Good morning, everyone, and thank you for joining this analyst call for RTL Group's results for the period January to September 2021. I'm here in Cologne together with Irina and Oliver from our investor relations team. The presentation for this call is available online to download on our corporate website, rtlgroup.com, and you can also follow my presentation via the link in your invitation. Today, we will cover RTL Group's Q3 highlights, our outlook for the full year 2021, and an update on streaming, including the new RTL+ that will be presented at a separate launch event in Berlin today. Let me start with the highlights in the third quarter of 2021. Overall, we're very pleased with the first nine months for RTL Group in terms of financial and operating performance, as well as with our strategic progress.
Three major developments marked the third quarter. First, the strong growth of the TV advertising market in the second quarter continued in the third quarter of the year. As a result, our largest revenue stream, TV advertising, was up 16% in Q3 versus prior year. Second, our streaming and content businesses continued to grow strongly. Third, with active portfolio management, we continue to make significant progress in the transformation of RTL Group. With the combination of RTL Deutschland and Gruner + Jahr, we announced three major consolidation moves this year to create national cross-media champions in Germany, France, and the Netherlands. We also fully acquired Super RTL to strengthen our German families of channels, and the growth plan for Fremantle is well on track, targeting full-year revenues of EUR 3 billion in 2025.
Following the step-up in Eureka in the first half of this year, Fremantle closed the acquisition of 12 production labels from NENT in the Nordics in September. These labels are now called This Is Nice Group. Also in September, Fremantle completed the sale of Ludia to Jam City for $165 million. Given our strong performance, we're happy to confirm our outlook for 2021, which we raised in August with our half year results presentation. Today, our German streaming service rebrands to RTL+. We are constantly increasing the number of originals available on RTL+ across all genres. The next phase to boost RTL+ will be a cross-media extension in the first half of next year with the goal to build Germany's leading entertainment platform.
We will show you a preview of this cross media service later in the presentation and our significantly increased streaming targets. In the first nine months of 2021, group revenue was up 10.3% to EUR 4.5 billion, mainly due to strong growth of TV advertising revenues, which was up 19%. Our content and streaming growth businesses performed strongly. Fremantle's revenue was up 24.4% to EUR 1.291 billion, with delivery of The Mosquito Coast and the third season of the high-end drama series, American Gods, alongside the scope effect of the full consolidation of Eureka. Streaming revenue from RTL+ and Videoland was up 30.6% to EUR 162 million, thanks to the strong growth in paying subscribers.
Our high margin distribution revenue, i.e., the revenue generated across the distribution platforms, cable, satellite, and IPTV, including retransmission fees, increased by 4.9% to EUR 320 million. On an organic basis, i.e., before scope and FX effects, group revenue grew by 17.2% compared to the first nine months of 2020. Moving on to the next slide. On this slide, you can see the development of RTL Group's revenue in Q1, Q2, and Q3 for the years 2019 to 2021, alongside the development of our largest revenue stream, TV advertising. The soft start in 2021 was marked by lower TV advertising revenues, especially in Germany and the Netherlands, due to lockdown measures.
In addition, there were negative exchange rate effects and significant scope effects resulting from the disposals of BroadbandTV and Groupe M6's diversification businesses, Home Shopping Service, and iGraal. In the second quarter, TV advertising revenue grew by 65%. As a result, group revenue grew by 36% compared to Q2 2020. In the third quarter, RTL Group's revenue was up 3.9% compared to Q3 2020, and even up 2.3% compared to Q3 2019, driven by significantly higher TV advertising revenues. On an organic basis, i.e., before scope and FX effects, group revenue grew in the first nine months by 3.8% compared to the same period in 2019, which shows that we are already exceeding the pre-crisis level on a comparable basis.
To summarize, we have observed again the same picture as last year. Once the economic environment started to improve, TV advertising money came back quickly, and this clearly shows again the strength of TV with regards to building reach and brands in a high quality and safe environment. Let's turn to page six, which shows the group's outlook for the full year 2021, that again, we raised at the beginning of August. Following RTL Group's Q3 results, we confirm the previously given outlooks with expected revenues of around EUR 6.5 billion, an adjusted EBITA of around EUR 1.05 billion, and streaming startup losses of around EUR 150 million. That the adjusted EBITA before streaming will be around EUR 1.2 billion.
