Mediaset Espana Comunicacion SA

MAD:TL5

Earnings Call Transcript 2019-Q2

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's Mediaset España's first half 2019 results. [Operator Instructions] Also I must advise you, this conference is being recorded today, 25th of July 2019.I now hand you over to your speakers. Please go ahead.

[Mario Sacedo Arriola, Head of Investor Relations]

Good morning, everybody. Welcome to the First Half 2019 Result Presentation of Mediaset España Comunicación. I'm Mario Sacedo, Head of Investor Relations. Let me introduce you to today's speakers. The presentation will be hosted by Massimo Musolino, General Operations Manager. After the presentation, we will open a Q&A session hosted by: Massimo Musolino; Quico Alum, Publiespaña's General Manager; and Javier Uría, the group's Chief Financial Officer. They will answer all your questions. Massimo, you have the floor.

[Massimo Musolino]

Hello, and thank you for connecting to our first half 2019 results webcast this morning. Today, we will go over the main aspects of the operational and financial figures that we released to the market yesterday evening. I will then move on to the Q&A session, where you will have the opportunity to ask management any questions you may have.Let's take a look at Mediaset's main figures for the first half of the year on Slide 2. On the right-hand side of the slide, you can see how our leadership in audience was confirmed once again with an outstanding 28.6% in total individuals from January to June, which implies a 1.7 percentile -- percentage points up compared to our main competitor.According to Infoadex, the audiovisual market decreased by 1.9% in the first half of the year to EUR 1,424.9 million and Mediaset España's market share was 32.6%. The same source said that the TV advertising market declined by 5.6% with Mediaset España reaching a market share of 43.2% in the quarter, slightly lower than last year due to the absence of the World Cup event in the comparison base. This figure represents around 145 basis points more than our main competitor. When we look at the figures achieved in the year, when there are no sport events, the year 2015, '17 and 2019, Mediaset España has remained stable, achieving 43.2% market share every time. However, our main competitor has decreased by more than 1 point from 42.8% in 2018 to 41.7% in 2019.Looking now at the financials. On the left-hand side of the page, you can see that our total net revenues reached EUR 482.5 million while EBITDA for the period stood at EUR 163 million with an EBITDA margin of 33.8%, an increase of 250 basis points versus last year. Cash flow generation is one of the key pillars of our business and amounted to EUR 120.5 million in the first half of the year. Cash conversion remains high. Profitability and cash generation are the same per our daily operational decision. Finally, earnings per share went up by 6.3% to EUR 0.41. On Slide 3, you have the monthly audience evolution from January to June on both the group and the main channels. On the left-hand side of the slide, you can see how our leadership in audience was confirmed once again with 30.6% in total individuals in June. The performance evolution is improving month-by-month, thanks to the success of our programming increase, which led to an almost 5% gap in June, one of the biggest difference recorded in a year without sports events. You can see a similar trend in the main channel figures with Telecinco widening the gap with Antena 3 by nearly 4 percentage points in June. July preliminary figures confirm that this positive evolution is continuing, bringing Mediaset España closer to our annual target of being leader in both audience and advertising market share in this benchmark. We will go into more detail later. But the magnificent audience reach in prime time and the strength of our daytime has allowed us to make [ good cost savings ] during the period.Moving now to Slide 4. We have the evolution of our TV advertising revenues during the period. We posted 7% GRP small decline in the period due to the weaker TV consumption figures. In terms of prices, we saw a 0.8% improvement, which, if you exclude the World Cup effect, is equivalent to a 2.6% increase. The total TV advertising revenue market declined by 5.6% while Mediaset España declined by 6.5% versus last year, reaching EUR 450 million. Once again, the main explanation comes from the absence of World Cup event in the comparison base. If we break down the price evolution, you can see in the center of the slide that our policy of increasing price has remained on track with a remarkable 2.6% growth, excluding the World Cup impact.The chart on Slide 5 gives you a visual explanation of the company's effort to adjust operation to the new market reality in the audiovisual sector. Together with that, advertising revenues are the main driver of our earnings and profit. But other sources of revenues are gaining traction in a steady manner, such as digital income, which has grown by more than 40% in the first half of the year, including advertising and other revenue generated by the web. Other revenues grew by almost 10% driven by the Mediterráneo's business in the period. Content sales, so far, these are more than double the same period last year. The results of this at the end of the first half is that the other revenues, different to TV advertising revenues, contribute more than 10% of the total net advertising -- total net revenues of the group. These contents of development of new business lines that are capable of producing new revenues, lifting from the advertising revenue, we have launched our SVOD platform. On Slide 6, we have an overview of the new offers created by Mediaset España to enhance the viewers' experience through a different distribution channel and therefore generating new revenues. On the 22nd of July, we launched MiTele Plus, our new SVOD platform. It is an upgrade to our AVOD OTT platform, MiTele. The initial step is by paying EUR 2.50. And also you can watch the same content as AVOD without advertising. We want to achieve 2 objectives within the first offer: first of all, to test our platform on the call center, billing system and the GRP, in all the technologies; and at the same time producing the new SVOD platform into the market. The next step will be to increase the quality of the content and the tech functions of the existing software first and then at the same time create new channels and the VOD products that can be added to the basic offer at different prices. All our efforts are now focused on