchange with other viewers live during the program without leaving the ProSiebenSat.1 applications. They receive exclusive backstage information and can participate in voting. Users with a high level of interactivity receive virtual or real rewards. In 2012, ProSiebenSat.1 expanded the “Connect” application to include big shows such as “Germany’s Next Topmodel — by Heidi Klum”. For the ProSiebenSat.1 Group, social TV applications are an important instrument for increasing the connection between the audience and the show and station brands. For this reason, three years ago the Group set up a permanent, cross-divisional project group that developed a social media strategy for the Group and continues to ensure the cross-media interaction of TV, online and social media.

TOP 5 STATION WEBSITES IN GERMANY ON FACEBOOK

TOP 5 FORMATS OF THE PROSIEBENSAT.1 GROUP ON FACEBOOK

Thanks to its strategic brand leadership, ProSiebenSat.1 is one of Europe’s most successful media corporations. Strong brands constitute an important value creation factor for the ProSiebenSat.1 Group. The Group makes selective use of the popularity and reach of its TV stations in order to expand in related areas and develop new brands. In 2012, the marketing expenses of the Group for continuing operations amounted to EUR 44.8 million (previous year: EUR 33.5 million). These include all expenses in relation to program and image communication of the ProSiebenSat.1 Group with the exception of market research and PR activities. Key investment areas were online marketing measures, print advertisements as well as events and fairs. The ProSiebenSat.1 Group expanded the marketing budget for diversification activities in 2012. The company works continuously on increasing the reach and success of its media offerings further. For this reason, it will also invest in sustainable marketing campaigns.

Long-Standing Supplier Relationships

Attractive programming is one of the most important requirements for the ProSiebenSat.1 stations’ success with viewers. For this reason the Group maintains close dialogue with domestic and international film studios, as well as film and TV producers, which ensures a long-term supply of programming for the Group. The Group has agreements with virtually every major Hollywood studio. In 2012, the contracts with Warner Bros. International Television Distribution, CBS Studios, and Paramount Pictures were extended for several years. Due to its good supplier relationships, in the last few years the ProSiebenSat.1 Group has also concluded comprehensive contracts with US licensors for the video-on-demand portal maxdome and has acquired attractive series and blockbuster rights — e.g. from Twentieth Century Fox, NBC Universal, and Disney/ABC Studios in 2012. With more than 50,000 titles, maxdome is now Germany’s largest video-on-demandVideo-on-demand Allows the user to stream or download videos at any time. platform. Moreover, the Group cooperates with local TV producers and creative partners. For example, Dutch format developer and partner John de Mol has developed programs including the hit show “The Voice of Germany.”

Solid Customer Relationships

Advertising budgets are often granted on a very short-term basis. For that reason, the Group sets great store on retaining customer loyalty. In the core German market, the regional sales offices of the sales subsidiary SevenOne Media have principal responsibility for this. Here, intensive and tailored consultation and various marketing and research services are the essential pillars.

As well as maintaining the existing customer base, the new customer business is vital for the sustainable financial success of the ProSiebenSat.1 Group. Alongside SevenOne Media, the ProSiebenSat.1 subsidiary SevenOne AdFactory also made another significant contribution to this business in 2012. The company develops individual, cross-media marketing concepts for advertising customers, in which all of the Group’s advertising forms and media platforms are integrated — from traditional sponsorship to product placement and online, mobile, and applications such as HbbTV and social TV. In addition, in 2012 ProSiebenSat.1 established the creative agency Sugar Ray. The Group thus extends its value chain and now offers the implementation of audiovisual communication solutions. Thus, advertising customers have access to the complete range of services of a full-service provider, from idea conception to implementation. Using these measures, ProSiebenSat.1 increased revenues from new customers to a gross figure exceeding EUR 100 million in 2012.

