RTL Group Revenue Rises, Earnings Drop in First Half

European broadcast giant RTL Group on Thursday reported higher revenue, but lower earnings for the first half of 2012.

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Revenue rose 3.3 percent to $3.5 billion (€2.82 billion), reflecting higher revenue in Germany and from TV production arm FremantleMedia, makers of hit formats The X Factor and American Idol. Adjusted for acquisitions and disposals, revenue rose 2.5 percent.

But first-half earnings before interest, taxes and amortization of $631 million (€506 million) was down from €588 million in the year-ago period. Operating profits at FremantleMedia dropped significantly, to $50 million (€40 million) for the period as broadcasters put pressure on the production group to lower costs, cutting into its profit margin.

Profit from continuing operations fell from  €420 million to €332 million ($414 million).

"A higher profit contribution from the German TV operations was offset by challenging market conditions in other areas, higher investment in programming and portfolio effects," the company said. "FremantleMedia’s lower profit contribution reflected continued pressure on volumes and margins, and timing effects."

Co-CEOs Anke Schaeferkordt and Guillaume de Posch said: “Following an overall stable first quarter, advertising market conditions across Europe became more challenging."

RTL expects a stronger second half for FremantleMedia, with several new productions forecast to boost operating revenues. But RTL Group said it will not match its record earnings figures from 2011.

With growth in traditional television advertising uncertain and its production business under pressure, RTL's long-term strategy is to expand its operations, particularly in digital media. This year alone, RTL launched the male-targetted free-TV channel RTL Nitro in Germany; announced plans for a new DTT network called 6ter in France, which will bow in December; and is set to launch RTL Telekids, its third Dutch digital pay TV channel, next month.

RTL is also looking to take more control of the content its delivers over its channels, focusing on developing and acquiring intellectual property. In July FremantleMedia Enterprises and book publisher Random House  - like RTL a subsidiary of German media giant Bertelsmann - announced a strategic partnership which will see the two develop scripted TV programming for the U.S. and international markets based on Random House book titles.