RTL Group’s Thomas Rabe

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Among the many changes in the media business in recent years, the rise of SVOD and AVOD platforms has received the most attention and headlines. But broadcast groups have certainly not remained complacent. They have transformed from mere linear channels to multiplatform content providers. There is perhaps no better example of this than Europe’s RTL Group.

Comprising 67 TV channels, ten streaming services and 38 radio stations, the group includes RTL in Germany, M6 in France, the RTL channels in the Netherlands, Belgium, Luxembourg and Hungary, and Antena 3 in Spain. Furthering the reach of the linear broadcasters are the nonlinear platforms RTL+, Videoland, 6play and Salto.

Fremantle is also part of the group. A leading creator and distributor of scripted and unscripted fare, Fremantle produces nearly 13,000 hours of original programming a year and distributes some 30,000 hours of content worldwide.

Thomas Rabe is the CEO of RTL Group. He is also the CEO and chairman of the executive board of Bertelsmann, the majority shareholder of RTL Group. Rabe has been building on the “total video” strategy of reaching viewers on several screens. He has focused on investing in and improving the streaming services in the past year. The strategy is working; RTL+ in Germany and Videoland in the Netherlands have more than doubled their subscriber bases.

Rabe has also spearheaded consolidation inside and outside the group to build scale and better compete with the global streaming platforms. In France, RTL Group is awaiting regulatory approval for the merger between M6 Group and TF1 Group. A similar strategic rationale is behind the merger of RTL Nederland and Talpa Network and RTL Deutschland’s acquisition of Gruner + Jahr’s publishing assets and brands.

In addition to telling World Screen about these deals and the benefits they will yield, Rabe talks about RTL Group’s work with advertisers, Fremantle’s content offering and the business opportunities that have arisen from increased viewing during the pandemic.

WS: RTL Group reported positive financial results for 2021. What strategies and businesses have been driving revenues?
RABE: 2021 was a strong year for RTL Group in terms of operating performance and strategic progress. Revenue, operating profit and net profit were up significantly and back to pre-crisis levels, driven by the recovery of TV advertising markets and our growth businesses of content and streaming. This—combined with active portfolio management—led to a record group profit.

In addition, we increased our investments in our streaming services. At the end of 2021, we registered more than 3.8 million paying subscribers for RTL+ in Germany and Videoland in the Netherlands, meaning that our subscriber base grew over 70 percent year on year. If we exclude the streaming start-up losses, RTL Group generated its highest operating profit ever—just one year after the start of the pandemic. I believe this perfectly demonstrates our powerful rebound in 2021.

Finally, we made significant progress in executing our national media champions strategy throughout the past year. Major moves in France, the Netherlands, Germany, Belgium and Croatia will create significant value for RTL Group’s shareholders and put us in a strong position to compete with global tech platforms.

WS: Tell us about the increases in subscribers at RTL+ and Videoland. How are you investing in them to serve subscribers even better?
RABE: To further boost the growth of all our streaming services, we invest heavily in technology, marketing and content. In November 2021, we rebranded our German streaming service from TV Now to RTL+, with a growing number of original formats across all genres.

In the first half of 2022, we will expand RTL+ to a cross-media entertainment service comprising video, music, podcasts, audiobooks and e-magazines. We will create Germany’s first cross-media champion, offering our audiences the most diverse spectrum of high-quality entertainment and independent information. The new RTL+ will use state-of-the-art technology with a high level of personalization and content recommendations based on artificial intelligence and editorial inputs for a true cross-media user experience.

Strong partnerships are vital for this strategy. In November 2020, Deutsche Telekom and RTL Deutschland announced the expansion of their cooperation. We integrated our streaming service RTL+ Premium within Deutsche Telekom’s TV offer, MagentaTV, contributing significantly to the rapid growth of RTL+ in 2021. Both companies have also agreed to increase cooperation in advertising technology, advertising sales and content, with a particular focus on addressable TV.

In June 2021, RTL Nederland and T-Mobile announced that Videoland had become part of T-Mobile’s new “Unlimited & Entertainment” proposition in the Netherlands. Customers gain access to both Videoland Plus and Netflix standard as well as unlimited 5G data, calling and SMS in the T-Mobile network in the Netherlands with an attractive price advantage.

As a result of the rapid growth of our streaming services and the planned cross-media expansion of RTL+, we have significantly raised our streaming targets. Compared to 2021, we will triple the annual content investments to around €600 million [$663 million] by 2026. We aim to grow the number of paying subscribers for RTL+ and Videoland to 10 million by the end of 2026 in order to grow our streaming revenue to €1 billion [$1.1 billion] and to reach profitability of the two services by 2026. No other European broadcasting group has defined such ambitious streaming targets.