To strengthen audience loyalty, the ProSiebenSat.1 Group offers an extensive information service. The viewer service departments take viewers’ questions and suggestions. In Germany, the centralized viewer services for the ProSiebenSat.1 Group’s free stations logged almost 110,000 contacts in 2012 (previous year: 120,000). Each contact was dealt with individually. Viewers most often had questions about the program. A factor impacting the lower numbers of enquires was the sports year which directed audience interest to public broadcasters. In addition, social media platforms are becoming more important as an additional feedback channel. Our editors also answer questions about TV and online programs on Facebook and provide additional information on the content. In 2012, this made up 11.6% of written contacts. In comparison, letter contacts were down (by 3.6%) as were e-mail enquiries (by 9.5%). Comments and suggestions from our viewers are very important to us, since they contribute to the optimization of our programming. Those responsible for programming receive regular reports on viewer feedback. Furthermore, the departments request special analyses of specific topics.

Research and Development

The ProSiebenSat.1 Group conducts intensive market research in every area relevant to its business activities and in every area in which it foresees growth potential. However, market research activities do not fulfill the definition of research and development in a narrower sense, so more detailed figures are omitted from the management report.

Intensive market research and creativity are competitive advantages. Market analyses are used as a guiding parameter in the process of planning operations and strategy. At the same time, market data and analyses are an important basis for capably advising our advertising clients. In 2012, expenses for Group-wide market research activities in continuing operations totaled EUR 6.0 million (previous year: EUR 7.7 million).

At ProSiebenSat.1, 38 employees work in various research units. They prepare investigations and analyses on advertising impact, on trends in the advertising market and media use and also assess economic and advertising market projections. For instance, in 2012 SevenOne Media used the analysis tool „ROI Analyzer“ to demonstrate that investments in TV advertising pay off in the long term. With such analyses, the company provides advertisers with valuable knowledge for marketing and advertising planning, which constitute an important basis for their investment decisions.

It is enormously important for the ProSiebenSat.1 Group to bring new promising formats quickly to air. For this reason, program research is assigned a decisive role — as early as the format development phase. The team provides quantitative and qualitative studies and analyses of the ProSiebenSat.1 stations’ programming. Furthermore, the unit tests new formats with the aid of surveys and audience screenings and relays the results back to the editorial teams. With the market research results, we can adjust formats in the development phase and thus increase the number of successful programs.

Sustainability as a Factor for Success

Responsible use of resources. As a company from the TV industry, ProSiebenSat.1 is not part of the traditional manufacturing industry that consumes a large amount of fossil fuels and requires complex international supply chains. Nevertheless, the ProSiebenSat.1 Group also operates in a market environment where resources are growing scarcer and cost pressure is continually rising. For this reason, doing business on a sustainable basis, as well as using resources sparingly, is an important guarantor of future corporate success.

ProSiebenSat.1 consumes the biggest energy resources to produce TV content and transmit its stations. Therefore, as of January 1, 2012, the company converted its power supply at the Munich/Unterföhring location to use renewable energy sources and accepts additional costs of approximately EUR 40,000 per year. However, the TV group thus reduces its carbon footprint considerably. Due to its use of power from renewable energy sources, the Group reduced its CO₂ emissions against 2011 by 8,100 tons per year. Moreover, the Group produces 11 kilograms less radioactive waste each year. ProSiebenSat.1 thus makes a key contribution to protecting the environment. Under the motto “Green World”, the Group also regularly informs its employees via the intranet about ways in which they can protect the environment in the office, by being aware of their use of energy and paper, for example.

Media company with a high social responsibility. Every day, the ProSiebenSat.1 Group reaches many millions of people with its media offerings and the distributed content has a direct impact on the opinion-forming of viewers and users. The company fulfills the responsibility that comes with this in its reporting and in its commitment to society. The ProSiebenSat.1 Group sees the high reach and popularity of its media as an opportunity to get young people in particular excited about important topics like tolerance and environmental protection, and to impart values to them. For many years, the company has made an important social contribution with numerous initiatives, and its programming includes regular reports on ecological, social, and political issues.

