RTL Group’s Thomas Rabe

Thomas Rabe, the CEO of the RTL Group, talks to World Screen about how the company must continue to transform to keep apace with change.

When Thomas Rabe became CEO of the RTL Group in April 2019, he was taking over leadership of a company he already knew well. He had been CFO from 2000 to 2006 and a member of its executive committee. In 2012, he became chairman and CEO of Bertelsmann, which holds a 76.28 percent in the RTL Group. Today, Rabe heads both Bertelsmann and the RTL Group.

Rabe readily acknowledges the rapidly evolving nature of the media business and says the RTL Group must continue to transform to keep apace with change. The group consists of three main divisions: broadcast, content and digital. Broadcast encompasses interests in 30 radio ***Image***stations and 68 television channels across Europe, including the flagship RTL Television in Germany, M6 in France and RTL 4 in the Netherlands. Fremantle is the content engine of the group, producing more than 12,000 hours of original programming and distributing 20,000-plus hours worldwide. The digital division comprises investments in advertising technology and short-form video companies.

The RTL Group has made Total Video—offering content across all screens and devices—its primary strategy and that has been paying off. The group reported an increase in revenues in 2019 to €6.7 billion ($7.4 billion), delivering a profit for the year that was up 10.1 percent to €864 million ($960 million).

Going forward, expanding the group’s streaming services TV Now in Germany and Videoland in the Netherlands, whose subscriber counts have already exceeded management’s expectations, is a top priority for Rabe. So is strengthening the group’s core businesses—the German family of channels increased audience in the 14-to-59 target demographic in 2019, and Groupe M6 in France outperformed the market in advertising sales and audience shares. Third, Rabe wants the group to continue to form partnerships, in particular in advertising technology, streaming technology and international advertising sales.

Rabe talks to World Screen about the group’s businesses and the collaboration between RTL Group and Bertelsmann. The two have formed an Ad Alliance in Germany, which aims to offer clients a one-stop sales house across TV, digital and print, with a similar scheme being set up in the Netherlands, and a Content Alliance in Germany to provide opportunities for creatives across all media genres.

Rabe also makes a case for regulation he feels is necessary for Europe to ensure a more level playing field between traditional broadcast businesses and the U.S. digital behemoths.

WS: What is the RTL Group’s strategy for its streaming services?
RABE: We are in the midst of a major transformation of the media industry. To successfully transform our business, two factors are particularly important: higher reach, in both linear and nonlinear, which requires significant investments in content, marketing and a state-of-the-art tech platform for our streaming services; and better monetization of our reach, through targeting and personalization, which requires investments in advertising technology and data.

RTL Group’s strategy builds upon three pillars: firstly, strengthening our core businesses. Secondly, boosting the growth of our streaming services and global content business, Fremantle. And thirdly, fostering alliances and partnerships in the European media industry. Within this framework, we put a particular focus on becoming national streaming champions in the European countries where RTL Group has leading families of channels. We will continuously expand our streaming services by offering more local, exclusive content across all genres directly to the consumers.

Our aim is to maximize consumers’ attraction to our broad variety of video content, across all devices—this is what we mean by Total Video. Our national streaming champions are designed to complement our leading families of channels, making our content available wherever and whenever the consumer wants, while attracting new and younger audiences to our content.

WS: Which of the RTL Group’s streaming services are performing best and attracting the most subscribers?
RABE: At the end of 2019, RTL Group registered 1.44 million paying subscribers for its streaming services TV Now in Germany and Videoland in the Netherlands—37 percent more than last year. The viewing times of TV Now in Germany and Videoland in the Netherlands increased by 31 percent and 45 percent, respectively. So, our streaming services are growing rapidly and exceeding our expectations, and we will significantly raise our ambitions. Over the next five years, RTL Group aims to grow the number of paying subscribers for TV Now and Videoland to 5 million to 7 million.

WS: What is Groupe M6’s participation in Salto? Are there plans to join the ProSiebenSat.1-Discovery service, Joyn?
RABE: European broadcasters need to cooperate more than ever to compete with the global giants. Establishing partnerships is part of RTL’s DNA—this is how we became the first pan-European broadcasting group. Last year, we made a start at offering different forms of partnership to European broadcasters, all based on the philosophy of bundling resources to establish open and neutral platforms. We offer such partnership opportunities in three areas: advertising technology, streaming technology and international advertising sales.

Our advertising technology platform is based on Mediengruppe RTL Deutschland’s Smartclip. It provides a full stack of advertising technology, and many forms of cooperation, from software licensing to partial ownership. The tech platform for our streaming services is currently built by M6 and its tech arm, Bedrock. They will serve the French subscription service Salto, a partnership of TF1, M6 and France Télévisions, due to be launched in 2020. As with Smartclip, Bedrock is open to other partners.

