How did RTL Group perform in 2015?

Guillaume de Posch: Despite a mixed picture in the global economy, 2015 was a record year for RTL Group: for the first time in our history, revenue exceeded €6 billion. Operating profit EBITA also reached a new high, despite lower positive one-off effects than 2014. Net profit for RTL Group shareholders increased strongly by 21.0 per cent to €789 million.

Anke Schäferkordt: All European net TV advertising markets in RTL Group’s territories were up or stable year-on-year, with the German market remaining the healthiest in our portfolio. At Mediengruppe RTL Deutschland, we outperformed the German TV advertising market, which was estimated to have grown by 2.0 to 3.0 per cent in 2015. We also generated higher diversification revenue such as online couponing and platform revenue. As a result, our biggest profit centre grew significantly and generated another record profit.

On 11 November 2015, RTL Group Co-CEO Anke Schäferkordt was invited to speak at the OWM symposium in Berlin where advertisers and marketing executives talked about the topic “Winning in the Digital Reality”. Picture: Anke Schäferkordt with host Wolfram Kons.

Did digital grow as forecast?

Anke Schäferkordt: With more than €500 million in revenue, digital has become a dynamic third pillar for RTL Group, complementing our market-leading broadcasting and content production businesses. Digital revenue now represents 8.4 per cent of RTL Group’s total revenue. The massive growth rate of 72.2 per cent for our digital revenue reflects our early investments in online video.

According to Comscore, RTL Group is now number one on YouTube worldwide, with strong positions in the US, Europe and Germany. We generate around 11 billion video views each month, including mobile. We are the strongest and most international online video operator of all the broadcast groups in the US or Europe.

Organically, the revenue growth rates for our multi-channel network businesses BroadbandTV, StyleHaul and Divimove – and for our monetisation platform SpotX – are 50 per cent or more. And they will continue to grow, at significant double-digit rates.

Guillaume de Posch: We need to invest in these businesses to further strengthen their strong market positions. Some of them will continue to generate short-term start-up losses. The fact that we achieved faster revenue growth while keeping our high profit margin at Group level underlines the tremendous strength of our core broadcasting business. In other words: RTL Group is on the growth track. Driven by our digital businesses, we expect our total revenue to continue growing moderately in 2016.

What is the proposed dividend for 2015?

Guillaume de Posch: In September 2015, we paid an extraordinary interim dividend of €1.00 per share as an advance for the fiscal year 2015. In addition, RTL Group’s Board of Directors has proposed a final dividend of €3.00 a share for the fiscal year 2015. As in previous years, this reflects the Group’s strong cash flows, investment plans and target leverage factor. Based on our average share price on the Frankfurt Stock Exchange in 2015, all dividends for the fiscal year – totalling €4.00 a share – represent a dividend yield of 4.9 per cent. This is, again, among the most attractive in Europe.

On 20 January 2015, Bertelsmann organised the ‘Let’s Go Connected’ forum in Brussels to exchange views on challenges ahead in the digital realm.

In August 2015, at the half-year results, you mentioned rapidly evolving total video market. What do you mean by ‘total video’?

Anke Schäferkordt: Linear TV still dominates the video market – it’s the only medium consistently reaching mass audiences daily. But people watch more video content than ever – in long and short-form, linear and non-linear, on the TV screen and on mobile devices. The demand for high-quality video content is growing rapidly, as is online video advertising. So for us, TV isn’t just ‘television’ any more, it means ‘total video’. This is important as many people still think of the TV set in the living room – rather than the wider TV industry.

Where do you see the significant changes in the value chain?

Anke Schäferkordt: From the production of content to its aggregation on TV channels, multi-channel networks or thematic verticals, and from its technical distribution to advertising sales: the digital transformation is blurring the borders between the individual stages of value creation. Media agencies invest in production companies, US studios run European TV channels, producers and channels expand into digital, especially non-linear services, and platforms such as cable operators or telcos invest in their own content and advertising capability. There’s also extensive consolidation and integration at all stages of value creation, making competition ever fiercer.

Guillaume de Posch: As a leading video content provider this presents us with many new opportunities, but it also means we must set clear priorities. Therefore we have set two main investment goals for further acquisitions and partnerships. The first is to further develop in the digital domain. The second is to produce our content and owning rights, because we’re certain this will be key to growth.

Looking at the first stage of the value chain, what are the challenges for RTL Group’s content arm, FremantleMedia?

Guillaume de Posch: Increasing creative diversity – both organically and through acquisition – is FremantleMedia’s top priority. As they are already one of the biggest independent production companies, they focus on creative talent, developing projects that will feed into their unrivalled international network. Compared to bigger acquisitions, this is a longterm play, as development takes time. In the last three years, FremantleMedia made several acquisitions that illustrate this strategy, including scripted companies Miso in Scandinavia, Corona in the UK, Wildside in Italy, as well as Fontaram and Kwaï in France.

Wildside, for example, specialises in scripted television drama and commercial feature films. Their output includes The Young Pope – their first international production – with partners including HBO, Sky and Canal Plus. The series stars Jude Law and Diane Keaton, with Oscar winner Paolo Sorrentino working as co-writer and director.