WS: RTL Group has embarked on three consolidation moves. First, M6 Group and TF1 Group merging. What can you tell us about the decision to merge and its benefits?
RABE: Since the summer of 2020, we expressed our conviction that alliances and larger merger moves and thus the creation of national TV champions in Europe are necessary. With this, we called on the regulators to be supportive.

Given the ever-growing competition with U.S. platforms such as Google, Amazon and Netflix, our answer is to scale up our broadcasting businesses. Scaling up can take many forms, from alliances and partnerships to acquisitions—such as the full takeover of Super RTL in Germany—to larger in-country consolidation. In bigger markets, in-country consolidation would generate significant synergies, which we could partly reinvest in expanding our streaming services. One year ago, we said, We are aware that there are both regulatory and cultural obstacles, but we are ready to act. And we promised that we would do this from a position of strength and confidence, acting in the best strategic interest of our businesses and our employees.

Today, we are leading the consolidation of the European media industry. In May 2021, we announced the first major transaction: the planned combination of TF1 Group and M6 Group to create a major French media group. The completion of the transaction remains subject to condition precedents, in particular authorization from the [relevant] authorities. The transaction is aimed to close at the beginning of 2023. RTL Group would then own 16 percent of the combined group, after ­selling an 11 percent shareholding to Bouygues—the principal shareholder of TF1—for €641 million [$709 million].

With full-year revenue of more than €3.4 billion [$3.8 billion], the merged company would be the fourth-largest European broadcasting group. The synergy potential, for example, the positive impact on operating profit EBITA, is estimated at €250 million to €350 million [$276 million to $387 million] per year, within three years from closing the transaction. This demonstrates the value-creation potential of in-country consolidation.

WS: What is the rationale behind the combination of RTL Nederland and Talpa Network?
RABE: The strategic rationale is the same as in France: scale—the pooling of resources and creativity to compete with global tech platforms. It is about higher investments in exclusive, local content to further boost the growth of our streaming services. And it is about investments in tech and data, in particular addressable TV advertising and personalization.

In June 2021, we announced the combination of RTL Nederland and John de Mol’s Talpa Network. The completion of the transaction remains subject to approval from the [regulatory] authorities and is expected to get approved in the first half of 2022. Talpa Network will contribute its TV, radio, print, digital, e-commerce and other assets to RTL Nederland and will receive a 30 percent stake in the enlarged RTL Nederland in return. RTL Group will hold the remaining 70 percent in the combined com­pany and will continue to fully consolidate RTL Nederland in its accounts.

In addition, Talpa Network’s content units—which are not part of the deal—and RTL Nederland will enter into a content agreement for newly developed formats for linear TV channels and Videoland. John de Mol has an outstanding entrepreneurial and creative track record. Our long-term partnership and collaboration in content development will be an important success factor for our linear TV channels and streaming offers. The potential synergies of the merger are again substantial, estimated between €100 million and €120 million [$111 million and $133 million] per year, to be fully realized in 2025.

WS: What does the combined RTL Deutschland and Gruner + Jahr (G+J) offer consumers?
RABE: In January 2022, RTL Deutschland completed the acquisition of Gruner + Jahr’s German publishing assets and brands. The combination is a unique opportunity, creating a German cross-media champion with full-year revenue of more than €2.6 billion [$2.9 billion] and an operating profit of around €500 million [$554 million].

The two companies combined are a journalistic powerhouse with more than 1,500 journalists. The synergy potential is around €100 million [$111 million] per year, to be fully realized by 2025. Three-quarters of the synergies are growth-driven. First, more exclusive and diverse content from cross-media editorial teams, for example, with Geo-branded documentaries and new TV formats from Stern. Second, better cross-promotion between different media categories, for example, cross-marketing for RTL+ to existing subscribers of G+J brands. Third, increased appeal for Germany’s top creative talents and media personalities. Fourth, optimized cross-media advertising campaigns, and fifth, an overall more attractive and complementary brand and product portfolio.

The enlarged RTL Deutschland will increase investments into what matters most: premium content and journalistic excellence.

WS: Is RTL Group better positioned to compete with global streaming services and tech companies than it was a few years ago?
RABE: Absolutely. The elements I described, consolidation and boosting our streaming services, result in a clear target structure for RTL Group’s portfolio. On the one side, we have national cross-media champions in Germany, France, the Netherlands and Hungary, complemented by well-established international cooperation in advertising sales, advertising technology, streaming technology and content development. This strategy will significantly strengthen our broadcasting businesses in the competition with global tech platforms. On the other side, we will continue to expand our global content business, Fremantle. Within this target structure for our portfolio, we have defined ambitious growth targets to achieve in the next four to five years relating to streaming, content production and addressable TV advertising.