One key development for RTL Group’s largest revenue stream, advertising, has been the growing demand from advertisers and agencies for global ad buying opportunities. As a consequence, we are further expanding our international sales house, RTL AdConnect. Its portfolio encompasses leading partners such as ITV in the U.K. and RAI in Italy.

As these examples show, we are always open to partnerships wherever they make sense. However, concerning streaming in Germany, we decided to focus on and boost our platform TV Now, which has great traction. Time to market is of the essence, and we do not want to get distracted by negotiating complex joint-venture agreements and going through a lengthy regulatory approval process with uncertain outcomes.

WS: How are the linear channels in the RTL Group remaining relevant to viewers?
RABE: In 2019, our German family of channels increased its audience share in its main target group—viewers aged 14 to 59. This was largely thanks to our main channel, RTL Television, which increased its audience share for the first time since 2011. Live sports, such as the Europa League, drama series and entertainment formats continue to attract large audiences. This is why we recently acquired the full and exclusive rights to broadcast the UEFA Europa League and the newly established UEFA Conference League, starting with the season 2021/2022, for a period of three years. This deal not only strengthens two of our linear channels, RTL Television and Nitro, but is also key for our streaming service TV Now.

In our second-largest market, France, Groupe M6 outperformed the market in advertising sales and audience shares. This was also driven by the acquisition of the leading children’s channel, Gulli, in 2019. As in Germany, live sport attracts mass audiences. This is why Groupe M6 also acquired free-to-air broadcasting rights for the UEFA Europa League and the newly established UEFA Conference League, again for a period of three years.

WS: What has been driving Fremantle’s positive financial results?
RABE: Fremantle was very successful across all genres and across its global footprint—in drama with the second seasons of American Gods and Charité, in entertainment with American Idolon ABC and America’s Got Talent: The Champions on NBC and with the game show Ask Me Anything on RTL 4 in the Netherlands.

Fremantle’s strong growth in 2019 shows that the expansion of Fremantle we started five years ago is successful in entertaining and international drama production. With a series of acquisitions, including Miso Film in Scandinavia, Wildside in Italy, Kwaï in France, Easy Tiger in Australia and Abot Hameiri in Israel, Fremantle created a global network that now comprises 19 production sites for drama series.

Fremantle also bought minority stakes in a number of newly founded production companies to secure first access to their creative talent and output.
Working with world-class storytellers is key to Fremantle’s scripted strategy, because great stories always sell, all over the world.

In 2019, Fremantle made its first investments in the Latin and Hispanic scripted market, with a 25 percent equity stake in the Los Angeles-based company The Immigrant. In addition, Fremantle signed an exclusive first-look deal with the Oscar-winning production company Fabula to develop a slate of original English and Spanish dramas. Fremantle will then distribute the projects worldwide.

As a result of this strategy, our global content business now generates 23 percent of its total revenue with drama productions for the international market.

In digital, Fremantle has built a new client base with global streaming platforms such as Netflix, Amazon Prime Video, Apple+ and with YouTube and Facebook. Fremantle’s digital revenue was up strongly in 2019 by 20 percent.

WS: How is the RTL Group working with advertisers?
RABE: Last summer, we announced a strategic review of our ad-tech businesses. In Europe, the aim is to create an open ad-tech platform, based on the technology developed by Smartclip and tailored to the needs of European broadcasters and streaming services. We have been on a roadshow to present this concept to other European broadcasters and received a great deal of interest.

At the same time, we are reviewing strategic partnerships for the SpotX global business, which serves some of the world’s largest media owners, device manufacturers, platform operators and publishers. Our goal is to find a strong U.S. partner to further develop SpotX and cater to the U.S. market.

WS: Is RTL Group collaborating with other companies within Bertelsmann on content creation and advertising opportunities?
RABE: With new alliances and partnerships across Bertelsmann’s and RTL Group’s value chains, we are opening up significant growth opportunities—from ad sales to content creation and technology.
Three years ago, we launched the Ad Alliance in Germany. The alliance was born out of the concept of ‘What does the market want?’ And what the market wants is a one-stop sales house with high-quality content and high reach across all media—TV, digital and print. This did not exist in the German market before and is a unique proposition. In 2019, the sales house Media Impact became a partner of the Ad Alliance for the digital inventory of Axel Springer and Funke Mediengruppe. Together, all platforms of the Ad Alliance reach 99 percent of the German population. The power of our Ad Alliance was one driver of RTL Deutschland’s strong sales performance in 2019.

RTL Nederland followed the German example and is currently building an integrated advertising sales network for the Dutch market, also called Ad Alliance. The Dutch Ad Alliance will sell advertising for RTL Nederland, BrandDeli, Adfactor and Triade Media, and will also be open for new partners.

A year ago, we formed the Bertelsmann Content Alliance in Germany. Bertelsmann is a creative powerhouse, investing close to €6 billion ($6.7 billion) in creative content per year, of which €2 billion ($2.1 billion) is invested in Germany. The Bertelsmann Content Alliance in Germany pools our group’s content expertise to fully exploit the potential of our most important market. With content offerings across all media genres and new marketing opportunities, Bertelsmann has become an even stronger partner for all creative professionals in Germany.