MiTele [indiscernible] system or platform as soon as possible.Turning now to Slide 7. Let me give you some color on our current digital activities, a new option launched over the last few months. Regarding the figures, our digital business is growing quickly with a 41.4% revenue growth, up to EUR 15.9 million. In terms of unique users, the 28.5% increase allowed us to expand our digital viewer base to more than 17 million users, 29.6% more than the same period last year. This is the best results in its history, reaching #16 in the global traffic ranking to place higher than in May this year. Regarding services, in June, we have launched Uppers, a media site with an important presence on social network, which is dedicated to people over 45, one of the most attractive commercial targets, with the aim of reaching new audiences and clients. And finally, as I stated in the previous chart, on July 22, Mediaset España started its business in the distribution of paid content with the launch of the first phase of MiTele Plus, a new subscription platform, which will gradually incorporate new products and exclusive content.Moving now on to the financial review on Slide 8. You can see total cost for the period amounted to EUR 319.5 million, which is an 8.4% decline versus the same period last year. The selling has mainly been made in program increases, both sports rights and programs and cost of sales due to the lower third-party advertising revenues during the period. The 13.9% increase in personnel costs is explained by the full consolidation of new company in this market, which wasn't included in the consolidation perimeter last year, and the line-by-line consolidation of 2 companies, Supersport and Megamedia, which were previously accounted for as minority stakes. In terms of results, the adjusted EBITDA for the period increased by 2.4% to EUR 163 million. This figure implied a 250 basis point margin improvement to 33.8%. This number makes Mediaset España one of the most profitable European broadcaster despite the market conditions in the first 6 months of the year. Once again, it's remarkable how we improved the audience and the profitability with 0 cost inflation in the business, proving that business resilience in a challenging environment, thanks to the cost flexibility and top line diversification strategy. And now let's talk about the rationale of the MFE transaction on Slide 9. Scale is going to be more and more important, crucial for the future in the media space. Clearly, we realize that around us, all the other entities, customers, competitors, content providers are bigger and global. And they are growing in size. Economy of scale is even more crucial when you start to think about the new business and the new activities that media companies need to run to stay relevant in the media space. As you can see in the chart, there is a list of topics, such as addressable TV, OTT platform, digital audio, et cetera, that are clearly important for the future of a media company. And scale is going to be crucial in that aspect. The quicker technology evolves, the more important is to be strong. On top of that, this transaction will create value for our shareholders with cost efficiency and savings at EBIT level of around EUR 100 million to EUR 110 million and the EUR 100 million cash dividend and buyback program after the merger. But we are not doing this just to create cost synergies. This is being done to create something bigger. The most exciting part of this project that we haven't quantified yet are the projects and developing new activities, particularly addressable TV, big data analysis, digital pack in general and production and distribution content for third parties. If we are capable of reaching these objectives stated today, we believe we can be in the center of attraction for other European media companies.On Slide 10, you have the next steps in the transaction. After the announcement released on the 7th of June, on the 4th of September, both Shareholder Meetings, we're going to approve the merger. If as it's expected, the proposal are approved, there will be a period of time, 15 days in Italy and 30 days in Spain, for the exercise of the withdrawal rights. After all different steps in the process, the effective date of the merger should be in December. Immediately after, the EUR 100 million dividend will be paid and the buyback plan of up to EUR 280 million will begin. Concluding this presentation now, I would like to give you an outlook for the rest of the year. On Slide 11, you have the update targets. In operational term, we, of course, maintain our [indiscernible] target of leading the audience and advertising market share in Spain. We consider this achievement to be a requirement for moving our main target, which is to achieve the highest profitability of Spanish media players and best in the class in the European market. After the remarkable 2018 performance in terms of operating expenses, we upgrade our cost guidance I gave you at the beginning of the year to a new OpEx target of EUR 710 million, which represents a figure of EUR 10 million lower than our initial target, despite including the football rights acquired for the new OTT MiTele Plus. Of course, Mediaset España is keeping an eye on the market in order to adapt the cost structure and the programming grid to the changing advertising market condition. Regarding OTT activities, we are expecting a higher contribution from sales and distribution content and also digital business both with a positive EBITDA contribution. Regarding the MFE transaction, I would just like to add that we all consider this as the right thing at the right moment. The right thing because it enables both companies to upscale their business models, increasing their capabilities to compete in the audiovisual market. On top of that, there's clear benefits for all shareholders due to the synergy value with a EUR 100 million dividend and a EUR 280 million buyback plan. The right moment because both companies are profitable, generating cash at the beginning of many digital developments. On top of that, to be a first mover is considered really positive. Since the announcement of the transaction, market has traded down significantly for the overall free-to-air TV sector. But market trade-down doesn't affect the rationale for the transaction or the exchange ratio because this transaction is basically an industrial project and not a financial one. There is a strong strategic logic behind the combination that remains absolutely unchanging. And now let's move into the Q&A session.

