Business Development of the Segments

078 / Revenue Share by Segment in %, 2017 figures in parentheses

079 / Adjusted EBITDA by Segment in EUR m

ENTERTAINMENT segment

In 2018, the Entertainment segment’s external revenues amounted to EUR 2,626 million. This is a revenue decline of 4% or EUR 112 million, which is attributable firstly to the development of revenues in the advertising business: Especially at the end of the year, economic indicators had had a negative effect on the entire German TV advertising market. Secondly, the revenue decline reflects the deconsolidations of maxdome and 7NXT. In contrast, the areas of sport and distribution, which are independent of the advertising market, performed positively and strengthened the revenue base.

As with all consumer-related markets, the advertising industry often reacts very sensitively to macroeconomic developments. In addition, revenue and earnings performance is characterized by seasonal effects and above all the importance of the fourth quarter. As both propensity to spend and television use increase significantly in the run-up to Christmas, the Company usually generates a far greater share of its annual revenues in the final quarter.

Adjusted EBITDA fell by 2% or EUR 17 million year-on-year to EUR 881 million. The revenue decline was partially compensated by efficient cost management. The adjusted EBITDA margin was therefore slightly higher than the previous year at a high level and amounted to 32.4% (previous year: 32.1%). EBITDA declined to EUR 461 million (previous year: EUR 651 million). This figure is shaped by reconciling items of minus EUR 420 million (previous year: EUR –247 million), including the total effect from the change in programming strategy of minus EUR 354 million and expenses relating to reorganizations of EUR 62 million.

CONTENT PRODUCTION & GLOBAL SALES segment

In the Content Production & Global Sales segment, external revenues increased by 6% year-on-year to EUR 552 million (previous year: EUR 523 million). In 2018, the significant growth driver was the digital studio Studio71, which picked up a lot of momentum in the fourth quarter in particular. In addition, the production business again made a substantial contribution to organic revenue growth in the fourth quarter of 2018. Revenues in the global sales business also increased, with the initial consolidation of the US film distributor Gravitas Ventures, LLC, Wilmington, USA („Gravitas“) since November 2017 having an impact.

Adjusted EBITDA increased to EUR 31 million (previous year: EUR 19 million). This increase of 66% is primarily the result of economies of scale at the digital studio Studio71 and thus of an enhanced profitability. Also the profit situation in production business improved. The adjusted EBITDA margin amounted to 5.1% (previous year: 3.1%) and reflects the different margin structures of the individual business models. EBITDA likewise increased considerably, amounting to EUR 26 million (previous year: EUR 8 million).

Commerce segment

External revenues in the Commerce segment slightly increased on the previous year to EUR 831 million (previous year: EUR 818 million) and were influenced by contrasting portfolio effects: Growth momentum was characterized by the deconsolidations of the online tour operator Etraveli in the third quarter of 2017 and of COMVEL GmbH in the fourth quarter of 2017, as well as by the sale of the tour operator Tropo in the third quarter of 2018. By contrast, the initial consolidations of Jochen Schweizer GmbH in October 2017 and of eHarmony Group in November 2018 had a particularly positive impact. Adjusted for the portfolio measures mentioned, the segment recorded double-digit revenue growth of 16%. The online perfume store Flaconi GmbH, the online comparison portal Verivox Holding and the OTC provider WindStar Medical GmbH, Wehrheim made substantial contributions to organic revenues here.

Due to the above-mentioned deconsolidation effects, adjusted EBITDA was down year-on-year. In addition, cost development was influenced in particular by higher intragroup marketing expenses for the expansion of strategically important growth areas, so adjusted EBITDA fell by 24% to EUR 103 million (previous year: EUR 135 million). The adjusted EBITDA margin amounted to 12.3% (previous year: 16.5%); its decline reflects the different margin structures and growth momentums of the individual business models. At the same time, EBITDA fell to EUR 84 million (previous year: EUR 464 million). The comparatively high EBITDA of the previous year contains the gross proceeds from the sale of the online travel agency Etraveli of EUR 302 million.