In the past few years, commitment to society has grown continuously in relevance for the ProSiebenSat.1 Group. The Group launched various projects, for example the initiative “startsocial — Hilfe für Helfer” in 2001 and the fund-raising campaign “RED NOSE DAY” in 2003. Since sustainable action and commitment to society also have an increasing impact on the success of the ProSiebenSat.1 Group, in 2011 the Group embedded its corporate social responsibility activities in a larger social context and established an Advisory Board. An interdisciplinary body chaired by Dr. Edmund Stoiber supports the media group in the implementation of relevant socio-political projects. The Advisory Board also provides reflections and suggestions on the media offerings of the Group. The focus is on areas that will be of crucial importance to the ProSiebenSat.1 Group and society in the future: Research, ecology and sustainability, young people and social issues, art, culture and sport. Alongside Dr. Edmund Stoiber, the Advisory Board is made up of the following members:

• Minu Barati-Fischer, producer and author
  
  
• Prof. Dr. Dr. h.c. mult. Wolfgang A. Herrmann, President of the Technische Universität München
  
  
• Dr. Heike Kahl, Managing Director of the German Children and Youth Foundation
  
  
• Prof. Dr. Dieter Kronzucker, journalist
  
  
• Prof. Markus Lüpertz, painter
  
  
• Dr. Christine Theiss, doctor, world champion in kick boxing
  
  
• Prof. Dr. Dr. h.c. mult. Klaus Töpfer, Executive Director IASS, Institute for Advanced Sustainability Studies e.V., former Federal Minister

In 2012, the Advisory Board met a total of four times. The members of the Executive Board of the ProSiebenSat.1 Group participated in these events. In 2011, the Board had already recommended to the ProSiebenSat.1 Group that it use its media reach to commit itself particularly to communicating politics to young people. In 2012, in cooperation with the Advisory Board the ProSiebenSat.1 Group invited four TV production companies to develop suitable concepts. In 2013 the ProSiebenSat.1 Group will use them to develop one TV format which it will broadcast. After all, private stations such as SAT.1 and ProSieben have a special role in presenting politics and mediating values such as tolerance. For many years, they have generally been reaching more young people than the public channels from ARD and ZDF.

MARKET SHARES OF TV STATIONS IN 2012

In the last few years, the ProSiebenSat.1 Group has already regularly managed to introduce young people in particular to politics in a manner geared to the target group and to awaken their interest in political topics with formats such as “TV total Bundestagswahl” and “Ahnungslos.” At the end of 2012, ProSieben launched a political talk show called “Absolute Mehrheit — Meinung muss sich wieder lohnen.” In the first edition of the show, which lasted approximately 90 minutes, four professional politicians and a businesswoman discussed the topics of the energy transition, tax fairness, and social networks with host Stefan Raab. Among 14 to 49 year olds, the ProSieben political talk show achieved a market share of 18.6%, while the program’s market share among 14 to 29 year old viewers was as high as 24.9%. The program thus stands out clearly from the political talk show formats of the public stations, especially among young viewers, as the following chart shows:

MARKET SHARES OF SELECTED POLITICAL TALK SHOWS ON GERMAN TELEVISION

Study demonstrates sustainability of ProSiebenSat.1’s commitment. As early as 2011, the ProSiebenSat.1 Group conducted a survey that showed a clear link between the Group’s commitment to society and its image enhancement among viewers. A survey about “Tolerance Day” (ProSieben) confirmed that especially young people appreciate programs with sociopolitical content and want to see more projects of this kind. This shows that initiatives such as “Tolerance Day” have a positive effect on the brand image of a station, so that both sides, society and company, benefit from social engagement. In 2012, the ProSiebenSat.1 Group commissioned a further, far more extensive study so that it could review and further advance the awareness and success of its most important initiatives. The research institute mindline media GmbH conducted a telephone survey of 1,002 people in Germany of 14 years of age and older on the initiatives “RED NOSE DAY”, “Tolerance Day”, “Green Seven”, and “Seven Moves”.

