How did RTL Group perform in 2016?
Guillaume de Posch: 2016 was another record year for RTL Group. We registered high revenue growth, resulting in consolidated revenue of € 6,237 million. Operating profit also reached a new all-time high, thanks to a higher EBITA contribution from Germany and a positive one-off effect at Groupe M6. In France, this positive one-off effect at Groupe M6 – amounting to € 42 million – was due to the settlement of the M6 Mobile contract, which more than compensated for the impact of higher programming costs for the Uefa Euro 2016 live broadcasts. Meanwhile, both Groupe M6 and Mediengruppe RTL Deutschland saw a year-end rally in TV advertising in December.
Anke Schäferkordt: Mediengruppe RTL Deutschland generated another record profit, for the fifth year in a row. Despite strong competition from the public channels broadcasting the Uefa Euro 2016 and the Olympic Games, Mediengruppe RTL Deutschland’s channels recorded a stable combined audience share in the target group. RTL Plus, launched on 4 June 2016, was our most popular channel launch of the past few years.
What does this mean for your shareholders?
Anke Schäferkordt: We are a very cash-generative business, which allows us to make attractive dividend payments to our shareholders. The ordinary dividend for the financial year 2016 is € 3.00 per share. Combined with the interim dividend of € 1.00 paid in September 2016, this brings the total dividend for 2016 to € 4.00 per share. Based on the average share price at the Frankfurt Stock Exchange for the full year 2016, this represents a dividend yield of 5.4 per cent – once again, among the best in class in Europe. Having said that, we still have the financial means for further investments, fuelling our growth strategy.
But you just decided not to exercise the call option for BroadbandTV. How does that fit in?
Guillaume de Posch: First of all, let’s not forget that RTL Group owns 51 per cent of BroadbandTV and is the controlling shareholder. This is still the case for now, while we review our strategic options together with the BroadbandTV minority shareholders. This doesn’t change our digital strategy. BroadbandTV was our ground-breaking, significant investment in online video back in 2013 and we are very proud of what the BBTV management and teams have achieved in the past three and a half years. Since then, the company has been a driving force for our digital ambitions – especially if you look at the number of online video views RTL Group generates among the millennials. Now, we have reached a point where we need to decide how to best develop this rapidly growing asset. That’s why we’ve decided – together with the BroadbandTV minority shareholders – to evaluate all strategic options for BroadbandTV. We aim to finish this evaluation process during 2017.
“Ultimately it is not only
about video views,
but about the ability
to monetise them”
Guillaume de Posch
In March 2015 you announced you wanted to generate 10 per cent of RTL Group’s total revenue from digital within three to five years. How is this progressing?
Anke Schäferkordt: If you look at the competition, you’ll notice that some of the other players in the market come up with digital revenue shares that are a little higher than ours, but if you take a closer look, you’ll see that our definitions differ fundamentally. RTL Group’s digital revenue includes only pure digital revenue: no home shopping, no e-commerce and no platform revenue for digital TV. If you apply this definition to all players, we’re in a reasonably comfortable position. Our digital revenue grew by 32 per cent in 2016. With currently € 670 million in revenue, digital is truly a dynamic third pillar for RTL Group and makes up 10.7 per cent of our total revenue. We have reached this goal much faster than originally expected. We will aim for further growth in digital, with the target of generating at least 15 per cent of our total revenue from digital within the next three to five years.
“TV stands for total video”
and Guillaume de Posch
spoke about the
rapidly changing TV business
at the Bertelsmann
Management Meeting 2016
How do you plan to achieve that?
Guillaume de Posch: Looking at online video views – RTL Group generated 274 billion online video views in 2016 – we are already one of the leading online video companies globally, in particular in the YouTube ecosphere. But it is important to understand that ultimately it is not only about video views, but about the ability to monetise them. There is still a big gap in value between a view on our broadcasters’ catch-up TV services such as 6play or TV Now, which feature premium long-form content, and a view on YouTube which is more short form. Having achieved significant global reach in online video, we will now focus more and more on monetising this reach. This is also why we invested in SpotX. We aim to become one of the leading partners for the advertising industry, offering an inventory that covers all the different programming segments from short-form video to premium long-form content.
