Reality Bites for 'X Factor' Parent Company FremantleMedia
Revenues and profits at reality TV giant FremantleMedia, producers of X Factor, American Idol and America's Got Talent, dipped sharply in the first half of this year.
Operating profits at Fremantle, which is owned by European broadcaster RTL Group, plunged to $38 million (€29 million) in the first half of this year, down from $62 million (€47 million) over the same period in 2013. Revenue was also down 6.5 percent to $825 million (€623 million). Fremantle made and sold fewer shows this year — a factor that could accelerate now that Fox has axed X Factor US — and the international operation was hit by negative foreign exchange effects.
To counter this drop, Fremantle plans to get bigger. Its $50 million-plus acquisition earlier this year of a 75 percent stake in SallyAnn Salsano's 495 Productions — makers of Jersey Shore and Party Down South — is only the beginning of a acquisition spree for Fremantle and RTL.
“We are clearly committed to further scale up our global content arm,” said RTL Group co-heads Anke Schaferkordt and Guillaume de Posch. “Strengthening the creative pipeline — and ultimately improving the profit margin — of FremantleMedia requires targeted investments in new talent, genres and geographical areas.”
Fremantle is one of a group of big European companies that have been actively snatching up U.S. reality TV shingles.
But even as it fattens up on traditional TV, RTL is also investing heavily in digital. RTL signed a deal in July to pay $144 million for a 65 percent in SpotXchange, a programmatic video advertising group that De Posch has said will give the broadcast giant access to the younger, more tech-savvy audience that is switching off traditional television.
RTL Group's total online video views amounted to 15.7 billion in the first half of 2014. By the end of 2014, RTL said it expects to more than double online video views to around 40 billion. In fact, digital revenues were one of the few strong growth areas at RTL this year, with sales up 10 percent to $150 million (€113 million).
Overall, sales at RTL Group were down 2.5 percent to $3.57 billion (€2.687 billion) and net profit attributable to RTL shareholders was more than halved, at just $268 million (€202 million). In addition to its recent acquisitions and negative exchange rate effects, the European group was also hit by a new punitive tax regime in Hungary, which it says will result in a $117 million (€88 million) charge to its operations there.