Buried deep within the Q1 2024 earnings call transcript of German media giant ProSiebenSat.1 Media SE lies a subtle but potentially seismic shift, one that seems to have slipped past the radar of even the most astute Wall Street analysts. While much of the discussion focused on the anticipated sale of non-core assets like Verivox and Flaconi, a quieter story is unfolding within the Dating & Video segment – a story that could redefine the company's trajectory and unlock significant shareholder value.

The headline numbers for Dating & Video continue to paint a bleak picture. Revenues have plummeted 9% year-on-year, driven by a 12% slump in the Dating business. The culprits are familiar: fierce competition and the lingering impact of Germany's Fair Consumer Contracts Regulation, which curtailed the lucrative automatic renewal of subscriptions.

But here's where the narrative takes a fascinating turn. Within the Video business, a spark of resurgence is igniting. While overall Video revenues dipped 4% year-on-year, a closer examination reveals a remarkable 18% sequential growth compared to the fourth quarter of 2023. This surge, according to the transcript, is largely attributed to the company's strategic shift towards focusing on "owned and operated" live streaming apps, with revenues from "virtual goods" enjoying double-digit growth.

What makes this development so intriguing is its potential for exponential growth. Unlike the Dating business, which grapples with regulatory hurdles and a mature market, the live streaming landscape is still in its nascent stages, characterized by a dynamic, global audience and a rapidly evolving revenue model. ProSiebenSat.1, with its established media infrastructure and a keen understanding of audience engagement, is perfectly positioned to capitalize on this explosive trend.

"Dirk Voigtlander, Head of Investor Relations, highlights that the company's owned and operated live streaming business has already attracted a "significant number of streamers" defecting from rival platforms. This "helpful development," as he calls it, could signify a tipping point – a momentum shift that could snowball into a dominant market position."

Why This Matters:

The transcript notes that the shift towards owned and operated apps "partly shifts revenues to higher-margin businesses." This suggests that the live streaming model, with its emphasis on virtual goods and direct user engagement, boasts a superior profit profile compared to the subscription-based Dating business.

Unlike the geographically constrained Dating market, live streaming transcends borders, opening the door for rapid international expansion. ProSiebenSat.1, with its existing footprint in Europe and the U.S., can leverage its expertise to capture a global audience.

The company's vast media network, encompassing television channels, digital platforms, and production studios, provides a powerful ecosystem to cross-promote its live streaming offerings and amplify audience reach.

The double-digit growth in virtual goods revenue validates the viability of the live streaming business model. As audiences increasingly embrace virtual experiences and digital communities, this revenue stream is poised for continued expansion.

The Numbers Tell a Story:

While the Q1 transcript doesn't disclose precise figures for the owned and operated live streaming business, the 18% sequential growth suggests a trajectory that could quickly surpass the declining revenues of the Dating business. If this trend continues, the Video segment could become ProSiebenSat.1's primary growth engine, overshadowing even the anticipated gains from asset sales.

Hypothetical Growth Scenario:

If the owned and operated live streaming business maintains its 18% sequential growth rate, it would double in size within a year, potentially exceeding €100 million in annual revenue.

Assuming a conservative 20% EBITDA margin, this business could generate €20 million in annual earnings, significantly bolstering the Dating & Video segment's profitability.

Visualizing the Potential:

ProSiebenSat.1, often perceived as a traditional media company grappling with a digital transition, may be on the cusp of unlocking a hidden gem – a quiet giant with the potential to reshape its future and deliver outsized returns for investors who recognize its hidden value.

"Fun Fact: The global live streaming market is expected to reach $247 billion by 2027. ProSiebenSat.1 is well-positioned to capture a slice of this massive pie with its strategic focus on owned and operated live streaming apps."