In the survey period, 15.9% of those surveyed remembered “RED NOSE DAY” (unaided awareness). The campaign thus reaches the highest figure among the fund-raising campaigns of all German stations. As the second most remembered fund-raising campaign, those surveyed spontaneously remembered the RTL telethon, which achieved 11.2%. Nearly a third of ProSieben’s core viewers remembered “RED NOSE DAY”. In addition, 63.6% of those surveyed clearly attributed the campaign to the station ProSieben. Among 14 to 29 year old viewers, this figure is as high as 84.8%. A majority of 53.7% evaluated “RED NOSE DAY” as good or very good. One in six people who are familiar with “RED NOSE DAY” has already donated to the campaign, corresponding to 8.6% of the German population. In this respect, there are hardly any differences between the various age groups.

This survey demonstrates that “RED NOSE DAY” has a firm place among the big social TVSocial TV The linking of social media and television. campaigns, even though in the aided question, where it scored 54.1%, it understandably did not yet reach the level of awareness of initiatives such as “Aktion Mensch” (90.0%) and “Ein Herz für Kinder” (89.9%), which have been established for decades. However, ProSiebenSat.1 would mainly like to reach young people with its campaigns. And it is successful in this respect as the survey figures show: 14 to 29 year olds describe “Red Nose Day” as particularly appropriate, appealing, and understandable. They also find ProSieben’s commitment to society highly credible (51.1%), with the station only slightly behind ARD (57.3%) here. The other ProSieben initiatives such as “Tolerance Day” (49.3%, aided awareness), “Green Seven” (37.8%) and “Seven Moves” (10.2%) are also popular among young viewers, even though some of them have been part of the programming for only one year or at most just a few years. As a result of the survey, the ProSiebenSat.1 Group feels vindicated in its commitment and will continue to work on expanding the awareness and effectiveness of its initiatives in the next few years.

Independence and Transparency

Transparency and independence are important values for our management and particularly for us as a publishing company.

• Transparency: Relationships of trust with journalists and financial analysts have significant value. Our media presence improves awareness of our brands and shapes our social reputation. Our public relations and investor relations work is guided by the transparency guidelines of the German Corporate Governance Code. Accordingly we communicate fully, promptly and frankly with journalists, investors and analysts. Here equal treatment of all market participants is very important. At the Company website www.ProSiebenSat1.com we provide detailed information in German and English about all aspects of our business activities, the ProSiebenSat.1 stock, and our financial results.
  
  
• Journalistic independence: To protect journalistic independence and fundamental journalistic conditions, the ProSiebenSat.1 Group formulated guidelines already in 2005 that all program creators in Germany are obliged to uphold. The “Guidelines for ensuring journalistic independence” can be viewed on the corporate website under Company/Legal framework. The Media Group’s journalists are free to shape their contributions and report independently of social, economic or political interest groups.

Protecting young people is also something that the Company is particularly responsible for. Professionally independent youth protection officers make sure that the ProSiebenSat.1 Group offers programming geared to development in the legally prescribed broadcasting slots. Youth protection workers are involved early on in the production and purchase of programs at ProSiebenSat.1. At an early stage, they assess screenplays, accompany productions and formats and compile reports at various stages of the development process, as well as preparing colleagues in workshops for the responsible task in design programs.

Like TV, internet services must also meet various requirements for the protection of young people. The ProSiebenSat.1 Group is continously expanding its portfolio of digital services and — as in TV — fulfills its responsibility with regard to the protection of minors online. For example, we are represented on the Board of the Voluntary Self-Monitoring of Multimedia Service Providers Association (FSM e.V.). In addition, in early 2013, ProSiebenSat.1 Games was one of the first major providers of online games in Europe to join the German Entertainment Software Self-Regulation Body (USK).