Big Media Eyes The Household Budget

Michael Hedges August 12, 2021 Follow on Twitter

Building scale has long been the favored business strategy. Bigger is, quite naturally, stronger. Smaller is just a lot of work. It is just the same for the media world as, say, the oil business or, in recent decades internet technologies. Bigness has its detractors; enemies even. This has only grown with big associated with bad, particularly super-big, particularly in popular headlines. Empirical evidence is far less incriminating.

Giant media concern Bertelsmann Media last week (August 6) took another step in creating “national champions”. Broadcaster RTL Deutschland will acquire the assets of publisher Gruner + Jahr (G+J). It will be a cash-free “related-party” transaction valued at €230 million. RTL Deutschland is a subsidiary of RTL Group, principally owned by Bertelsmann Group. G+J is a Bertelsmann Media subsidiary. Hence, this is a spreadsheet deal. (See RTL Group statement here)

Bertelsmann Media has struck similar transactions in recent months; the M6, subsidiary of RTL Group, and TF1 merger in France (May 2021) and the RTL Nederland acquisition of Talpa Networks (June 2021). At the same time RTL Group exited assets in Belgium. “The combination of RTL Deutschland and Gruner + Jahr is our third milestone in 2021 to create national cross-media champions,” said RTL Group chief executive Thomas Rabe in the statement. “In the growing competition with global tech platforms, exclusive local content is the key to success – in particular to boost our streaming services.” Herr Rabe is also Bertelsmann chairperson and chief executive.

RTL Deutschland operates television channels RTL and Vox, primarily entertainment, as well as news channel NTV and others. RTL Group, the parent company, holds stakes in several German radio stations, which seem not part of the current transaction. G+J publishes magazines Stern, Geo and others. It has an international footprint. The 25% shareholding in Spiegel Group, publisher of Der Spiegel and Manager Magazin, is also not part of the current transaction and will remain with Bertelsmann Media.

The strategy oft mentioned by German media watchers is derailing competition from big streamers like Netflix and Amazon. Actually, there are many others in that pool. This was widely touted when the French and Dutch combinations were announced. Of course, Herr Rabe has said as much over and over. The business side of that plan is rather simple; controlling or influencing any shift in the subscription business. The coronavirus pandemic saw Germans paying for multiple subscriptions, usually video, sometimes audio and digital publications. Nobody in the accounting office really believes those numbers are sustainable particularly as households begin noticing higher prices for necessities, like food.

Also to be considered is the competitive environment in Germany. The combined RTL Deutschland/G+J will stare down other media concerns with digital ambitions. Axel Springer chased that dream all the way to Silicon Valley only to be bailed out by private equity giant KKR. Burda and Bauer, both significant publishers, have enhanced their digital footprints. Perennial takeover target ProSiebenSat1.Media operates a slew of free-to-air and pay-TV channels. With a minority shareholding, Mediaset has long touted development of a “European champion” with ProSiebenSat1.Media. Also a competitor not to be disregarded is the vast public broadcasting realm, the nine regional broadcasters plus the ARD network, the ZDF television channel and national radio broadcaster Deutschlandfunk, largely and generously financed by a mandated household contribution, a subscription by another name.

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• Hot Topics - Bertelsmann/RTL

• Hot Topics - Media Mergers and Acquisitions

• Hot Topics - Streaming Media