WS: What is the group hearing from advertisers, and how is it helping its ad clients?
RABE: First of all, TV advertising continues to be powerful when it comes to brand-building, story­telling in a brand-safe environment and achieving high reach in a short period of time. Once the economies started to recover during the Covid-19 crisis, TV advertising money came back quickly and strongly. And we have many reasons to be optimistic for 2022 and beyond.

Addressable TV advertising is one of the biggest growth opportunities for European broadcasters. In addition to the traditional strengths of TV advertising—creating brand awareness with massive audience reach—advertisers can use new data-driven capabilities to target audience segments that are more likely to generate a specific business impact and, ultimately, measure that impact. In essence, addressable TV promises to grow available inventory, attract new advertisers—local and regional—and deliver higher CPMs, with market studies predicting that addressable TV could account for 30 percent to 50 percent of all TV advertising spend in Europe in the long term. In Germany alone, the market for addressable TV advertising is expected to grow to more than €500 million [$553 million] by 2025, with RTL Deutschland taking approximately €200 million [$221 million] of this market.

To seize these opportunities, advertising technology remains a strategic priority for RTL Group. To transform our business successfully, two factors are particularly important. One is higher reach in both linear and nonlinear TV. The second is better monetization of our reach through targeting and personalization, and this requires state-of-the-art advertising technology and data management.

In October 2021, we announced a comprehensive cooperation with the U.S. ad-tech company Amobee. Amobee and our European ad-tech company Smartclip will establish TechAlliance, a jointly owned sales and services company. TechAlliance will set market standards in the European TV industry to boost addressable TV, giving advertisers and media agencies seamless programmatic access to our premium video inventory.

WS: Tell us about Fremantle, its recent investments and its growth plan.
RABE: We have large ambitions for Fremantle. We will accelerate the company’s expansion, both organically and via M&A, targeting revenues of €3 billion [$3.3 billion] by 2025. This means doubling the revenue compared with 2020. Since 2012, Fremantle has successfully expanded into scripted drama and established a global production network in 20 countries, organically and via acquisitions such as Wildside, Kwaï and Miso Film. This helped to significantly expand partnerships with global and national streaming services, which in 2021 accounted for more than 15 percent of Fremantle’s total revenue.

There is a strong and growing demand for high-end factual content and documentaries, particularly from streaming services. Fremantle reacted to this demand by establishing a new global factual division, with the aim to replicate its success in scripted. M&A is part of the €3 billion revenue growth plan for Fremantle, and we have been active with three acquisitions in 2021. We increased our stake in Abot Hameiri, taking full ownership of one of the leading entertainment producers in Israel. We also stepped up our shareholding in Eureka to a majority position, and we fully acquired 12 production labels from Nordic Entertainment Group. These transactions will add more than €300 million [$332 million] to Fremantle’s annual revenues.

WS: Despite the challenges Covid has posed, have any trends, business models or programming strategies emerged that have been positive for the group?
RABE: First, the strong ratings of our news shows and information magazines during Covid-19 demonstrated again that when it matters, people turn to TV. And they can rely on the dedication and professionalism of our news teams. Over the past two years, we have expanded our news and information programs as they are a real USP for our linear channels in the competition with tech platforms.

Second, total video consumption has reached new highs during the pandemic. Streaming services have become mainstream; for example, they reached new customers in terms of age and other sociodemographic factors. This is a big opportunity for us, in particular with the cross-media extension of RTL+ in Germany. We always had the ambition and philosophy to reach all audiences with our entertainment and information offerings. RTL+ will bundle them in one entertainment app. The time has come for an easy-to-use, attractively priced and true cross-media entertainment experience that will allow us to gain a bigger share of our users’ daily media time. This is the concept of RTL+: one app, all media.

WS: What opportunities and challenges do you see in the next 12 to 24 months?
RABE: The fundamentals of our business are intact; video consumption is increasing, as is the demand for content. We are optimistic that we will receive all the regulatory approvals required to close the transactions in France and the Netherlands over the next 12 months. In
Germany, we will implement our cross-media strategy and boost our streaming service. And we will continue to grow Fremantle. The challenges are primarily related to Covid restrictions and the competition with the global tech platforms for reach, advertising and subscription money. We believe in positive entertainment and independent news reporting—this is what we are good at and what our audiences want.