Ladies and gentlemen, welcome to the analyst conference call of RTL Group regarding the presentation of the Full Year 2019 Results. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I now hand you over to Andrew, who will lead you through this conference.
Please go ahead, sir.
Thank you very much, and good morning, everyone. Thank you for joining us for our analyst meeting covering the results for the full year 2019. The speaker all the speakers for today's presentation are Thomas Raba, the Group CEO Helmer Hegen, our COO and Bjorn Bauer, our CFO. Looking at the agenda on Slide 2, this covers the areas that will be covered today by the management team. And with that, I now hand over to Thomas.
Yes.
Thank you, Andrew, and good morning from me as well. Slide 3 highlights the strategic progress made in 2019. In the Group's 2 main TV markets of Germany and France, we have gained in both audience and advertising market shares. Both Free Mantle and our streaming platforms have reported strong revenue growth, giving us confidence that the next phase of investment in these businesses. And finally, we have continued to pursue new alliances and partnerships in technology, content development and advertising sales.
The progress made across these 3 strategic priorities has contributed to another strong financial year as you can see on slide 3. The group is in a good shape. Profitability is strong. We have low financial leverage and a clear set of growth opportunities. Revenue came in at €6,650,000,000 up 2.2% with underlying revenue up 3.2%.
EBITA pre restructuring was above our market guidance at €1,160,000,000 resulting in a margin of 17.4%. The gross profit for the year rose 10% to €864,000,000 On the next slide, we show what this means for the ordinary dividend payout. There are no adjustments to the reported net result, meaning that the proposed dividend of €4 per share results in a dividend payout of 81%, which is in line with the new dividend policy. Based on the average share price for 2019, this translates into a dividend yield of 8.7%. I will now hand over to Bjorn, who will take you through the group's financials.
Thank you, Thomas, and good morning, everyone. I'll start on Slide 7. Group revenue on a full year basis was up by 2.2 percent at €6,650,000,000 thanks to higher revenue from Fremantle and our digital activities. Organic revenue, which is a constant exchange rate scope and adjusted for the wind down of Styl Hall was up by 3.2%. The positive foreign exchange impact amounted to €49,000,000 in 2019.
The group's operating cost base rose 2.9% year on year, mainly as a result of higher programs and streaming investments. The group's net debt at the end of 2019 was €384,000,000 resulting in a net debt to EBITDA ratio of 0.27 times. Looking now at the items below EBITA down to the net profit on Slide 8. Our net financial expense totaled €5,000,000 and is made up of a net interest charge of €32,000,000 and a positive €27,000,000 from financial results other than interest. We've also recognized a non cash impairment against our associate Atres Media of €50,000,000 The weak local advertising market was reflected in the share price development.
The group's tax charge came in at €292,000,000 5% higher than last year. The group's profit attributable to RTL Group shareholders increased by 12.9 percent or €86,000,000 to €754,000,000 thanks to higher gains on disposals and a lower overall impairment charge. Earnings per share were €4.91 Looking now at Slide 9, the cash flow statement. The group's EBITA to free cash flow was strong, reaching 105% in 2019. The acquisitions of subsidiaries reflect the Lagardere CV assets and geospace.
This has partially been offset by the disposals of Roni Verdun Film, CLIP and the final payment received following the sale of the football club, Geron d'Orleans de Bordeaux. The higher cash conversion rate in 2019 is mainly due to the delivery of some large drama productions, which has negatively impacted the cash conversion in 2018. I will now hand over to Eirmark for the business review, which starts with meeting RPL Dorf Rand.
Thank you, Bernd. I'll start on Slide 11. As mentioned by Thomas, in 2019, Medinhrope RTL Deutschland outperformed the TV advertising market and grew its audience share. Part of RTL Deutschland's outperformance of the market is due to ADALYNS. This sales grouping allows advertisers access to cross media campaigns at scale and with clear performance targets.
Overall, reported revenue came in 1.8% lower than last year. On an organic basis, however, once the sale of Universal Films has been considered, revenue was stable year on year. With investments into both the Program Grid and Save For Now, our German streaming service, EBITDA came in at €663,000,000 resulting in a margin of 29%. In terms of audiences, our family of channels reported a combined order share of 28.1 percent in our target group, 14.59. This is an increase of 4.6 percentage points compared to last year and has come mainly from our main channel RTL TV.
This is the first time since 2011 that the RTL channel has increased its full year audience share. We are hopeful that this positive trend we have seen will continue into 2020, even against the sports heavy summer schedule of the public TV broadcast channels. Looking ahead, the main focus of management will be the boosting of growth of TEFOR NOW. German section will form an important part of the offer with 11 series planned for the service. The Ultra League will also be a key program element for 3 seasons from 2021.
Moving to Group MCs on the next slide. The main highlight of the year was the acquisition of La Gazzard TV Asset, Les Neste TV. This has significantly strengthened our French family of channels and digital services and offers significant upside through synergies. The total audience share, including Beauty, amounted to 22.8% with the historic channels stable overall year on year. The net advertising market in France was estimated to be down 1.5% in 2019, as the strikes at the end of the year resulted in a weak last 4 quarters.
Reported revenue for Group MCs was slightly down by 1.8 percent to €1,460,000,000 while organic revenue was stable. EBITDA came in at €287,000,000 up 4.4% year on year. The group's priorities for 2020 include the successful launch along with its partners of the streaming service, Salto, and the full integration of Guli. Let's now turn on to Martinellen on Page number 13, Slide 13. In the TV advertising market that we estimate to be slightly up year on year, RTL lost market share.