[Mario Sacedo Arriola, Head of Investor Relations]

Thank you, Massimo. This is the end of our presentation. We are now ready to take your questions. Operator, please, let's proceed to open the Q&A session.

[Operator]

[Operator Instructions] Your first question comes from the line of Julien Roch.

[Julien Roch, MD & European Media Analyst]

The first question is about 5 years ago, you had EUR 760 million of costs, you're now guiding to EUR 710 million so that is EUR 50 million of savings over 5 years. Can you tell us how much came from overheads and how much came from lowering the programming grid? That is my first question. My second question is if advertising continues to be weak this year, what's the lowest you can go in terms of cost? Could you go to EUR 700 million or EUR 690 million? And then the third question is can we get some color on July and August and maybe early indication of September in terms of advertising?

[Massimo Musolino]

I'm Massimo. Talking about cost -- in fact, if you remember when I stated that EUR 760 million, EUR 770 million was the right amount of cost for a company like this. What has happened during this year? First of all, we are achieving high audience share with our program that has enabled us to modify our programming grid. I want to give you an example, a real example of what has happened within first half of this year. Our prime time normally has a reality show every month. And the normal programming grid strategy is to have 2 nights of reality show. The fact that the audience share of Big Brother Duo in the first quarter of the year and Survivor in the second quarter of the year has been absolutely great, higher than any expectation. And that's enabled us to broadcast a third night of prime time with this program. Of course, the third night has a margin of cost with respect to a normal cost of the prime time show. And at the same time, we have saved 1 fiction program. If you multiply the cost of a fiction for the 20 weeks that we have faced, this is the biggest destination on our programming grid in this first half of the year. Secondly, the change of strategy in the quarter of programming grid, you have seen how internal programs, like Cuatro, has increased year-by-year with respect to third-party rights. Internal products are normally, at the end of the year, cheaper than the cost of the third-party rights. And this is another main reason that has enabled us to reduce our programming grid. In terms of overheads, we continue every day to study how to optimize our structure. This is something that's done also in this line of cost. And finally, you may remember that in the past, we had higher third-party right licenses in advertising. We sold different third-party media, which had a cost of sale. Now this line of business is smaller than in the past, so we have -- we account for lower third-party advertising revenues. But at the same time, we have lower cost of sale on this activity. And last, there is something which is not linear, like the movie activities. This year, we have only -- we premiered only 2 movies. I remember that some years, we have premiered up to 4 for the year -- up to 4 movies in a year. And so also in terms of movie cost, movie amortization in the year, it's probably lower than a normal year. In terms of flexibility of our cost guidance, when we give you a cost guidance, we have in mind a very strong programming grid because we remain positive in terms of the fact that the ad markets can recover. So in this moment, we have in mind a very strong programming grid for the last quarter of this year. Of course, if an information we'll receive during the summer from our commercial department are better, the advertising market will continue weaker, we'll try to say something in the last quarter of the year. But at this moment, we are forecasting important programming grid for the last quarter, hoping in a recovery of the advertising market.

