Winds of Change

October 2006

The Netherlands’ prolific
TV market has made it a preferred playground for many media companies.

By Marlene Edmunds

The tiny, densely packed
territory of the Netherlands, with its 16.5 million people and 6.7 million TV
households, has become one of the most commercially competitive media
landscapes in Europe.

It has also become a major
stomping ground for media companies who want to base their headquarters in the
recently enlarged European Union. Endemol has remained in the Netherlands and
launched its recent IPO, despite its parent being the Spanish media giant
Telefónica. The production and distribution companies Eyeworks, Absolutely
Independent and Off the Fence; the upstart interactive media outfit
2waytraffic; Liberty Global’s UPC Broadband and chellomedia; All3Media’s IdtV;
SBS Broadcasting; and Jetix Europe are but a few on the growing list of
companies using the Netherlands as a base for their global interests.

The Netherlands is home to
John de Mol and Joop van den Ende, the billionaire co-founders of Endemol, as
well as to a handful of media millionaires, including the popular entertainment
host and Eyeworks founder Reinout Oerlemans. De Mol and van den Ende went on to
launch new media ventures of their own after leaving Endemol. De Mol’s Talpa
Media Holding is now moving into the second year of its TV programming venture
Talpa, and is set to launch a second channel in March or April of 2007. Van den
Ende’s Stage Entertainment, which organizes live events, is now in its seventh
year. More recently, van den Ende, through his venture-capital outfit Van den
Ende & Deitmers, took a 30-percent stake in Eyeworks.

One of the reasons such a
large number of companies were drawn to the Netherlands in the first place is
the Dutch market, which, despite its small size, is home to ten broadcast
stations, with more to come. There are three channels run by the public
broadcaster NOS, and the commercial sector is divided up between the RTL Group,
which has three stations; SBS Broadcasting, which has another three; and de
Mol’s evening block of programming—Talpa shares a channel with
Nickelodeon, which provides programming during the day.

THE PRODUCTION CORNER

The Netherlands cranks out
thousands of hours a year of formats, documentaries, drama and now even
telenovela franchises. Endemol’s best-known product, Big Brother, is now in its sixth season, and its second season
at Talpa, but the production outfit churns out a number of other titles in its
own territory, including the popular Dutch take on Desperate Housewives called Gooische Vrouwen, the game show Deal or No Deal and Good Times, Bad Times, the FremantleMedia format that is still on the air in the
Netherlands 16 years since it first launched.

The Dutch market used to
be a major test bed of a format’s fitness to travel, but Paul Römer, the
general manager of Endemol Netherlands, notes, “It is more common now to buy
formats outside of the Netherlands, particularly from England, and re-version
them for the local market. Broadcasters tend to react more positively if I
bring a show to them that has set a track record, such as Dancing with the
Stars,” a format that has just
finished its second season on RTL 4. Endemol is also producing Dancing on
Ice for RTL 4’s Saturday-night
slot.

Endemol, after this
season, will stop production of the RTL 4 hit cop show Baantjer, which has been at the top of the TV ratings in
the Netherlands since it began, in 1996. The series features the 77-year-old
Piet Römer, the father of Paul Römer, in the lead role, and is scripted by
Peter Römer, the star’s other son.

FremantleMedia’s Dutch
production entity, Blue Circle, is creating a growing number of shows for the
local market, among them Idols,
the top-ranking program in the Netherlands, and Lotte, the local version of Colombia’s successful
telenovela series Betty la fea.
Blue Circle is also producing the second season of the format The Farmer Wants a Wife, which brought in a major audience share on pubcaster NOS’s Nederland
1 the first time around.

The almost 30-year-old
IdtV, while now part of the All3Media group, operates as an independent
production outfit and is busy cranking out several hot new products, among them
Couscous & Cola, which is
expected to be a strong traveler. The series features teens from first- and
second-generation immigrant and minority communities being interviewed as they
travel to the U.S. The English-language Al-Jazeera channel has picked up the
first series. The second series was in production at press time.

Statistics show that more
than 66 percent of all people under the age of 30 in the four major
metropolitan areas in the Netherlands come from minority and immigrant
communities. “Couscous & Cola
is not just about the minority community but about the ideas and thoughts of
young people today,” says Frank de Jonge, the CEO of IdtV. The show was
commissioned by the public broadcaster BNN, which targets a youth audience.

