Gerhard Zeiler

This interview originally appeared in the MIPTV 2011 issue of TV Europe.

 

With 40 TV channels and 33 radio stations in 10 countries, the RTL Group calls itself the leading European entertainment network. That is because besides operating leading TV stations, such as RTL in Germany, M6 in France, Antena 3 in Spain and RTL 4 in the Netherlands, it also owns FremantleMedia, one of the largest international creators and producers of program brands in the world. RTL Group’s CEO, Gerhard Zeiler, talks about the strengths of the group’s channel strategy and its program-producing prowess.

 

ZEILER: I’d rather talk about a “family of channels” concept where you have different generations of channels. Viewers don’t care whether it’s digital or analogue, they just want to watch their favorite programs. All the European countries where multichannel television developed earlier—Germany, Belgium and the Netherlands—have second-generation channels that are quite big. In Germany, for example, our channel Vox has an audience share of almost 8 percent in the target group, and Kabel1 from our main commercial competitor has a 6.5-percent share. In France, the second-generation channel of M6 Group is W9. The digital terrestrial channel was launched in 2005 and now has a 4-percent audience share in the commercial target group. These are just different stages of development. Eventually, everything will be digitized and there will be hundreds of channels in every country. You might have more cable penetration in one country, more direct-to-home satellite in another, and in yet other countries you may see an impressive penetration of IPTV services, like in France. But for the broadcasters, this doesn’t matter. In principle, you still have the same landscape: there are two or three major TV groups, and then there are a lot of small channels which address defined niche audiences.

 

TV EUROPE: What are you learning from your various catch-up-TV services?

ZEILER: We’re already learning a number of things, although we’re still at an early stage. First of all, catch-up TV is not cannibalizing linear TV. Linear TV is still growing, and so far catch-up TV has been additional viewing.

 

The second aspect concerns fragmentation. In the linear world, digitization always meant further fragmentation, with viewers being spread over ever more channels. In the nonlinear world, it’s the opposite: on-demand means less fragmentation. If you take a closer look, it’s quite logical. What do people watch on demand? Their favorite shows they missed on linear TV because they weren’t at home or had other things to do, or there were other programs that were even more interesting. So on-demand viewing is about viewing blockbuster shows. Regardless of whether you look at data from the U.S., U.K., France or Germany, it’s always the same picture: the top-rated shows get a much higher share on nonlinear than in the linear world. In other words: on-demand favors the most popular programs, favors big channels, and therefore favors companies such as RTL Group.

 

Finally, nonlinear is all about what you missed in a serial. So Desperate Housewives and Lost are watched more than CSI. This is true not only for the fictional world but also in the reality genre. A program such as Come Dine with Me in France is one of the top shows on nonlinear because it’s serialized. You know the results will be presented on Friday but you missed Wednesday’s episode, so you want to know what happened and you catch up on nonlinear.

 

TV EUROPE: What opportunities do social networks like Facebook and Twitter offer broadcasters, and how is the RTL Group using them?

ZEILER: We’re all still experimenting, and I don’t think anyone can say today what the combination between social networks and TV will be in the future. It’s a great marketing tool, for example, for event shows such as I’m a Celebrity, Get Me Out of Here! or the Dutch talent show The Voice of Holland. I also believe social networks can provide access to creative people. TV is about professional content, but how do you find the future creators of great programs? And for young creators, the key question had always been how they can catch the program director’s attention if they had a show or idea to pitch. Now they can put it on YouTube or Facebook, create a buzz without huge costs—with a fair chance that professional commissioners and the people who are scouting next-generation creators will see it. Social networks connect broadcasters and producers with young talent. In the future, we’ll be seeing much more of this as a positive impact of social networks.

 

TV EUROPE: How has Fremantle­Media managed to keep its finger on the pulse of what viewers want to watch? That can’t be easy.