[Quico Alum, General Manager of Publiespaña]

Yes. About the advertising market, first, if you don't mind, I'm going to internalize what happened in the first semester of the year. [indiscernible] a 5.6% decline, this market has declined. But if we see that decline and we have to break down that decline, we can see that 1 point, 1.5 comes from the impact of the World Cup. And we are not to have this impact in the last part of the year. And the important thing we have, we have had in the automobile sector and drinks sector. Automotives, it's true, it has been an earnings surprise of this first half of the year. And you don't forget that this sector is the strongest sector in this first 6 months. The decline in automotive market means [indiscernible] 1 point, 1.5 in the market, a decline of [indiscernible] market. And the other sector has been drinks. Although drinks, although it's a smaller sector, but it's concentrated in the second Q. And descent of this sector means around 1 point in the market. What can happen in the second part of this year? On automotive market, we think that it's going to perform better than -- this sector is going to be better than in the first half of this year. We believe that this has been a [ superficial ] issue due to the uncertainty that it's created around this sector. And we think that the performance of this sector in the second half from September -- because in July and August, automotive sector has no impact. From September, I expect it to perform better than the first half of the year. And on the other side, you have the drinks sector that no impact in second half of this year [indiscernible] first week of September. After no real impact, then it's not [indiscernible] then you have this kind of sector, then it will not have any other impact, we think that, on the second part of this year. In the other half, we have a new sector that is not so very grown. And we hope to deliver -- show very strongly in the last part of this year due to the deployment of new 5G technology. And we have good news from this sector. And we also have good news from the retail that we can continue with this specific trend. Of course, we have lack of information from beauty, foods and other sectors [indiscernible] in the second half of the year will be better than this first half of the year. Our [indiscernible] in August, in the first 15 days of July, in our case, we have the impact of the World Cup. And in the second part of July and August, we do not expect any surprise. I mean we have really low figures of investment. And we don't expect any surprise in this period.

[Julien Roch, MD & European Media Analyst]

Okay. Just going back on my first question, on EUR 50 million of savings in the last 5 years, from EUR 760 million to EUR 710 million, how much was overhead, how much was programming out of that EUR 50 million? And Quico, coming back on your answer, you said first half of July impacted by the World Cup for you, second half of July and August, not expecting any surprises. What does that mean? Does that mean that the market will be flat? Or are we still having a market that is negative?

[Quico Alum, General Manager of Publiespaña]

Okay. I cannot give you any figure because we are -- we don't have all the information on August. The most important part of August, remember, is the last 3 weeks of August. And for that I mean, in this moment, we have no bad news from the market. We have to wait for that. I cannot say at this moment it's going to be flat, it's going to be minus 1, 2, 3, I don't know. I don't have this information in this moment. But in any case, it's not representative. I mean August, the investment on the [indiscernible] in August is really low. The most important thing for us is beginning of the -- is start from the beginning of September because we have the Basketball World Cup that we're going to broadcast especially at this period. And Spain has a great team. And we have a lot of expectation in this period is the first 2 week of September. But in regarding in August is -- I mean the last week of July is really low. And the lowest period of the year is the middle of August. And we have to wait until the end of August to know what's going to happen in this period.