Five-year-old Eyeworks is
not only picking up additional work on the Dutch scene, but it’s also spreading
its wings abroad. It now has offices in Germany, Belgium, Sweden and New
Zealand. Recent deals include one with ProSiebenSat.1 to air its format Ticket
to the Tribes.

Off the Fence [OTF] began
life as a small co-producer and distributor of wildlife programming but
significantly added to its presence in the international arena in 2003 with the
Natural History New Zealand catalogue of several hundred hours of quality
programming. Erik Schuit, OTF’s sales manager, says that while the company’s
main focus is on selling outside of the Netherlands, it is also acquiring and
developing programming and is moving increasingly in the direction of
co-productions. OTF has recently made distribution pacts with Zig Zag in the
U.K. for Freeze Me and with the
U.K.’s Quickfire Media for Minoans.
It has also announced a co-production of The Lost Kingdom of Guge with France 5, Bang Singapore and the Media
Development Authority of Singapore.

Commercial TV did not come
to the Netherlands until 1989, with the launch of RTL 4, but the territory has
proved to be a hungry consumer of content. The Dutch, as the enormous wealth
brought into Amsterdam during the Golden Age suggests, are good at the
commercial game. With some ten channels now dependent on commercial advertising
for income, including three public channels, and another channel set to launch
in March or April of 2007 by de Mol, the jury is out on whether they may be,
perhaps, too good.

The TV ad pie grew by 9
percent in the first half of this year, pushed by the World Cup and the Olympic
Games. Advertising growth was just 2 percent to 3 percent more than the last
couple of years, but, as Jasper van Doesselaar, the TV director for Universal
Media Netherlands, adds, “Advertisers are, nevertheless, showing a lot of
confidence in TV now and in the future.”

THE BROADCAST CORNER

The Dutch media landscape
has three commercial television networks: RTL Netherlands, with RTL 4, RTL 5
and RTL 7; SBS Broadcasting, with SBS6, Net 5 and Veronica; and the Talpa
evening block. All three go at each other with counter-programming that only
gets fiercer each year. RTL, led by its family- and female-skewing channel RTL
4, has always pulled the strongest audience shares in the 20-to-49 main
commercial target age group, although it got hefty competition from public
channel Nederland 2 during the Olympic Games and the FIFA World Cup. In the
first half of 2006, eight of the top ten programs in prime time and access
prime time, including films, were from the RTL Group, according to Universal
Media research. Among the highest-rated programs were Idols; Good Times, Bad Times; CSI;
and CSI: Miami. Contender SBS
Broadcasting slotted in third place in the Top 10 shows for the first six
months with the film Pirates of the Caribbean: The Curse of the Black Pearl, and also with a series called The Tribes Are Coming.

RTL and SBS, never
milquetoast when it came to going up against each other, are more competitive
than ever before, and there are good reasons for this. RTL Netherlands is
headed up by Fons van Westerloo, the man who helped launch SBS in 1995 and was
general director before he defected to head up the RTL Netherlands group in
2003.

Van Westerloo took on the
challenge of a group that was market leader in the prime-time 20-to-49-year-old
demographic, but didn’t actually make money. When he moved over to RTL in 2003,
it had posted an EBITDA loss of €12 million, and in
2005, it posted a profit of €46 million. Cost cuts
were made but, says van Westerloo, “We never cut back on programming. However,
unlike my predecessors, we did stay within our budget.”

Van Westerloo in essence
took a confusing three-channel mélange and gave it some spine. The strangely
named third channel, Yorin, disappeared as a brand and was renamed RTL 7. Most
of its sinewy programming went to RTL 5, who, for historical and regulatory
reasons, had always been fairly weak and had a confusing identity.

WINNING FORMULA

These changes—along
with the launch of de Mol’s Talpa in August 2005, which injected more
competition into the market—helped the RTL stations increase their edge
over the SBS group of stations. From the beginning of the year until
mid-August, RTL 5 had an overall market share of 9 percent in the 20-to-49
demographic, RTL 7 was at 6 percent, and RTL 4 at 4.9 percent.

