RTL Buys Stake in Streaming Platform Bedrock, Targets 5-7 Million SVOD Customers

The New Pope - Publicity - H 2019
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John Malkovich and Jude Law star in The New Pope.

The European TV giant posted record revenue of $7.4 billion for 2019, but warned the coronavirus could impact financial forecasts for this year.

European TV giant RTL Group is pushing hard into streaming, taking a 50 percent stake in SVOD technology platform Bedrock and forecasting major growth in its German and Dutch online streaming services.

RTL published its year-end figures Friday, reporting 37 percent year-on-year growth in paying subscribers for its SVOD platforms TV Now in Germany and the Dutch Videoland. Together, some 1.44 million users subscribe to the two services. Streaming revenue from TV Now and Videoland was up by 46.7 percent to $151 million (€135 million) from the 2018 figure of €92 million.

RTL also agreed to take a 50 percent stake in Bedrock, the company that provides the tech platform for its SVOD service 6Play in France, as well as the new French streaming service Salto, a cooperation between commercial networks TF1, France Te?le?visions and RTL-controlled M6. Salto's commercial launch is planned for later this year.

RTL said it will use the Bedrock tech platform for Videoland in the Netherlands, as well as the RTL services in Belgium, Hungary and Croatia. The platform will be open to third parties, and RTL is aiming to make the company a European leader in the streaming space. Financial terms weren't disclosed.

RTL CEO Thomas Rabe outlined ambitious goals for SVOD, saying the company planned to “grow the number of paying subscribers for our streaming services TV Now in Germany and Videoland in the Netherlands to between 5 and 7 million, to grow our streaming revenue to at least €500 million ($560 million) and to break even by 2025.”

Alongside its fast-growing streaming operations, RTL saw strong performances last year in both its digital operations, which posted 8.9 percent revenue growth to $1.2 billion (€1.07 billion), and its production operations at in-house shingle Fremantle , which saw revenue jump 12.6 percent to $2 billion. Alongside entertainment formats such as Got Talent and X Factor, Fremantle has a growing drama business with high-end series including Amazon's American Gods and HBO's The New Pope. Fremantle’s drama revenue in 2019 jumped 36.2 percent to $463 million (€414 million).

Overall, group revenue increased 2.2 percent to $7.4 billion (€6.65 billion), a new record for the company. Profit for the year was up 10.1 percent to $967 million (€864 million)

But while streaming and digital operations are driving growth at the company, RTL was keen to show it is not neglecting its core business of advertising-supported TV.

RTL's German television operations increased their combined audience share in their target demographic of 14- to 59-year-olds by 0.6 percentage points to 28.1 percent, the first such increase since 2011. Overall, some 44.2 percent of RTL Group's revenue came from TV advertising in 2019, with 21.6 percent coming from content sales, 16.1 percent from digital activities and 5.5 percent from platform revenue. RTL earned 4.1 percent of its revenue from advertising on its European radio channels and 8.5 percent from other sources.

Rabe gave an optimistic forecast for 2020, predicting a 2 percent-3 percent gain in total revenue for the year. Adjusted operating profits (EBITA) are expected to slip by 7 percent though after the company's startup investment in its new SVOD platforms are taken into account.

But Rabe noted that the outlook did not reflect the coronavirus outbreak in Europe, saying it was too early to quantify its impact on RTL's business. “However, we already see first cancellations of advertising bookings and impacts on productions,” he noted, adding that several organizations, including the IMF and the OECD, have already lowered their growth forecasts for 2020.