ZEILER: A production company is in the creative business, which is always more volatile than a stable business like broadcasting. A producer can’t be as flexible with its costs as broadcasters can. Managing an international production group is essentially about managing talent. To look into someone’s eyes, talk with him or her and say, I believe in this person and I will let this creator develop the next show, that’s the big challenge—being on the cutting edge of what happens next. It’s absolutely great to have such a creative powerhouse as FremantleMedia in our group; it’s the true forefront of the TV industry. Broadcasters have more time to look at what is developing and to decide where to invest. Production companies have to be first.

 

TV EUROPE: The Hollywood studios are starting to get into the format business. Sony has for a while, but it’s a long way to get to where FremantleMedia and Endemol are, right?

ZEILER: They’ve got a very long road ahead of them. Why? It’s not about creating a new format or two. It’s about having the capability to roll them out worldwide. Actually, rolling out formats such as Idols, Got Talent or The X Factor worldwide is not that difficult. But to roll out a format such as Hole in the Wall to 41 countries within 18 months, you really need a great organization. And to build this organization from scratch is what Endemol and FremantleMedia have done. To get what they have will cost you either an incredible amount of money, or you have to be really brilliant and lucky. At the very least, you have to have deep pockets.

 

TV EUROPE: Do you think the studios have waited too long to catch up?

ZEILER: No. Remember, the studios have always been very focused on the U.S. Yes, the importance of international has grown quite dramatically over the last 10 to 15 years. But if you have a domestic market where at least 80 percent of the money you make is from either drama or sitcoms, then you don’t really focus on anything that has to do with reality and entertainment formats. When I look at what the U.S. networks are doing in terms of non-scripted programming, I recognize that a lot of them will only take a show if it’s already successful in Europe, and mostly if it has been successful in the U.K. As the U.K. is FremantleMedia’s home ground, that’s good for us.

 

TV EUROPE: You have strong bases in the U.K. and in Holland. Both are strong incubators of formats. Why is that?

ZEILER: In the U.K. you have a completely different balance between creating and producing on the one hand and broadcasting on the other hand. I’m not even talking about the rights situation, that’s another issue. If you have a successful afternoon daytime show in Germany or in France you air it 250 days a year. And if you have a lot of money you can afford 190 original episodes. With less money available you might cut it down to 170 original episodes, but it’s still the same show and the rest of the days you run repeats of the show. That’s how we program schedules in Germany, France and Spain. In the U.K. it’s a maximum of 60 new episodes a year. Even if it’s a hugely successful format they don’t air more on the channel. Don’t ask me why. But as a result, more new formats make it to the commercial channels and to the BBC’s channels. And that’s very beneficial for the production community.

 

In the Netherlands it has to do with the fact that there has always been a strong relationship between producers such as John de Mol and the broadcasters. For example, RTL Nederland has an ongoing output deal with John de Mol’s Talpa Media. At the same time, John de Mol’s company is a minority shareholder in RTL Nederland. The fact that the Netherlands is a relatively small country also nurtures a positive mind-set when it comes to trying out new concepts and experimenting.

 

TV EUROPE: So the bigger the country the more expensive it is to improvise?

ZEILER: Yes, and the higher the risk.

 

TV EUROPE: Is the recession yesterday’s news, or are you still feeling the impact of it? And where do you see growth?

ZEILER: TV advertising in Western Europe has rebounded with a vengeance. Nobody, not even the most optimistic of optimists, would have thought we’d see TV-advertising growth rates of 9 to 11 percent in countries such as Germany, France, Belgium, the Netherlands. The U.K. was up almost 18 percent in 2010. At the same time, advertising markets in Central and Eastern Europe did not recover, but we can assume that most CEE markets have bottomed out. Southern Europe is more difficult, except for Spain. Though the country’s macroeconomic situation isn’t the best, its TV-advertising market saw pretty impressive single-digit growth in 2010.