Moving on to streaming, where I will give you a performance update, a short presentation of the cross-media extension of RTL+, leading to significantly increased streaming targets and ending with a sneak preview of the new service. The number of paying subscribers of the group streaming services continued to grow strongly and was up by 91% compared to the end of September last year. This translates to average net subscriber additions of 130,000 per month from September 2020 to September 2021. RTL Deutschland accelerated the growth of its streaming service. The number of paying subscribers more than doubled to 2.389 million compared to the end of September 2020. The partnership with Deutsche Telekom's MagentaTV contributed significantly to the growth, also boosted by the growing number of original formats.
Until the end of the year, RTL+ will provide an additional 17 originals, including Ferdinand von Schirach: Glauben as of today, followed by the new drama series Sisi by the end of 2021, just to mention a couple. RTL Nederland streaming service Videoland recorded paid subscriber growth of 24.8% compared to the end of September 2020. Videoland's growth was driven by the third season of the original series Mocro Maffia and the reality hit format Temptation Island. Moving on to slide nine and turning to the new RTL+. In the first half of 2022, RTL+ will be enlarged to a cross-media entertainment and service comprising RTL+ originals, movies, TV series, shows, documentaries, sports, and news. Plus music, podcasts, audiobooks, and premium digital magazines.
The new RTL+ will be Germany's first cross-media champion, offering our audiences the most diverse spectrum of high-quality entertainment and independent information, all in an easy-to-use and personalized manner with a significant price advantage for the customer. This one app, all media approach is a true innovation in the German market with the motto, "Watch more, listen more, and read more." Watch. The new RTL+ will provide a growing number of originals and more than 50,000 hours of video content across all genres, as well as the HD live streams of all the 14 TV channels of RTL Deutschland. In terms of listening, the new service will also include music, audiobooks, audio plays, and exclusive podcasts. RTL+ has agreed to exclusive partnerships with Deezer for its premium package to offer a comprehensive music offering. The publishing group, Penguin Random House Verlagsgruppe, for audiobooks.
In addition, RTL+ will include the podcast offering from Audio Now and radio offering from our German RTL stations. Read. RTL+ subscribers will also be able to read digital editions of premium magazines from the Gruner + Jahr portfolio, with access to a diverse range of content from popular brands such as Stern, Brigitte, and Geo. This cross-media extension marks the first example of the upcoming combination of RTL Deutschland and Gruner + Jahr. The new RTL+ will use state-of-the-art technology with a high level of personalization and content recommendations based on artificial intelligence and editorial inputs for a true cross-media user experience. The successful partnership with Deutsche Telekom continues, and the new RTL+ will also be integrated in their MagentaTV offerings.
Following the strong growth in high-paying subscribers year to date, and as a consequence of the increased investment in RTL+ and Videoland, RTL Group significantly raises its midterm targets for the two services as follows. We aim to grow the total number of paying subscribers to 10 million by the end of 2026, to grow streaming revenue to EUR 1 billion by 2026, and to reach profitability in the same year. To reach these goals, we will grow the annual content spend for RTL+ and Videoland to around EUR 600 million in 2026. This means that we're going to triple the annual content spend compared to 2021. The peak of the streaming startup loss is expected next year with around EUR 250 million.
Finally, I'm happy to show you a sneak peek of how the new RTL+ will look next year. You can see at the top of the app visualization how the different categories will be structured across TV video, music, podcasts, audiobooks, and magazines. At the bottom, you see the feature, Für Dich. In English, you would call it My Feed, plus Discover, Search, and Saved. My Feed will be the technological heart of RTL+ and will by default be the starting page of the service. It is a cross-media recommendation engine that combines database recommendations with curated recommendations from our editorial teams. In other words, data meets journalistic power. A true innovation and USP in the market. My Feed will also accompany you, our users throughout the day.