On the level of RTL Group, we launched our Format Creation (FC) Group to meet the global demand for exclusive content by developing both new format ideas and IP, fully owned and controlled by RTL Group. FC Group is a collaboration between RTL Deutschland, Groupe M6 and RTL Nederland. It focuses on developing factual-entertainment formats and reality shows and works closely with RTL broadcasters to reflect their needs in their local markets. The most important element is to be in control of the format rights.

WS: What regulation is necessary to ensure a level playing field between linear broadcast businesses and the FAANGs in Europe?
RABE: U.S. tech groups have risen to positions of unprecedented power and dominance with their globally scalable business models, almost unlimited access to data and new technologies, and the money to either acquire challengers or clone their offerings. Our response is not to complain but to transform and build on our own strengths. What we need is fair competition and a regulatory framework that reflects today’s market realities.

I see four areas of particular concern. First, regulation on TV advertising in Europe. This is essential as advertising continues to be our main source of revenue for funding content investments. The recently revised Audiovisual Media Services Directive will allow linear TV channels in Europe to go beyond 12 minutes of advertising per hour as long as they do not exceed 20 percent during core hours. Clearly, a step in the right direction, provided member states fully implement the directive—but it is still much more restrictive when compared to advertising on the global tech platforms.

Second, copyright protection is essential to protect our content investments. We believe that a simple principle of market economies should apply: if the tech groups use our content to improve their reach and revenue, they should pay for it. We welcome that under the recently adopted European Copyright Directive, the tech groups have to take more active measures against copyright infringements. But again, a lot depends on how forcefully member states will implement the directive.

Third, data protection. Digital business models increasingly depend on data, for example, to personalize advertising and content and to improve the user experience. There are two challenges: excessive data regulation and access to data. Platforms distribute our content to drive reach, but they limit our access to the data generated with our content. This should be addressed.

With its General Data Protection Regulation (GDPR), the European Union has taken a significant step for better data protection, but its long-term economic consequences are still unclear. The next step—ePrivacy Regulation—is already discussed at the EU level. It could drastically reduce the use of personalized advertising on many media sites.

What we need is a moratorium: EU policymakers should wait for another two years to analyze the effects of GDPR before deciding on further steps, if any.

And fourth, competition law. For traditional media, antitrust rules primarily relate to national markets, and often to even more narrowly defined sub-markets or sectors. This increasingly stands in the way of meaningful and necessary cooperation and consolidation in the sector—and does not reflect today’s market realities and the new dimension of competition with the tech groups.

WS: Is the RTL Group looking to make acquisitions? Does it need to get bigger to compete in today’s media world?
RABE: Our primary focus is on organic growth at RTL. However, wherever interesting opportunities arise, we will continue to drive consolidation in our existing broadcasting footprint, including through acquisitions or increased shareholdings. A current example is the acquisition of the French children’s channel Gulli and five pay-TV channels by Groupe M6. To summarize: we are consolidators within our TV footprint and will continue to grow our global content business, Fremantle.

WS: How are newscasts on the group’s channels and stations being received by viewers?
RABE: Delivering credible, easy to understand and—above all—independent news has always been one of our core competencies and it clearly pays off with strong ratings, high audience loyalty and trusted brands.

RTL Group is tackling news verification, for example, with an initiative that started within RTL Deutschland and has become a group-wide collaboration: the user-generated content verification team brings together information specialists who, upon request, check user-generated content submitted by newsrooms from across RTL Group. More than 70 trained journalists use various tools and methods to check this material for authenticity before broadcast.

In addition, ENEX is an association of the world’s leading commercial broadcasters who share their news content and production resources. Last year it launched ENEX Discovery, a social media news-gathering operation. Its aim is to source and verify user-generated news content and to secure publication rights for its partners. This allows for the exchange of information, best-practice techniques and increased efficiency in alerting colleagues to fakes, deep fakes and mislabelled content.

WS: Tell us about the RTL Group’s social responsibility initiatives.
RABE: The focus of our CR [corporate responsibility] commitment is to embrace independence and diversity in our people, our content and our businesses. Millions of people watch our news each day. They need to be able to trust us. A healthy, diverse and high-quality media landscape is the foundation of a democratic and connected society. In this light, our CR commitment means we can maintain journalistic balance and reflect the diverse opinions of the societies we serve. And this diversity must also include the composition of our workforce and management. Our long-term ambition is for women and men to be represented equally across all management positions. As an intermediate step, we have set a target for 2021 to increase the share of women in top and senior management positions to at least one third.

We are mindful that conserving resources and protecting the climate are key issues for the 21st century. Thus, we have decided to become a carbon-neutral company by 2030.

This interview was conducted prior to the COVID-19 global pandemic. Media companies are currently shifting their strategies in the wake of production postponements and economic trends.