Bigger Might Be Better But It’s Hard To Get There

Michael Hedges February 19, 2020 Follow on Twitter

The media world is no place for the faint of heart. It is also, it seems, no place for the small. Scale, of course, has long been touted as the greatest of all competitive advantages. That logic fell out of favor as the digital revolution arrived, further excited by private equity fund managers. Agility became the favored flavor. Being speedy and clever is still seen as beneficial but nothing beats raw brawn.

Bertelsmann SE is one of the world’s largest media houses and it has been for decades. Based in Germany it owns or principally owns publisher Gruner+Jahr, book publisher Penguin Random House, music publisher BMG and broadcaster RTL Group. Thomas Rabe is chairman as well as chief executive of RTL Group.

In an interview with Frankfurter Allgemeine Sonntagszeitung (FAS) (February 16), Mr. Rabe explored the possibilities of expanding further. “It is vital that sensible partnerships, and even large mergers, are allowed in order to create national champions in television, for example between RTL and ProSiebenSat.1,” he ventured. “Otherwise, national companies will simply have no chance in a few years against the giants from Silicon Valley. "The TV business needs to be deregulated. The rules date back to the analogue age when there was no YouTube, no Facebook, no Netflix.”

His market analysis was interesting: people will pay for more than one subscription, one of them being local. "Believe me: there is no such thing as a global taste. We can see that in all media genres, be it music, books or films. People always have a strong need to surround themselves with local content that suits their own feelings corresponding to their own environment.” RTL has a significant broadcasting footprint in Germany, France and the Netherlands.

Opinions on this varied in Germany. “He threw a rock into the water to see if it would become a wave or a tsunami,” said an anonymous expert, quoted by Reuters Deutschland (February 17). Another suggested Mr. Rabe wanted to test the reaction from German competition officials, who had no immediate comment. "I think nothing of such a demand," said a German Journalists Association (Deutsche Journalistenverband - DJV) spokesperson. "We still need effective antitrust law on media mergers.” Stock traders loved the idea. The following day RTL shares traded up 3.5%, ProSiebenSat.1 up 2.4%.

Bertelsmann has been “slowly” increasing its shareholding in RTL Group, now about 75%. "We have no plans to take over RTL Group completely and to take it off the stock exchange,” he noted in the FAS interview. "RTL Group is and will remain an independent company.” German media market rival Axel Springer recently delisted from the Frankfurt stock exchange after a healthy cash infusion from private equity giant KKR.

RTL and ProSiebenSat.1 are already vested in an ad tech alliance. RTL backed away from joining in the ProSiebenSat video platform Joyn. Before the end of last year Italian broadcaster Mediaset increased its stake in ProSiebenSat.1 to 15.1%, becoming its largest shareholder but indicating it would go no further. Mediaset, principally owned by the Berlusconi family, is meanwhile entwined in court battles with French telecom/broadcaster Vivendi over a failed merger.

See also...

• Hot Topics - Bertelsmann/RTL Group

• Hot Topics - Media in Germany