In the morning, it may recommend the latest news or podcast for the daily commute. Later in the day, My Feed may notify users in a timely manner about RTL shows or the new album of one of the user's favorite artists. To summarize, we are creating an easy-to-use, attractively priced, and true cross-media entertainment experience for our users that will allow us to gain a bigger share of our users' daily media time. This is the concept of RTL+, one app, all media. Many thanks. This brings me to the end of the presentation. I'm now happy to take your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Julien Roch from Barclays. Please go ahead.
Yes. Morning. It's Julien Roch with Barclays. Morning, Björn. Morning, Irina. Morning, Oliver. First question is, can we get the ad trends in your main markets, so Germany, France, Netherlands in October, and if possible November? That's my first question. Second question is, why not raise your full year guidance? When M6 reported their Q3, everybody upgraded their full year numbers. Cruz even just raised their guidance, so I would have expected you to raise guidance on the strengths of your Q3. So what's the rationale there? That's my second question. Third question is on the new streaming target. Do they still include France, which I believe you will deconsolidate if TF1 M6 does happen? And when will you split streaming between Germany and Netherlands?
Because most analysts do their model based on business units, you kind of have the business unit and then streaming on the side, but that is actually included in the numbers. You probably don't get the benefit of streaming because of the way people model the company. Thank you.
Yeah. Good morning, Julien. Happy to answer the questions. I'll take them in the order you asked them. Let's start with the ad trends in October. We continue to be happy with the momentum in October. We see growth in October across the portfolio. I would say in the mid- to high-single-digit %. The trends are not dissimilar, I would say, in the markets. It's a little bit too early for November and December. I mean, when you look at last year, we had a strong Q4, which was up to the pre-crisis level by around 3%. We're seeing some weaknesses, I would say, in some industries, especially the auto industry. We're seeing some supply chain issues.
Tourism is still below historical levels. I think it's also important just when you look at the last three elements that I mentioned. I think these are upsides for the coming year. All in all, we remain optimistic for Q4. Again, slight growth in October, and overall, I think Q4 will be around or slightly below Q4 of last year. In terms of the outlook and the guidance, we did raise the guidance substantially in August. We do confirm the outlook of around EUR 6.5 billion and around EUR 1.05 billion in terms of EBITA. Again, as I said, we're very pleased with the strong performance in Q2 and also the ad trends in October.
On that basis, I see currently more upside than downside in our outlook. Despite some of the uncertainties that I just mentioned. I think the other point to consider here is, when you think about the outlook that we are given, we've also raised our outlook for the streaming targets quite substantially. This is where kind of our focus is in the moment. As you know, Q4 is a large quarter for us. There's, I would say, a few moving pieces, and we'll see where the year will end. In terms of streaming disclosures, the first question was whether France is included in the targets. That's not the case.
The targets solely relate to Germany and the Netherlands, so 10 million subscribers in Germany and the Netherlands targeted for 2026. Obviously, we have ambitions for France that will be communicated separately over the next year, I believe. We'll review the rest of the portfolio in terms of our streaming ambitions as well. Lastly, why is streaming not a separate business in terms of kind of disclosures? We have consistently, I would say, increased the disclosures in the past around streaming and will continue to do so in the future. I think it's also important to mention that streaming is not a separate business. We fully believe in the fully integrated offering.
There are synergies between the linear and nonlinear when you think about marketing, when you think about windowing, when you think about content investments. I think that the new RTL+ also shows this integrated approach. As such, we also believe it makes more sense to continue to report the numbers on a, I would say, yeah, geographical footprint. We'll continue to review and increase the disclosures around streaming. I hope this is helpful.
No, that is super helpful. No, I agree that streaming is not a separate business. It clearly is an integrated business, but I'm just saying that you should split the revenue, at least the revenue, if not the revenue and the profit between Germany and the Netherlands. Because at the moment, I think most models are on a business unit basis, and therefore not everybody's modeling streaming. That was just my wish is to split revenue and losses into Germany and the Netherlands.
Okay, understood.
Okay, good. Thank you very much.
The next question is the line of Annick from Exane BNP Paribas. Please go ahead.
Hi, good morning. My first question is just of this increased investment, how much is going to be video content versus all the other things that are going to be part of the new platform? My second one is, what triggered you to upgrade that guidance for 2026 now and not, you know, wait maybe another couple of years to see how it goes? Just lastly, on Fremantle, if you could give us guidance for the full year.