FremantleMedia has also re-invigorated its own heritage in scripted drama. The German series Deutschland 83 has had great success internationally. It was the first German language drama aired, to critical acclaim, in its original language in the US. It has now been sold to 20 channels and platforms, including Channel 4 in the UK, Canal Plus in France and Hulu. We also have hopes for the new FremantleMedia-produced drama, American Gods, for which 10 episodes have been commissioned by US premium cable channel Starz. The drama genre has great potential in distribution, brand partnerships, licensing, merchandising and digital.

On 23 July 2015 at the world’s largest online video conference, VidCon, RTL Group Co-CEO Guillaume de Posch explained RTL Group’s push into online video.

Turning to the content aggregators – linear TV channels and the new digital multi-channel networks. What are your priorities here?

Anke Schäferkordt: It’s becoming more difficult to generate blockbuster formats for mass audiences. But with fewer of these on the market, they become more valuable. Our broadcasters can’t just wait for the next big international hit. We have to develop our own formats because they strengthen the channel brand and, most importantly, command exclusivity in the marketplace. That’s the major driver of future success for all linear TV channels: to have a clear profile – something that makes them stand out. For example, Vox commissioned its first scripted series, Club der roten Bänder. With its emotional stories and outstanding young cast, the series has been the stand-out hit in Germany so far in the TV season 2015/16, and was named best series by the German TV Awards.

Our two main channels in Germany, RTL Television and Vox, already had a high proportion of local content but now this is shifting towards 90 per cent on RTL Television. I have no doubt this will bring us a huge competitive advantage in the coming years.

Guillaume de Posch: As for digital, what audience flow is to linear TV, user guidance, recommendation engines and thumbnail optimisation are to MCNs. Reaching large numbers of users online hinges on finding technical ways of aggregating numerous small audiences – particularly of ‘millennials’, a group advertisers are most keen to reach. If you want to understand how enthusiastic teenagers are about video content and vloggers, attend VidCon in Los Angeles. I saw it first-hand. For me, it was a call to continue our push into short-form video.

The younger the target group, the more they use mobile devices, and the higher demand for short-form video. To succeed as a video content company, we have to serve this audience well. This is why we invested in leading multi-channel networks such as BroadbandTV, StyleHaul and Divimove.

RTL Group introduced their new digital family at the Dmexco trade fair in Cologne on 17 September 2015.

What about monetisation of digital video?

Anke Schäferkordt: Here again, technology has become essential. Advertising sales in the digital market are far more fragmented and complicated, with many highly specialised intermediaries between advertising clients and content providers. Traditional sales will remain a people business, but digital advertising sales will become more automated, and advertising technology more consolidated. Media agencies and sales houses are investing in platforms, interfaces and tools that advertising customers can use to plan and place bookings directly.

With SpotX, we own one of the most innovative video monetisation platforms – a team of more than 150 talented engineers continue to improve the platform, adding new features such as crossscreen audience measurement. We have also invested in Clypd, a US-based start-up for programmatic advertising sales on linear TV. We see great potential in the collaboration of SpotX and Clypd, in the US and Europe.

Guillaume de Posch: Increasing competition in the digital world calls for closer co-operation across RTL Group, to give our global advertising clients the best service. With its international presence, IP Network is ideally positioned to explore these growth opportunities for us. The new management of IP Network has a clear mission – to use all the RTL Group’s assets to offer a global proposition for international advertisers in the fields of video and digital marketing, branded content, and, of course, traditional TV and radio sales. Just recently, IP Network integrated our fashion and beauty MCN StyleHaul into its multiscreen offer.

Talking about co-operation in the Group, what is the role of the new RTL Digital Hub?

Guillaume de Posch: Where online video is concerned, I think scale is vital. Scale is easier to attain internationally, especially in North America because the market is much larger and more advanced in technology and viewing behaviour. Therefore we made North America the focus of our investments in online video and advertising technology, to then roll out internationally based on our experiences there. The RTL Digital Hub team manages our portfolio of digital acquisitions and supports their further international expansion. It also develops external partnerships and synergies within RTL Group. The creation of the RTL Digital Hub underlines our strategic goal to further build a strong third pillar.

How do you measure – and ultimately monetise – mobile, second-screen and other alternative viewing habits?

Anke Schäferkordt: This is a really important topic. Although there is more data available about use and viewing behaviour, audience measurement does not yet match the pace of changing viewing patterns. As a result, the total net reach of a video advertising campaign is still hard to quantify across all screens. In other words: audience shares do not reflect the full reality anymore.

We find ourselves faced with fragmented markets in ageing societies where young target groups are increasingly consuming non-linear video. So we ought to measure our success in comparison with all of our competitors – meaning all companies offering video content. This is why we promote and support cross-screen measurement initiatives.

Is this a glimpse of your future?

Anke Schäferkordt: With our financial strength, it is our ambition to continue to grow RTL Group over the forthcoming years – to transform the leading European entertainment network into a global force in video production, aggregation and monetisation.