Published:
27-Aug-08
Leading European broadcaster RTL Group has partly offset H1 2008 losses in key business segments (UK, production) by thriving advertising sales in Germany.
Despite a sluggish German TV advertising market (+0.9 per cent in the first half), RTL Germany posted a revenue increase of 4.1 per cent year-on-year to its highest share of net TV advertising ever (45.8 per cent). This is largely due to advertisers' dissatisfaction with the new ProSiebenSat.1 sales model, leaving ProSiebenSat.1's German TV revenue hit rock bottom; down 4.9 per cent in Q1 2008 and 8.8 per cent in Q2. RTL's German EBITA even was up 29 per cent, helped by the good performance of RTL II, which is only consolidated at this level.
In contrast to this, a strong Euro against the British Pound and the US Dollar has dented revenues from UK television operations (-12.4 per cent, but up 0.6 per cent at constant currency) and production arm FreeMantle Media (-6 per cent). French TV operations were flat due top the acquisition costs for the Euro 2008 football rights, which was aired on RTL's M6 channel.
RTL Group reported total revenues of Euro2,864m in the first half of 2008, down 0.9 per cent over the same period in 2007. Reported EBITA was down 2.5 per cent to Euro502m, whilst net profit increased by 9.2 per cent to Euro391 from Euro358m. However, this increase was largely due to an impairment of goodwill as high as Euro123m which negatively affected performance in H2 2007, following a re-evaluation of the group's UK television activities.
Despite an improved competitive position in Germany and positive results in smaller business segments, such as Dutch TV (+12 per cent), RTL's outlook for the remainder of 2008 is cautious, given the macroeconomic conditions.
Our take...
RTL Group's good advertising performance in Germany comes despite a decline in audience shares from 33.6 per cent in the first half of 2007 to 32.7 per cent in H1 2008. Competitor ProSiebenSat.1, in contrast, which suffered severe revenue losses, only saw a modest decline in audiences from 29.1 per cent to 28.9 per cent. Part of both groups' audience decline can be attributed to the Euro 2008 football championship in Q2, which was aired by public broadcasters ARD and ZDF. Nevertheless, relatively speaking, ProSiebenSat.1 demonstrated a better audience performance. However, this was not rewarded with increased advertising revenue.
The key to RTL's H1 2008 performance and ProSiebenSat.1's misery lies in 2007, when the German cartel office ruling declared that the advertising sales models of both RTL Group and ProSiebenSat.1 violated competition law. Both groups were forced to come up with a new model for the 2008 booking season. The market, however, rejected the new ProSiebenSat.1 model. Instead, media agencies and advertisers turned to RTL Group's sales house IP Deutschland and to RTL II (only partly controlled by RTL and marketed by a separate sales arm).
The ProSiebenSat.1 malaise has increased RTL's share of the net German TV advertising market from 43.3 per cent in 2007 to 45.8 per cent in the first half of 2008, while ProSiebenSat.1's share dropped from 43.1 per cent in 2007 to 39.6 per cent in the same period.
Although ProSiebenSat.1 has made adjustments to its sales model, so far, a turnaround is not in sight. Screen Digest expects the broadcaster to continue losing revenue in the second half of 2008, albeit at a slower pace. Despite worsening economic conditions, we forecast revenue from RTL's German operations to grow above market in the remainder of 2008 as well.
The picture remains blurry for 2009. ProSiebenSat.1 is poised to introduce a new sales model for 2009. While this may help bringing the broadcaster back on track, ProSiebenSat.1 still suffers from unsolved internal problems after many top managers resigned earlier this year and programming problems at Sat.1 have not been solved. With an established programming strategy and trusted advertising model, RTL is well-equipped to perform better than its competitor again in 2009.
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