 

Probably what happened is that in some of these countries TV advertising became so cheap during the recession that other media turned to TV. The newspaper and magazine businesses are still declining, so that could be one aspect. In Greece, the TV-advertising market has dropped 40 percent over the past three years.

 

TV EUROPE: Germany should own a few islands in Greece.

ZEILER: Some people made remarks to that effect and there was quite an uproar. Germany’s biggest tabloid, Bild, ran a headline that read, “Sell some of your islands, Greece.” It was a nightmare! And our company is seen as ‘the Germans’ in Greece. At least, I can always say I’m Austrian, I have nothing to do with it.     

 

TV EUROPE: Viewers have many other entertainment choices; why do they keep coming back to TV?

ZEILER: Because the programming is great. Our industry knows how to produce good television: First, TV has to be relevant and related to our lives. Second, successful TV has to get into our hearts and touch us. Third, it has to be original, not a copy. And fourth, it has to be executed brilliantly, in terms of both the story line and the acting. If we as an industry uphold these principles, then I’m 100-percent sure that the future of TV is TV.

 

TV EUROPE: As TV viewing has fragmented, how has the RTL Group’s “family of channels” concept helped the group grow and maintain loyal viewership?

ZEILER: When we saw, five to ten years ago, that technology is moving in the direction where there will be hundreds of channels in every single country, we decided we’d rather fragment ourselves than have others fragment us. That was the origin of our “family of channels” concept. RTL Group operates five free-TV channels in Germany plus three digital pay channels. M6 Group has 11 channels in France, RTL Nederland has four free-TV channels plus a digital pay channel, and so on. If you want to be number one, you need a 30-percent audience share, which you can capture with a complementary family of channels. And that’s what we’re aiming for.

 

TV EUROPE: And through the family of channels you aggregate audiences and build market share?

ZEILER: You look at the combined audience share of the family. It’s a simple equation: the higher the audience share, the higher the advertising market share and eventually the financial results. To obtain the critical mass, you need a strong flagship channel such as RTL Television in Germany, M6 in France or RTL 4 in the Netherlands. However, even the most successful channel won’t be able to cater to all the needs of our viewers. So the main channel needs brothers and sisters—and building this family is all about positioning. For example, Vox in Germany is focusing more or less on three genres, and it’s highly profitable. Finding the perfect positioning for your channel, building a strong brand, is the art.

 

TV EUROPE: Are you bullish on TV in the next five years?

ZEILER: I’m very bullish. After all, what did the industry prove during the economic downturn? We can be flexible with our costs to a much higher degree than anyone had predicted. When we saw the rapidly declining ad bookings at the beginning of 2009, we had one goal: cut as many costs as possible, but without losing audience share. RTL Group’s whole incentive program was built around this. Some of our competitors didn’t impose that condition—they cut costs but didn’t focus on retaining their audience share. Our strategy helped us maintain both our audience shares and TV-advertising market shares.

 

Advertisers rediscovered that there is no way they can get their message to consumers without TV because it’s the only medium that touches the heart. Whenever you want to build an image or introduce a new product, you need TV. It establishes the central concept of a major campaign, which then resonates through other media. Thus, TV is compatible with online, radio, newspapers and magazines. You can argue whether it makes sense to go with TV and online or with TV and radio, but you can’t argue whether TV is essential. I haven’t seen any country in Europe where TV’s share in the advertising media mix has been reduced significantly in the past five years.

 

I believe that in the next five to ten years Europe will be having the same discussion we’re seeing in the U.S. right now, between the big platform owners and the major networks. The networks are saying the platform operators get most of their audience and most of their money from our programs, so they should take a small part of their profits and give this fair share to us. This whole retransmission-fees discussion will come to Europe. As a consequence, broadcasters will get a second revenue stream, whether it’s from the cable and satellite operators paying us or opening some space for us so we can launch additional channels.

 

Apart from that, broadcasters have to invest in content, get their business models for catch-up TV and video-on-demand right and be creative for their advertising clients.