Yeah. Happy to. Good morning, Annick. Again, I'll go through the questions one by one in the order you just asked them. First, the new investments, and kind of the losses that we'll incur, they go into, I would say content is one area. Second is technology, but to certainly also marketing. We're not splitting up kind of where exactly the investments go. A significant part is obviously in video content that will continue to grow. The second biggest, I would say, content category is music, which is also shown by, I would say, all the market researchers, that is a key component. Adding a fully comprehensive music offering, I think, will be a significant advantage to the customer.
It'll give us the time when we release the pricing also at an attractive price point. It will be the full Deezer premium catalog, with around 70 million songs at the moment. Some of these investments also go in that, and the other content areas are, relatively speaking, smaller to video and music. Why have we upgraded the guidance now? I think there are two reasons. One is, we're very pleased with the performance year to date, and we are now at 3.4 million paying subscribers. As you know, our previous target was 5 million-7 million by 2025. I think it was a natural question whether we still believe this is the right ambition level or whether we should increase it.
That was the one reason. The other was the new RTL+, the investment into the cross-media offering. We wanted to share with the capital markets how big the opportunity is that we are seeing. Lastly, on Fremantle, full year outlook, we will see, I would say, continued strong growth in Fremantle and EBITA should be, I would say, close to pre-crisis level, but not fully.
Okay, thank you very much.
The next question is the line of Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Good morning, Björn. Thanks for taking my questions. Just the first question, just to come back on the streaming. I guess your forecast for 2026 implies, I think the bulk of the growth will come from Germany. I'm just wondering what you've seen so far from your sort of 3 million base across the two, in terms of those households that are paying subscribers, what the impact on their free-to-air TV consumption has been. If you could give any insights on that, would be very interesting for me. Secondly, just in terms of the Q4 last year, you mentioned +3%, year-on-year.
Can you just remind us which months were the strongest, and which months are generally the biggest in Q4? And then finally, just on programming spend, you know, so far in the second half of the year, I think your close peer in Germany stepped up significantly their investment in Q3, but not necessarily for Q4. What how are you playing it, with the, you know, the ad market probably stronger than expected, so far in the second half of the year? Could you be minded to spend more or similar to previous, the return of live shows could mean you're able to substitute lower cost programs? Thank you.
Okay. A number of questions. I'll do my best to answer them.
Sure
Please be honest if I'm not covering all of the points that you mentioned. I'll start with streaming. One of the questions you ask, whether the majority of the growth is expected to come from Germany, and that can be confirmed. I mean, Germany is, I mean, just in terms of households, about four times bigger-
Mm-hmm
In the Netherlands. As such, that's why we see a majority of the growth there. In terms of TV viewing and kind of usage of our streaming services, that's not an easy to answer question, and we don't have full data. What we realized is, it's also a question of how we attracted the users. To give you one example, the users that we are gaining on through our owned and operated platforms, they are, I'd say, a little bit more younger skewed and more urban and a little bit more female. Whereas, as you know, we have the partnership in Deutsche Telekom.
The users that we gain, especially through the physical network of their stores, is a little bit more male skewed, a little bit more less urban, a little bit older. Just by comparing these two groups, you also obviously the TV usage is a little bit different. There are a number of factors playing into here. I think it's a little bit too early, but overall, as you know, the TV usage is high and we see a lot of, I'd say, usage that is concurrent with TV viewing and that users have used both the linear and nonlinear service. In terms of Q4 2020, the biggest months are October and November.
December is a little bit smaller by comparison. Programming spend, we have started to increase programming spend, and we're looking to also increase programming spend next year, but mostly on the nonlinear side.
Okay. Understood. Just to come back on the Q4 last year, within the 3% growth, was November your strongest month of growth overall?
Give me a second. I think December was overall the strongest month.
December. Okay.
Yeah.
Okay. Great. Very helpful. Thank you.
There are no further questions at this time, so I hand back to Björn Bauer for closing comments.
Well, thank you very much for joining this call and your interest and, we're looking forward to keep in touch with you at, one of the next conferences, and wish everyone a good day.
Thank you.