[Massimo Musolino]

60% to 65% of the selling comes from programming grid.

[Operator]

Your next question comes from the line of Lisa Yang.

[Lisa Yang, Equity Analyst]

My first question is on the pricing. I mean looking at Atresmedia's presentation, I think pricing for them was about flat. And for you, I think it was roughly flattish or slight positive. How would you expect that to change in the second half? I mean given it looks like viewing continues to go down kind of 5% to 6%, so to be positive, I mean you need to put through a significant price increase. So just wondering, like why would you expect the pricing to improve in the second half?And the second question is on MFE. I mean you talk about your ambitions in data to several TV content and so on. And all the other broadcasters in Europe are investing significantly more in those areas. So just wondering, like how much you think you'll have to invest, given obviously all your profit is in television today. And the third question is on the OTT initiative, I think, you had talked about with Atresmedia and TVE. So I think it was LOVEStv. Just wondering where we're up to on that and whether it's still on the agenda, given the MFE project. And do you prefer to build more like an OTT platform with Mediaset Italy rather than with your local competitors?

[Quico Alum, General Manager of Publiespaña]

Okay. About the prices, I mean our goal is to implement our prices by 2%, 3%, 4% in the last part of this year. And we have done the first semester. If we discount the impact of the World Cup, our price is going by 2.6% in the first semester and our goal is to keep on that price policy. And we think we can do it. I mean even, as you know, we have problems with the automotive sector, that is a more expensive sector because they demand the local prime time, and even with the lack of this investment, we have increased our prices by 0.6%. And our goal is to do 2.6%, 3%, 4% in the last part of this year because we expect that the automotive sector is going to come back in the -- from September to December.

[Massimo Musolino]

Yes. The investments in OTT or digital technology is not linear year-by-year. We -- in our -- in the last year, we have invested from EUR 5 million to EUR 10 million, EUR 12 million every year. This is not only for this OTT platform but also for, let's say, all the digital technology that we use in our company. Looking at the MFE project. Today, as we mentioned, we have our OTT platform, they have their OTT platform. We are doing our investment, they are doing their own investment. The rationale, the logic, is that we have to join the two, let's say, capabilities to invest on both companies to try to reach only one objective. In my mind, I have that the next OTT platform that we will have will be a unique OTT platform for both companies and all the digital evolution of the system will be unique. I'm not able now to say -- to tell you how much will be this investment. But what I can say now is that we will -- joint parties, we will invest less because we will invest for two companies. And so this will create, of course, a cost saving for both. If on top of that, we will be able to other projects, any other player, of course, the selling will be higher. Because it's basically for everybody that digital technology is not a local -- is not local. This is something that is possible to share everywhere. So in our mind, we will try to obtain the best product, the best strategic platform, the best data, big data system analysis, join our effort to other -- to Italy and work for the cost.

[Quico Alum, General Manager of Publiespaña]

First, you have to keep in mind that TV is a local business, but digital is not a local business. Digital in some parties are European business and we have to compete with really high competitors and really good competitors. Then we think we have to go to work well with Italy and then we can do -- we can then get good results in this new operation. Because digital is not a local issue. This may be a European issue, a world issue. I don't know if U.S. side, TV is a local issue but no digital.

[Lisa Yang, Equity Analyst]

Just to follow up on your last point. I mean the content that is viewed on OTT remains, I think, largely local. So I'm just wondering why you prefer to have a joint platform with Mediaset Italy rather than with your local competitors. Because if you look at elsewhere in Europe, I mean all the main kind of local incumbents are joining forces. I'm just wondering why you're not doing that in Spain. And then on the first question I had, so if GRPs continue to be down, let's say, 5% to 6%, and you think pricing could be up 2% to 4%, do we expect advertising to be down 2% to 3% in the second half? Or are there other factors coming into play?