“The strategy was to keep
RTL 4 strong and steady, to go with a younger target group of 20-to-34 for RTL
5, and to use RTL 7 as a high-profile ‘second-chance’ viewing outlet for people
who wanted to see something on RTL 4 or RTL 5 but couldn’t do so,” says van
Westerloo. As part of the strategy, van Westerloo negotiated a 26-hour free
rerun window with producers and took everything of substance from RTL 4 or RTL
5 and repeated it the following day on RTL 7. He points to Idols as an example of the success of that strategy. Its
repeat episodes attracted some 600,000 viewers.

Highlights from the new
season include The X Factor on
RTL 4, to be hosted by one of the Netherlands’s best-loved presenters, Wendy
van Dijk, who is one of the contestants in RTL 4’s Endemol-produced Dancing
on Ice, a show co-produced by
Flemish channel VTM, in which famous people from both the Netherlands and
Belgium compete. RTL 4 also wants to invest in more cop dramas following the
retirement of Piet Römer and his lead character Baantjer after this season.

Clearly, on all commercial
fronts, the gloves are off. Eric Van Stade, the programming director for three
SBS Dutch channels—SBS6, Veronica and Net 5—notes, “It is the first
time in the Netherlands that we have two [similar] programs up against each
other in the same time period.”

SBS has Stars Dancing
on Ice, produced by Eyeworks in
collaboration with Stage Entertainment’s Holiday on Ice, which has a 65-year history of ice shows. Stars
Dancing on Ice is in a Friday 8:30
p.m. time slot, and its elimination show, when one of the contestants is voted
off, airs on Saturday night. RTL airs its Dancing on Ice Saturday night, with its elimination show on
Sunday. Ice follies? Time will tell.

SBS will also come up
against RTL’s ice show with Je Wordt Bedankt!, which sounds like a Dutch look-alike of the old
’50s U.S. format This Is Your Life,
starring famous Dutch businesspeople and other celebrities.

NEW KID ON THE BLOCK

While still an upstart
with only an evening schedule, Talpa has made itself a force to be reckoned
with, thanks to the sheer capital available from the deep pockets of its owner.
It lured over major talent like Jack Spijkerman and Linda de Mol from the
public broadcasters, as well as a pack of people from the RTL and SBS stations.
It also picked up sports rights that had hitherto only belonged to the public
broadcasters, including the Dutch football premiere league, the Dutch national
team’s “away” matches, and all the non-pay-TV rights to European football
competitions, with the exception of the British teams.

Talpa has also begun
investing heavily in new series, among them Gooische Vrouwen and a new drama series that the talented Dutch
filmmaker Johan Nijenhuis began shooting in mid-August for launch in 2007.

Talpa promised advertisers
a 10-percent audience share but it has never met that goal, although its first
season came close, at 9.5 percent. Remko van Westerloo, the program director
for Talpa and an executive de Mol managed to lure over from SBS, admits that
the first year has been no bed of roses. But he is clearly on the offensive,
with a strategy to build up access prime time with shows like Big Brother, Lotte,
The Golden Cage and Endemol’s Deal
or No Deal. The Golden Cage,
a win-the-castle-and-become-a-millionaire reality show, is clearly expected to
travel.

The biggest problem Talpa
is experiencing is giving its programming block an identity when it is up
against the rest of the more established Dutch networks. Talpa plans to
undermine that handicap with a strong evening profile. Monday is reality night,
featuring eviction show Big Brother
Live and the latest Expedition
Robinson. Tuesday evening is
comedy night, featuring an obvious spoof on competitors’ celebrity ice and
dancing shows titled Woef: Hoe word ik een beroemde hond?, translated as How Do I Become a Famous Dog? Wednesday night has a lineup of films, in-cluding
the Dutch broadcast premieres of Sweet Home Alabama and Seabiscuit. Thursday evening targets women with Gooische
Vrouwen, followed by the
tongue-in-cheek How Do I Become a Gooische Vrouw? Friday night features one of the Netherlands’ most
in-demand comedians and hosts, Jack Spijikerman, with Koppensnellers [Headhunters], a redux of Kopspijker,
the show he hosted on Dutch public TV that was one of the highest-rated
programs in the territory for more than a decade.

In such a highly
competitive climate, Talpa has no choice but to launch a second channel. “It’s
a necessity to get a balance in the market, to increase the pressure on our
competitors,” says Talpa’s van Westerloo.
Advertisers also want more potential. “If we are going to do more acquisitions,
we need another channel to air them on,” he adds. Talpa will announce more
details on the launch of the new channel in late 2006.

