Thomas Rabe, CEO of RTL Group, explains how the Group is speeding up the digital transformation of its businesses during the coronavirus crisis.
RTL Group reacted swiftly to the worldwide spread of the coronavirus disease by focusing on four areas: the safety of our employees, the continuity of our businesses, liquidity, and cost and cash flow management.
Across RTL Group, we have seen a limited number of infections. Mid-March, we implemented compulsory work from home, with only a few exceptions. Since mid of May, we have pursued a prudent return to office policy.
Our TV channels, radio stations, streaming services and websites continued to operate without interruption, registering significantly higher reach and usage. They provide information and entertainment to millions of people who have faced unprecedented disruption to their daily lives.
As expected, RTL Group’s revenue declined strongly in the second quarter of 2020, but we succeeded in offsetting 50% of the revenue decline. We did so without cutting into the substance of our businesses or reducing investments in our streaming services, which is reflected in gains in market shares and a significant growth in paying subscribers for our streaming services. Our broadcasters and Fremantle restarted productions across all genres to offer our viewers fresh and exclusive content. This demonstrates the resilience of our businesses, and the strength of our management teams.
Our industry is going through a massive transformation which has been accelerated by the coronavirus crisis. Over the past ten years, many media groups have been folded into vertically integrated conglomerates that control both the production and distribution of content. Comcast bought NBC Universal, while AT&T bought DirecTV and Time Warner, owner of HBO and the Warner Bros studio. The world’s largest media company, Disney, expanded horizontally with its acquisitions of 21st Century Fox, Pixar, Lucasfilm and Marvel Entertainment.
This period of consolidation created a handful of content giants, ready to spend billions of dollars in the battle with global platforms such as Netflix and Amazon. As part of these socalled ‘streaming wars’, Disney, Apple, AT&T/WarnerMedia and Comcast/NBC Universal have all launched new streaming services. With unprecedented lockdown measures implemented, growth in usage and paying subscribers for streaming services soared around the globe in 2020.
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Higher reach, better monetisation
To successfully transform RTL Group’s business, two factors are particularly important. One is higher reach, in both linear and non-linear, which requires significant investments in content, marketing and a state-of-the-art tech platform for our streaming services. The second is better monetisation of our reach, through targeting and personalisation, which requires investments in advertising technology and data.
To achieve these goals, our strategy builds upon three priorities. Firstly, strengthening our core businesses. Secondly, boosting our streaming services, global content business and capabilities in technology and data. And thirdly, fostering alliances and partnerships in the European media industry.
Core: investing in content and consolidation
Every year, RTL Group invests €3.5 billion in content, combining the programming spend of its broadcasters and the productions of its global content business, Fremantle. Exploring all possible ways to develop and own new hit formats and continuing to grow our investments into premium content are key to strengthening our core businesses. Our primary focus is on organic growth at RTL. However, wherever interesting opportunities arise, we will continue to consolidate across our existing broadcast footprint. A recent example was our acquisition of the French children’s channel Gulli and five pay-TV channels by Groupe M6.
Growth: building national streaming champions
Within our three-priority strategy, we put a strong focus on building national streaming champions in the European countries where we have leading families of TV channels. At the end of June 2020, RTL Group registered 1.77 million paying subscribers for TV Now in Germany and Videoland in the Netherlands, up 45% year-on-year. To further boost the expansion of our streaming services over the next five years, we plan to grow the number of paying subscribers for TV Now and Videoland to between 5 and 7 million; to grow our streaming revenue to at least €500 million; and to break even by 2025. To reach these goals, our annual content spend in TV Now and Videoland will grow from €85 million in 2019 to around €350 million in 2025.
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Growth: investing in technology and data
Combining the key success factors of TV advertising – such as high reach, brand safety and emotional storytelling – with data and targeting offers significant growth potential for RTL Group. With Smartclip, we aim to create an open ad-tech platform, tailored to the needs of European broadcasters and streaming services.
Smartclip offers multiple forms of partnerships, from software licensing to partial ownership. Accordingly, we will invest further in evolving and growing the Smartclip platform.
The tech platform for our streaming services is being built by Groupe M6 and its tech unit Bedrock, which will initially serve the French subscription service Salto and Videoland in the Netherlands, as well as the RTL services in Belgium, Hungary and Croatia. RTL Group will offer the platform to external broadcasting partners – as with Smartclip.
Fostering alliances and partnerships
Establishing such partnerships is part of RTL’s DNA. This is how we became the first panEuropean broadcasting group. Over the past year, we made a new 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 these opportunities in areas such as advertising sales, streaming technology, advertising technology, content creation and data.
One key development for our largest revenue stream – advertising – has been the growing demand from advertisers and agencies for global ad-buying opportunities. To seize the opportunities from this development, we are further expanding our international sales house, RTL AdConnect, to give international clients easy access to our large portfolio of TV and streaming services, digital video networks and advertising technology, in a brand-safe environment. To be more relevant in all key European markets, RTL AdConnect’s portfolio also encompasses leading partners such as ITV in the UK, RAI in Italy and Medialaan in Belgium.
Four years ago, we launched the Ad Alliance in Germany, a one-stop sales house with high-quality content and high reach across all media: TV, digital, and print. At the beginning of 2020, 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% of the German population. The power of our Ad Alliance was an important factor behind Mediengruppe RTL Deutschland’s strong sales performance in 2019 – and it has become even more important in the current crisis. RTL Nederland has followed the German example and is currently building an integrated advertising sales network for the Dutch market, also called Ad Alliance.
More than 90% of the population in our key European markets are familiar with the brand RTL – it stands for our promise of high-quality entertainment, independent information and always being close to the audience. In times of massive audience fragmentation and growing disinformation, this is both a competitive advantage and a responsibility for all of us at RTL.
As described in this editorial, we have significantly accelerated the transformation of our Group. To underline our brand promise and to express that we are one RTL, we have started a review of our brand architecture, and will strengthen and harmonise the RTL branding across the Group.
More creativity and diversity; faster decision-making; a willingness to take risks and to cooperate across traditional boundaries – this is how we describe our mindset at RTL.