[Quico Alum, General Manager of Publiespaña]

Okay. About the market, I cannot give you a figure because I don't know that figure. The other one thing is that we have some problems with automotive sector and drinks sector. Drinks in the second -- in the last part of the year isn't that really an important sector, no investment in the second part of the year. In the other side, automotive, we have [indiscernible] there, we have some information that they are going to come back with some investments. But we don't know how much. We are not -- we don't know how we are talking about is it going to increase or decrease. But I think that the performance of the automotive sector is going to be a better in the second part. And also telecom sector, we have good news for them. And we think that in the last part of the year, they are going to be a really strong sector for the TV sector, I mean. But I cannot give you any figure in this moment. But we think that the second part of this year is going to be better than the first part of the year has been.

[Massimo Musolino]

Why Italy and not a local partner is because with Italy, we will merge. And it's very difficult to align interests when -- or between 2 listed companies with different shareholders, different Board, different management team and especially different P&L. After the merger, there will be, between Italy and Spain, just one unique Mediaset with a unique group of shareholders and with a unique P&L. In this way, we perfectly align all the interests very favorably to develop something and to maintain the continuous upgrade of the platform with only one, let's say, management team managing the project. We -- as we -- as you know or you should know, we are part of the European Media Alliance. So we have discussed many times about to develop among partners, to develop a unique OTT platform. And the main difficulty comes from the fact that each one has its own interest. Each one, of course, thinks that their own technology or their own platform is the best. But I would think the same clearly. And it's not easy and it's not quick to align the interests because there are many people around the table that, of course, each one defending its view of the project. After the merger, this won't be a problem because there will be only one responsible for the OTT platform and he will decide without any -- without the need to discuss it with any other. So this is a practical issue, not a -- in any case, we can announce that we can sign a partnership with a local partner in the future.

[Operator]

Your next question comes from the line off Patricia Paré.

[Patricia Pare, Associate Analyst]

My first one is on MiTele Plus. I wonder whether you can share some targets you may have in terms of subscribers or revenue you are planning to reach in the next 1, 2 to 3 years. The second one related to that is on the agreement with Telefónica to distribute the football, whether you can like share or give some more color on the economics of that agreement. And my third question is on the digital and quantum sales. You talk about positive margins. I wonder whether you can talk like where are the margins now and where do you think they can get to in the long term.

[Massimo Musolino]

Yes. MiTele Plus is an ambition project. We have seen how, after the end of a program in free-to-air, there is a second life of these programs in the digital environment. And we have seen how there are mainly viewers that continues to watch and chat in our platform, comment on the programs. And they are really interested in something -- all the things related to this program. Just to give you an example, we -- when we broadcast a reality show, Big Brother, for example, we can be able to produce and to put in our platform a 24-hour program of Big Brother for a marginal cost because we have a 24-hour recording into the house. And at the same time, there are other programs in which there are mainly people registered in our platform. So the idea is to create premium content related to this program and to create SVOD channels for this kind of viewer/users that are really fans of this content. This is the rationale of MiTele or MiTele Plus. I would like to add that this isn't something that we have, let's say, invented in the last couple of months. We have started -- bought majority stakes in Alea Media, which is the company that produce all our digital content. So in this way, we assure to our group the capability and the talent and skills to develop digital content for us or for the group without any problem. And to give you now a number of subscribers is not possible because we have just started 2 days ago. We don't have any experience on it -- in this. But what I can tell you is that today, we have registered close to 4 million people at our platforms, free platforms, so they are not paying, of course. And we expect that part of them will shift to the SVOD MiTele Plus, so paying the fee. And now just another thing very important, of course, the number of subscribers also will depend on the quality of the programs that we will put in MiTele Plus. To launch the platform and to ensure as the, let's say, the [indiscernible] application to push the platform, we have participated to the bid for the football rights of the Spanish championship, for the international competition like Champions League and Europa League. You may know that Telefónica every year launch this bid. And there, we have participated. We have accepted all the terms of the -- of course, of the bid. And in principle, we have an agreement with Telefónica. Now we are waiting to sign the final document. I think that we can able to close this, if not this week, at the beginning of the next one. We have done everything to do this, of course. So now we are waiting only the final document from Telefónica. Of course, this will be the driver for the next month to push our subscriber platform. And how many subscribers, I think, will depend on the, of course, the commercial policies and the quality of our technology. And also it will depend on the competition that we will have with other platforms that will broadcast the same content. [Foreign Language]

[Mario Sacedo Arriola, Head of Investor Relations]

I guess if all the questions are covered, then there's [indiscernible]

[Operator]

Your next question comes from the line of Annick Maas.