Anke Schäferkordt: Mediengruppe RTL Deutschland acquired Smartclip in 2016. The company fits in with this strategy in two distinct ways. Firstly, it has substantially boosted our video inventory, because Smartclip currently aggregates the output of 750 publishers, most of whom produce short-form content. Secondly, there’s the technological factor: Smartclip is a strong player in connected TV, which is an up-and-coming area, and we are very happy with Smartclip’s development in 2016. The company scored a solid double-digit million revenue figure and, even more importantly, operates profitably. In January 2017, we made another investment and acquired 30 per cent of Q Division, an expert in data handling.
In April 2016,
Guillaume de Posch held
a keynote speech at Mip TV
in Cannes explaining
why TV nowadays is more than
just a device in the living room
Why is data a real topic for a TV company?
Anke Schäferkordt: In the age of digitisation, the role of ‘big data’ – in the form of cookies, clusters or cross-device analytics – is becoming ever-more prominent. Indeed, the aggregation and exploitation of data is increasingly important for media companies such as RTL Group, their advertising clients and ultimately the consumer. Accordingly, in July 2016, Mediengruppe RTL Deutschland created a new role of ‘Head of Smart Data’, who reports directly to the Chief Strategy Officer.
What is RTL Group’s response to the rapidly growing non-linear viewing of long-form content – mostly via streaming services, which often operate on an international level?
Anke Schäferkordt: Today, we clearly recognise that pay platforms such as Netflix or Amazon Prime are gaining in popularity. There is a simple reason for this: these services offer attractive price points for their pay offers, in particular in countries with high pay-TV penetration. Consumers in the US pay around $ 100 per month for their cable bundle, while Netflix charges – for an advertising-free service – $ 9.99 for its standard offer. This is fundamentally different in most European countries. But of course, we have intensively analysed our opportunities in the field of SVOD, subscription video-on-demand. For our broadcasters across Europe, we see interesting business opportunities for hybrid models, consisting of a free, advertising-funded service and a paid, premium content bundle – offering the programmes of our linear TV channels plus licensed content from third parties. Regardless of how we will further develop the business models of our non-linear services, one thing is more than certain: content, or more specifically, exclusive content, is the power engine for all our offers in the ‘total video universe’.
“RTL Plus, launched on
4 June 2016, was
our most popular
of the past few years”
Guillaume de Posch
Guillaume de Posch: Streaming platforms also represent an opportunity for FremantleMedia. Take, for example, American Gods, the ambitious fantasy series based on the popular novel by Neil Gaiman. The series was largely financed in the US by our client, Starz. Outside the US, the series found a worldwide client, Amazon Prime Video, to which we sold the rights to more than 200 territories. Deutschland 86, the sequel to Deutschland 83, will also be produced in collaboration with Amazon. To be prepared for this opportunity, FremantleMedia made some targeted acquisitions, fuelling the creative pipeline – and it is starting to pay off. The Young Pope, for example, starring Jude Law and directed by Paolo Sorrentino, is produced by FremantleMedia’s newly acquired company Wildside. And we see yet another trend: if you look at the market, you can see that more and more stars are changing from working for cinema blockbuster productions only to working on television series – both on and off camera. Coming back to The Young Pope: it’s unlikely that Jude Law or Paolo Sorrentino would have worked for TV 15 years ago.
In June, you presented a new mission statement.
Can you tell us something about that?
Guillaume de Posch: The old mission statement gave a really accurate description of RTL Group’s key mission of ten or 15 years ago. Back then, we had a clear focus on geographic expansion in the broadcast business. But a lot has changed in a decade, especially in our industry. Five years ago, we were not invested in any multi-channel network nor in advertising technology. Today, digital makes up more than 10 per cent of our revenue! In effect, we’re transforming a European entertainment network into a global leader in video production, aggregation and monetisation. That’s the only way we’re going to write the next chapter in RTL Group’s success story – and the new mission statement is all about capturing our ambition.
