Television Springs Forward, Blooming Announced

Michael Hedges March 16, 2011 Follow on Twitter

With media buyers spending on television like wild people and new channels blooming like spring flowers, the television business has drawn a sigh of relief from the bad days still fresh in the memory. Business is good. New media has been put in its place. Caution remains.

RTL, Europe’s biggest broadcaster, released glowing 2010 results last week (March 10). Revenues were up 8.7% to €5.6 billion over 2009. Profits before taxes were up 44% to €1.23 billion. Not only will there be bonuses but parent Bertelsmann upped shareholders dividends.  Advertisers and media buyers may have ‘friended’ new media but they adore, today at least, television.

Not to be forgotten is the other part of RTL’s business. Revenues at production subsidiary FremantleMedia were up 7.5% to €1.27 billion though pre-tax profits were off 9.7% to €140 million. This set off the financial wags speculating that RTL would jettison FremantleMedia for the sake of shareholder value, or some such thing.

“To squash every silly rumor we will not sell FremantleMedia, not 100 percent, not 90 percent not one percent, and we also not sell (UK production house) Talkback Thames, not 100 percent, not 90 percent, not one percent,” said CEO Gerhard Zeiler during the post-release conference call. “This is the core of our business.” So, there it is.

FremantleMedia, he said, will likely expand this year through acquisitions. RTL will be investing in “new programs, new channels and in our rapidly growing new media activities.” There is, of course, no good reason for sitting on that pile of money. FremantleMedia contributed 23% of RTL’s total revenues in 2010.

RTL owns and operates 40 television channels and 33 radio stations in Europe, the biggest being in Germany and France. In 2010 Mr. Zeiler ditched perennial loss making UK Channel Five, taking a €57 million loss. FremantleMedia acquired stakes in game developer Ludia and branded entertainment producer Radical Media last year as well as Netherlands producer Four One Media and Nordic producer Blu.

The Hungarian market has also been good to RTL, where it primarily owns television broadcaster RTL Klub. The television ad market share in Hungary for RTL Klub rose to 48.5% in 2010 from 46.7% one year on. Pre-tax profits for RTL Klub were €19 million. Right-wing Prime Minister Viktor Orban has made political daisies over foreign-owned companies taking profits out of Hungary. Two foreign-owned national radio broadcasters were booted out in 2009.

Widely anticipated is RTL’s expansion into India. Mr. Zeiler said joint venture talks with India’s broadcast giant Reliance Broadcasting Network (RBN) are in “advanced discussions.”  RTL and RBN have a preliminary agreement to form a joint venture “for the purpose of owning and/or operating a portfolio of English, Hindi and other local language thematic channels,” said the RBN statement to the Bombay Stock Exchange.  Two channels are in discussion, one based on FremantleMedia’s reality TV stock and the other a male-oriented action channel. Both channels will appear on all platforms.

India’s media market is the most attractive in the world. An economy that keeps expanding, politics reasonably stable and nearly 200 million television-crazy households spells opportunity. RBN has a joint venture in place with US production house CBS Studios, part of Viacom, for three general entertainment channels.

Big media houses continue to eye production and co-production opportunities. BSkyB, presently 39% owned by News Corporation, plans to reach out to other pay-TV operators for co-productions. “It makes sense for us to collaborate with other pay TV operators to bring wonderful, epic content to our screens and share the cost,” said managing director for entertainment and news Sophie Turner Laing to Variety (March 13). “Other pay platforms, be they in the US, France or Scandinavia, all have the same requirements as us.” BSkyB will likely be wholly absorbed by News Corporation, which owns pay-TV outlets in Germany and Italy as well as the giant Fox Studios.

“We’ve had a fantastic year,” said Mr. Zeiler, though hedging his bets. “RTL remains cautious while at the same time being very optimistic about the TV industry's overall growth prospects.”

But the future always looms large. Mr. Zeiler’s contract with RTL was extended through 2015 last August. Rumblings in Austria continually suggest he might be persuaded to return to organizationally and politically challenged public broadcaster ORF. He was ORF CEO from 1994 until returning to RTL as CEO in 2003. Owing to his current success at RTL, that seems highly unlikely.

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