[Annick Tonie Maas, Analyst]

My first question is just going back on Q2. I mean advertising was much worse than you initially expected it to be. So just reconciling what you said previously, so am I right in assuming that you believe this was all due to cyclical factors and particularly due to the automotive sector performing worse than expected? And without that, actually advertising could have been down just low to mid-single digit? My second one is on the cost guidance, I think -- so you've previously said, on average, EUR 760 million cost guidance would be what we should look forward to in the next years. If I take it from here, you say you have some flexibility still. So would I be right in assuming that EUR 700 million cost guidance for the years to come? And then just thinking back on pricing again, sorry for that, but you've previously suggested that pricing is going to rise mid-single digit. Now looking where we are today, how do you actually model your pricing going forward? Do you think, "Okay, actually pricing was now slightly weaker, so we adjust our forecast"? Or do you still just think mid-single digit is justified at this stage?

[Massimo Musolino]

About the cost guidance, we -- the cost guidance is for this year. Normally, every time I tell -- I give you a guidance, it is something that has been discussed internally and approved by my Board. So we -- next year, what can happen next year? We will have the European World Cup -- European Football Cup rights. This is probably an increase in our programming grid cost. It depends on our capability to replace this in the programming grid. But it's too early to give you -- to tell you something about next year. Before Quico answers to the second -- to the other -- your question, we didn't answer what are the margins of the content sales. It was a question of the -- of Patricia, sorry. When we say the content, the cost associated to this depends on the kind of agreements we have to the seller. Just an example, if we said something in exclusivity for them, outright, for example, the fiction that we are producing for HBO, of course, there is the revenue of sales and all the costs of production is associated to the sales. If -- this is a case.Other cases that we sell a fiction that we produce for ourself and then we sell the other second window to the platform or something similar, in this case, we normally use to account all the cost for the programming grid and then there is no or very small cost of sale for the revenues. This is normally -- in any case, there is always a margin, a positive margin.

[Quico Alum, General Manager of Publiespaña]

Okay. Our prices, if we discount the impact of the World Cup, you can say that the first half of this year, the market have decreased by around 4%, 4.5%. And in the same way, we have increased our price by 2.6%. It doesn't mean that, of course, the market have decreased and we have increased our prices. The reason of that is the value of the TV keep stable for the advertisers. I mean it's completely necessary to win in our prime time, to win our programs for advertising campaigns. And I think this is not going to change. And for that, our commercial policy -- pricing commercial policy is going to remain stable for the last part of this year. We also have launched our pricing points for September. And we are in this moment negotiating August and we are increasing our price in August. And we have launched our -- or we haven't launched pricing policy for September for the last quarter until the first week of September. And for the other thing, because the value that we need is really important for advertising, then I think we have to keep -- we have -- this increment is not really high increments when we are talking about 2%, 3%. I mean we are talking about 10%, 15%, just 2%, 3% because we think that also that the TV in Spain is cheap. If we compare with another media, then I think we have room for go-ahead with this increase of pricing. And the first question, sorry, was about the market?

[Annick Tonie Maas, Analyst]

Sorry. Yes, the first one was just on Q2. I mean initially you guided for less of a decline in advertising. It was much worse in the end. So I just wanted to -- reconciling everything you said, it seems to be that you seem to suggest that this Q2 decline is due to automotive mostly and it's cyclical rather than anything else. So am I right in assuming that? And ex that actually, advertising would probably only have been down low to mid-single digit.