“Digitisation has changed
Anke Schäferkordt at
TreffPunkt IHK Bielefeld in
“‘Always close to the audience’ –
this is and will remain one of
our key missions at RTL Group”
The words ‘independence’ and ‘diversity’ really stand out in the new mission statement. How important is editorial independence at RTL Group?
Anke Schäferkordt: Editorial and journalistic independence are deeply rooted in all of our news organisations. Senior management doesn’t interfere with the independence of our editorial personnel. This is especially crucial in times of ‘fake news’ and ‘filter bubbles’. Yes, there has always been fake news, across all media genres. With this, I mean news stories which simply weren’t true. However, one aspect of the public debate has changed significantly. Today, some people attack the media as being fake news themselves, resenting established news brands as part of an elitist, out-of-touch establishment – and this is a concern in many countries. I don’t believe that we will get anywhere by demanding that Facebook checks every single post or that governments decide what’s right or wrong. In times like these, it’s our responsibility as media companies not only to remain independent, but also to report factually and truthfully and to ultimately keep and regain the audience’s trust. Let me be very clear: we are not in the business of lecturing our viewers and listeners. We have to take their concerns very seriously. ‘Always close to the audience’ is, and will remain, one of our key missions at RTL Group.
Facebook is one of the dominant players in the digital advertising market. How do you prepare for the competition from the US tech giants?
Guillaume de Posch: First of all, we’re not afraid of competition, but we want the same rules for everyone. Our ‘total video’ industry is highly attractive, with many US giants placing big bets on expansion into video. Many of these players are using their state-of-the-art technology and massive consumer data to develop sophisticated advertising offers – currently for online services, but probably also for linear TV in the near future. To succeed in an ever more competitive world, there’s the need for a level playing field. The proposed revisions to European legislation by the European Commission are a step in the right direction, helping to adapt the legal framework to recent changes. A few more steps are desirable, as this might be the last opportunity for a long time to create the right framework to nurture, develop and grow the media groups ‘made in Europe’.
Anke Schäferkordt: In parallel, we are preparing ourselves by investing in advertising technology and exploring new partnerships. In 2016, we announced Ad Alliance, a new advertising offer in Germany in collaboration with Gruner + Jahr, which started in January 2017. There’s a high demand from advertising clients to showcase their brands in cross-media campaigns. But they’re also very interested in automation. For this reason, both advertising sales houses are likewise interested in technology in general, and programmatic advertising sales in particular. When developing technologies, it makes a great deal of sense to work together across RTL Group and with external partners, since scale yields are distinct competitive advantages in this connection.
Is this trend also a driving force for the planned combination of Groupe M6 and RTL Group’s French radio family?
Guillaume de Posch: We are an active player in shaping the media landscape. This combination, if realised, aims to open a new, promising chapter for RTL Radio and Groupe M6 in France as convergence and consolidation continue to shape our industry – not only in North America, but also across our European footprint. We are re-organising our French TV and radio activities into one integrated media house. This path is followed by other media groups in France and has already been successfully achieved in Benelux within our Group.
Does this mean that in the future, you will cover everything from content production to programmatic advertising and addressable TV?
Guillaume de Posch: That is exactly what our ‘total video’ approach is about. We want to focus our strategy on video as our current core business. This is what we do best, and we want to do it right. Professionally produced video is at the heart of our strategy and our objective is to cover all key links in the value chain, including its technological elements, and gaining expertise in them so we can offer them to viewers of all ages.
“TO SUCCEED IN AN
EVER-MORE COMPETITIVE WORLD,
THERE’S THE NEED FOR
A LEVEL PLAYING FIELD
in terms of regulation”
Guillaume de Posch
In June 2016, Anke Schäferkordt
and Guillaume de Posch
discussed the Group’s opportunities
and challenges in the
rapidly changing total video industry
at the RTL Group
finance meeting in Belgium