Gerhard Zeiler

October 2007

As CEO of the RTL Group, Gerhard Zeiler oversees 38 TV channels and 29 radio stations in ten countries, as well as FremantleMedia, which every year produces more than 10,000 hours of award-winning prime-time programming in 22 countries. It also has the rights to 19,000 hours of programming that it sells in 150 countries worldwide. One of Zeiler’s priorities is to move his group solidly into the digital world. The other is to make sure that, in the meantime, his stations remain profitable—that means having good content that attracts large audiences and generates high advertising rates. This allows him to remain in touch with his first love—programming. He spent many years early in his career heavily involved in scheduling some of Europe’s top networks, including Germany’s market leader, RTL Television. He talks to World Screen about his vision for the RTL Group in the digital age.

WS: Has the strategy to build families of channels been successful?

ZEILER: Our philosophy is that in the digital age, when consumers can choose between hundreds of channels, you can’t really be successful with just one channel even if you have the biggest one in your market. Like any other industry, you have to offer more choice to the consumer, which is why we started our family of channels approach.

This concept has proven to be very successful in many markets. It has been successful in the Netherlands, in Belgium and also in France. However, the best example to illustrate it is Germany, where we explored our first family of channels: In Germany, we have our flagship channel RTL, which really targets the whole family and all demographics. Then we have three so-called “second-generation” channels. One is Vox, which targets females and an upmarket demo. We have shares in RTL II, which is a channel for males and young people and is a trendier, and sometimes an edgier channel. And finally we have Super RTL, a joint venture with Disney, which is a channel for kids and their caregivers.

On the next level we go into niches. We own 100 percent of the news channel N-TV. We have a shopping channel and at the end of last year we launched some digital offerings for pay-TV platforms: RTL Crime, a channel for soaps called Passion, and RTL Living, which is more of a docusoap and magazines channel. Beyond those three “generations”, we will go into more niches, niches that can also involve other means of distribution—not just television. We can go online, we can go onto mobile devices, and that is what we intend to do—to offer more to the consumer.

WS: Is it less expensive and easier to launch channels in the digital world than it was in the analog world?

ZEILER: There are several ways of launching channels nowadays. For those broadcasters who already have a strong presence in the analog environment it is easier to launch channels in the digital era, because they can benefit from cross-promotion.

Those who don’t have a presence in the analogue world must either have a unique, absolutely striking idea, or they have to take a worldwide approach. International companies which own a lot of programming have the ability to brand one or more channel concepts—AXN in Sony’s case, 13th Street with NBC Universal, or FX and National Geographic with Fox—and then launch them in many countries. If you already have the resources, the cost base is lower. So the approach is to have a worldwide strategy with the same branded channel and a low cost base.

WS: So brand is very important nowadays.

ZEILER: Brand is as important as content. If you go into a big shopping mall, with hundreds of shops, where do you go to buy, for example, jeans? You go to the shops you know. And that’s why I believe that in a universe where you have 500 channels or more, having a strong brand is a big advantage.

WS: If a broadcaster invests a lot of money in a program, what is the best way to maximize its viewership?

ZEILER: As a market leader or as a strong number two, you need day-to-day programs that viewers consider must-see TV—soaps, daily magazines, the daily news, drama series and reality formats. This ensures a loyal daily viewership and helps with the [channel’s] profitability. But it is not enough. You also need big events, like Idols, sports, big entertainment shows and blockbusters.

If you are one of the leaders in the market, the family of channels concept, again, is a good mix for that, because then you can re-run your blockbusters on second-generation channels, for example. And you can go into further into the niches as well. You can, for example, differentiate male-skewed programs from solely female-oriented programs and use them for clearly targeted channels. Also, when you acquire from third parties, they aren’t just interested in selling you their blockbusters. They also want to sell you a lot of other programs, which won’t give you a 20 percent market share. With a family of channels, you can use these on one of your smaller channels.

WS: Why has DTT worked in some European countries and not in others?

ZEILER: DTT really depends on the distribution landscape. Look at Germany and the Netherlands. In these countries cable and satellite have been so strong that there was already a lot of choice for the consumer in the analog era. In the Netherlands, where 91 percent of the homes are connected to cable, you don’t need DTT because analog cable already offers as many channels as DTT. In Germany, 55 percent of the homes are connected to cable and 39 percent receive satellite. So with more than 90 percent already receiving cable or satellite, there’s not much need for DTT.

In the U.K. it’s different. For a long time you either had only the five terrestrial channels or you had to subscribe to Sky, the satellite pay-TV platform, to get a bigger choice. And Sky was very successful. But the establishment of DTT gave people who wanted to have more than the five terrestrial channels, for the first time, a free alternative to Sky. That’s the reason why DTT exploded via the Freeview platform.

In France it’s a similar situation: only one-third of the homes were connected to cable or satellite. Before the rollout of DTT in 2005, the rest of the country had only TF1, M6 and three public channels. So DTT started late but will be very successful in France.