[Quico Alum, General Manager of Publiespaña]

Okay. I mean the -- the decline, we have [indiscernible] in the automotive sector, that is clear. Remember last year, we have the World Cup and the automotive sector is reactive in these type of events. And programming, we have this kind of problem. Even if not all -- I mean if the market has declined by 5.6%, maybe automotive sector means 1 point, 1.5 of this decline, not all the decline. But it's really important, this sector for us. And we think and we believe that in September, this sector will come back. We have some news for some brands. But good news, we don't have all the information from all the sector and we have to wait for that. That's the idea, but it's not just the reason of that. I mean the shape of the market was not good in the first half. And then we try to analyze the reason of that and what issues of automotive, the other is drinks. And after we have 2 or 3 points that is in the market and we had food sector, not good. But retail was excellent, telcos was excellent. And then we have to work day-by-day. We don't have all the information because -- we are selling now August and we are almost at the end of August. That's incredible, but we are -- that's the way we're working in this moment in this market. For that, if you are asking me about some information, it's like I don't want to give news, I don't have all the information to provide you with a number.

[Operator]

Your next question comes from the line of Remi Grisard.

[Remi Grisard, Equity Analyst]

So the first question is on your tax rate. I saw that you're just below 20% for the first half. So should we expect such a low tax rate for the full year? And my next question is on your MiTele Plus offer. You talked about 4 million free users. How does it compare to the 17 million unique Internet users that you are putting in your slides? So what part of this 17 million users are watching free video programs? And what would be the potential revenues from the MiTele Plus offer in, let's say, 1 year in your view?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes. In terms of the tax rate for -- we might expect to have at the end of the year, it cannot be otherwise. It is the one that we have at the end of June. Because what you have to do in terms of the tax rate is to estimate and you put -- and to put what you think is going to be at 31st of December. So what we see at the end of the June is what we expect to have at the end of the year. Now you will see that there is a difference that we have a lower tax rate this year versus last year. But that was basically due to the sale of [indiscernible] company, the stake that we had Caribevision last year. Due to the tax rules in Spain, you could not apply the loss that we have on that sale. And therefore, the tax rate versus the pretax profit of last year is higher than what you see at the end of June of 2019. But unless something happens, and we don't have any reason to think that, that will be the case, the tax rate at the end of June is what we expect is going to be placed at the end of the year.

[Massimo Musolino]

In terms of the difference between of monthly users and the registered users comes from the fact that we -- our main source of revenues -- of interest revenues come from advertising. So you may know that there is the risk when you ask for a register, that people don't do this and leave the web. So up today, we have, let's say, preferred not to ask to everybody to register and because we have preferred to have a larger number of user and then to sell advertising on that basis. The 4 million or the close to 4 million, exactly there are 3.9 million users registered, is because in some web and in some product, we have preferred to have the information about this user. How much of them will decide to pay to enter into MiTele Plus, I think that honestly we don't know. It's clear that we are doing this to achieve a profit. So we will move all our possibility on our argument to convince the majority of them to enter in MiTele Plus. We think that the football rights, or better said the rights of the Movistar channel that will -- which are football will be an important driver for the growth of our SVOD platform because they will be to [indiscernible] to contrast this channel. You have to, first of all, to become a subscriber of MiTele Plus. And on top of that, you buy or you pay for the premium channel. This is a way for us to sell together entertainment plus sport. And this will be a quick way to show to all the user the quality, the quantity of content that we have in MiTele Plus. Honestly, I am not able today to tell you the revenues of this. I only can say now that no one -- we never do something with the idea to lose money. So it's evident that we'll try with all our efforts to materialize the revenues and to have a benefit from this activity.

[Mario Sacedo Arriola, Head of Investor Relations]

Thank you, Remi. I guess if there is no more questions pending to be covered, then now it's time to close this conference call. Thank you very much for attending our presentation, to all of you. If you have any further question, please don't hesitate to contact with Investor Relations department. And have a great summertime, all of you. Goodbye.

[Operator]

Ladies and gentlemen, that does conclude our conference call for today. Thank you for participating. You may now disconnect.