The public broadcasters
are facing yet another makeover, but oddly, this, about the tenth in the last
17 years, is being seen as the right fit. The new system will have the main
broadcasters—KRO, AVRO, NCRV, TROS, EO, VPRO, VARA and
NOS—splitting their programming across the three Dutch channels based on
genre and target group. This is a departure from the current system, where each
of the broadcasters has an individual programming block.

The channels rely on about
a third of their income from advertising, but there are government rumblings
from time to time that the country should only support two non-commercial channels.
“We’re not waiting for what the political parties decide,” says Roek Lips, the
channel manager of Nederland 1. The public channels air series, big events and
family entertainment like the popular Paul de Leeuw Show on Nederland 1; news, information, cultural and
other programming tied to the pubcaster remit on Nederland 2; and kids,
young-adult and experimental programming like BNN’s Couscous & Cola will be slated for Nederland 3.

MULTI-PLATFORM AND
DIGITAL DILEMMA

The penetration of digital
channels in the Netherlands is a notch over 10 percent, but that is expected to
change, and rather soon. The Netherlands has a cable penetration of well over
90 percent, and for a minimal subscription fee, the Dutch have access to well
over three dozen channels.

SBS Broadcasting is
looking to decrease its dependence on advertising income across Europe and its
acquisition of the Canal+ Nordic pay-TV channels clearly fits into its plans to
make pay TV a significant part of its business. And with the Netherlands’ buoyant
cable market, SBS is watching the digital situation closely.

“The Netherlands has the
enormous advantage of having tremendous value on the free-to-air channels, so
there is not a lot of incentive for viewers to pay for more channels,” says
Patrick Tillieux, the COO and acting CEO of SBS, and a longtime veteran of the
pay-TV market. “The only thing I see changing in that equation is interactivity
or some other way of looking at TV.”

Not everyone agrees.
Liberty Global, through UPC Broadband, is the dominant provider of cable in
Europe, and has a 40-percent share of the Dutch market. Subject to regulatory
approval, however, the New York-based Warburg Pincus and London-based Cinven
are planning on plunking down some $3.3 billion to put together the largest
cable network in the Netherlands with a combined subscriber base of 3.3 million
customers, up against Liberty Global’s 2.2 million.

The digital revenue, in
fact, is clearly the prize. Liberty Global provides through UPC Netherlands a
digital-cable entry package of 42 channels, and a basic tier of 72 channels.
Subscribers also have an option to subscribe to additional
general-entertainment, movie, sports, music and ethnic programming through
content bundled by chellomedia.

But Warburg Pincus and Cinven
are eyeing the increase in sales as customers switch over to digital receivers,
and get the triple play offering of Internet, telephony and video. Telco KPN
also plans to offer the triple play through the use of new digital technology
provided by Nozema Services. KPN began earlier this year lining up its offering
in a cross-content, joint-venture deal with Endemol for its digital thematic TV
channels and on-demand content for mobile and the Internet.

Sandra Tielenburg, the
country manager for the Netherlands at Discovery Networks Europe, predicts that
about 50 percent of Dutch TV viewers will migrate to digital by 2009, but she
admits that one of the reasons they aren’t there yet is the cushy analog
situation which Discovery has also profited by.

Discovery Channel launched
in the Netherlands in 1989 and reaches 98 percent of all analog households.
Animal Planet launched nine years later; Discovery Civilization, Discovery
Science and Discovery Travel in 2000; and Discovery Travel and Living bowed in
2005. DCI has the digital channels Discovery Travel, Discovery Science and
Discovery Civilization on the Digitenne/KPN platform, and on IPTV through KPN
as well.

The MGM Channel has been
available in the Netherlands on digital and analog since 2003. Its subscribers
represent the bulk of the digital homes, notes Bruce Tuchman, the executive VP
of MGM Networks. “I’m happy with what’s happening right now, but clearly,
increasing digital penetration is the big challenge here.”

The branded MGM channel
features a broad, eclectic, hand-picked selection of films from the MGM
library, one of the world’s largest, including titles like Drugstore Cowboy, They Call Me Mr. Tibbs! and The Pope of Greenwich Village.

As the Dutch TV market
continues to grow, there are questions as to whether the advertising market can
sustain the proliferation of channels, and whether digital pay TV can fully
develop. One thing is certain, though—this prolific market will continue
to attract the attention of major producers and media companies for a long time
to come.