Spain does not have a big cable penetration, and satellite is not too strong, but has a certain following. Let’s not forget that the Spanish free-TV market consists of two public channels plus Antena 3 and Telecinco and now Cuatro and La Sexta, and a lot of local channels. So viewers have quite a bit of choice. DTT will have its merits and it will stay.

WS: Is new media an effective way for an established broadcaster to extend its reach and strengthen the connection with viewers?

ZEILER: Definitely. Look at what most of the American networks are doing now. Look at what ABC is doing with Lost, what FOX is doing with 24 and Prison Break and what CBS is doing with CSI. They all offer shows on their websites immediately after the TV broadcast. Most of the shows you can watch for free, [with] commercials. It’s either advertising that was sold exclusively for the web offer or advertising that was already [included] in the broadcast. The advertising industry has accepted this model for the first time this new season. In the future there will be many more ways to reach the consumer. A lot of the platforms that are emerging now might not be around in the future, but I am sure that some of them will be. And the most important thing for the broadcasters is to be able to reach the consumer via many new ways and to monetize them by getting paid for that—either by the consumer directly, or by the platform or by advertisers.

WS: In the case of the RTL Group stations, how have advertisers embraced the fact that shows are being streamed on websites? Do they understand that this can be good for them or are they resistant?

ZEILER: The U.S. is ahead of us in Europe in this development. It was big news for us when we heard that during the upfront negotiations, the broadcasters [ABC, CBS, NBC and FOX] managed to put through what they call the [live-plus-three-day] formula with the majority of their clients, which means that the advertiser is paying for all viewing that occurs within the first 72 hours after the TV broadcast and not just for the initial broadcast anymore. That’s good news as we start negotiating with advertising agencies in Europe. The fact that such a model has now been established between networks, agencies and clients in America will be useful for our business in Europe because we can say to our advertising clients: Look, your brothers and sisters in the U.S. have already accepted the model.

We are in the first development cycle of streaming video. We are in the first development cycle of VOD. In most European countries you can watch linear TV via your PC but nonlinear TV on mobiles is still at the experimental stage. There were trials, but now the licenses will be awarded within the next 12 months.

WS: When dealing with new media and emerging platforms, is a lot of what you do trial and error to a certain extent?

ZEILER: My credo is that we have to try out everything, even though we don’t know if some of the models will work or not work. If we try something out and it doesn’t work, OK, then it doesn’t work. But imagine if we didn’t try something and it does work—that we cannot afford.

You always have to invest some of the profit into your future business. Yes, we have to invest in VOD, we have to invest in mobile TV, and we don’t have to expect a return on investment within two years. This is a long-term vision for our business.

WS: FremantleMedia has the ability to make shows that become events, like Idols. Those types of shows are very important for broadcasters.

ZEILER: Definitely. We need them not only for our own channels, but every channel needs them. We need the everyday programs for day-to-day viewing, but we also need the big events that stand out. And the big events have one advantage for broadcasters: people want to see them live, immediately, not later, recorded.

WS: As we move into the digital age, is it important for a media company to diversify its revenue streams?

ZEILER: We strongly believe that as much as the advertising industry will finance a lot of new media in the future, we can’t expect them to finance everything, so we also need to go directly to the consumer. We have to make money from the platforms. We have to further diversify our revenues. We have to have at least a second if not a third revenue stream. We started doing that many years ago, so that almost 40 percent of our revenues already come from non-advertising-based businesses.

WS: Why was the Talpa Media deal important to the RTL Group?

ZEILER: First of all, RTL Nederland is a major profit center for our group. The big thing about the deal is that John de Mol is involved—an excellent entrepreneur and a creative genius. Having him on board is a great asset for our group. Second, we just started a fourth channel in the Netherlands, called RTL 8. So we now have RTL 4, RTL 5, RTL 7 and RTL 8…this will give us further leverage in the fragmenting media markets. And we will also have in our group Radio 538, the country’s leading commercial radio station. It fits perfectly into our existing activities in the Netherlands. I know that our competitor SBS was keen to make the deal, but I’m very happy to say that we [have made] the deal!

WS: Your passion has always been programming. Is that still what gets you excited, with all the different things you have to handle as head of the RTL Group?

ZEILER: Oh yes, I love television and I really believe that in whatever industry you work, if you don’t have passion for the product, then you really can’t be the best manager. I have a passion for TV. I love TV, and one of my tasks—not the only one, of course—is to stay very much in touch with the development activities. I get the ratings of every single station of every country we are in, every single day. I look at them and if there is a surprising program in one of the countries, I have it translated into English or German, and watch it just to get an idea of what is new. Because I have to travel so much, I have a great DVD player. That’s what makes my travel time—which is otherwise sometimes crazy—really pleasant: I can watch all the programs I want to watch.

WS: Do you miss scheduling?

ZEILER: I shouldn’t say this, but yes! [Laughs] Sometimes I give advice about scheduling. I’m not sure whether everybody wants the advice all the time, but that’s my passion!