The combined such family of channels delivers an audience share of 29.8%, down compared to 2018. However, subscriber growth of 29% at VideoLAN and slightly higher platform fees helped to offset the lower TV advertising revenue. Overall, RTL finished the year with revenue down 1.6% at €496,000,000 EBITDA was down almost 24% at €54,000,000 as the weak advertising revenue performance and the continued investment in streaming impacted the results. Let's now turn to our content businesses, Fremantle, on Slide 14. Revenue increased 12.6 percent to €1,790,000,000 in 2019 with organic growth at 10.3 percent in line with the guidance given.
The slightly lower organic growth rates adjust for the positive exchange rate effect of €37,000,000 The higher revenue is reflected in an approved EBITDA. This rose 11.8 percent to €142,000,000 resulting in an almost stable margin of 7.9%. Looking ahead into 2020, over the course of the full year, we expect another year of improvement in both revenue and EBITDA. This is on the back of a strong drama pipeline led by shows such as the American Gods Season 3, a 2 part miniseries for BBC 2, a 4 part series for ITV and new dramas from Walsart. As a further demonstration that European content can travel, Fremantle have just sold their 6 parts French pharma, The Last Wave, to the BBC, ZTF and Atres Media for linear and streaming audiences.
This follows a deal with Starsplay, a Stars branded OTT surface for 3 high end dramas exclusively across 20 countries. And just last month, one of Fremantle's Italian businesses signed a multi year development and production partnership with Sky Studios. This deal will focus on the creation and development of high end global drama with international talent behind in the front of the camera. Sky Studios will, for their part, provide development funding for a minimum of 3 shows alongside a commitment to produce. I will now hand you back to Thomas, who will take you through the strategy update before finishing with the outlook statement.
Yes, many thanks, Irma. Let's turn to Slide 16. On the next slide, I will set out some key strategic goals and ambitions for the group over the coming years. Starting on Slide 16, RT Group's strategy is built upon 3 pillars: 1st, strengthening our core businesses secondly, boosting the growth of our streaming services and global content business, FreeMetal and thirdly, fostering alliances and partnerships in the European media industry. Our aim is to maximize consumers' attraction to our broad variety of video content across all devices.
Our national streaming champions are designed to complement our leading families of channels, making our content available wherever and whenever the consumer wants, while attracting new and younger audiences. And we want obviously better monetization for advertising and content via personalization. Looking at Core in a bit more detail on Slide 17. We will continue to strengthen our family of TV channels to address the increased audience fragmentation. In recent years, RG Group's families of channels have been enhanced by the addition of digital channels with clearly defined profiles, including Nitro, RGA Plus, Gorgsub, C Stair and RGA Z.
In 2019, our group MCS acquired Lagardere's TV business to complement its offering for families and to strengthen its overall position in the French media market, both in TV advertising and in digital. To finance the growth initiatives that I will come to shortly, we have started a wide ranging review to reallocate resources. This review will include continued portfolio management and cost reductions. The group is committed to an ongoing investment in content as demonstrated by the more than €3,500,000,000 invested each year and is continually looking at ways to develop and own new hit formats or to invest in premium content. Outside of Fremantle, we have created the format creation group, FC Group, to develop non scripted formats exclusively for our broadcast business streaming services.
FC Group is jointly financed by RT Deutschland, Group MCs and RTN Netherlands, and will focus on the development of factual entertainment formats and reality shows with the IP owned by RTO Group. Moving on to Growth, Slide 18. Artia Group will continue to focus on building national streaming champions in the European countries where it has leading families of TV channels. These streaming services are positioned as complementary to global services such as Netflix, Amazon Prime and Disney Plus by leveraging the group's competitive advantage in local programming. The strategy is being rolled out in us to stand alone services as TV Now in Germany and VideoLAN in the Netherlands or via national partnerships such as Saito and Trans.
These standalone services will adopt a hybrid business model, combining a free advertising funded offer with a premium pay content bundle that offers Arte Group's TV programs, both live and on demand, with licensed content from 3rd parties and exclusive originals. And our ambitions in the nonlinear world are high, as demonstrated by the new set of targets which we set out here. These targets are only for the group's Dutch and German streaming services and cover the period to 2025. In terms of subscribers, the group now expects to have between 5 and 7,000,000 paying subscribers by the end of 2025. Accordingly, streaming revenue is expected to reach at least €500,000,000 by 2025.
The subscriber growth is being driven by significant boost in content spend. Compared to the actual amount in 2019, aim to grow this by more than 4 times to reach approximately €350,000,000 in 2025. Given the lead to front load content, marketing and tech spend, the group expects EBITA breakeven and slight full year profitability in 2025. This is an ambitious, but we believe achievable objective given our leading market positions and firm focus on local content. Moving on to the next Slide 19, in terms of advertising technology, our Smartclip technology serves commercials the right Internet enabled television, smartphones, tablets or computers at the right time.
The combined conventional direct advertising campaigns is what is known as programmatic advertising. With Smartclip, we are creating an open ad tech platform tailored for the needs of European broadcasters and streaming services. Arce Group's tech platform for its streaming service currently being built by Group EMCYS and its tech unit Bedrock. Bedrock will initially serve the French subscription service, Seiko, the partnership of TF1, MCS and France Television, due to be launched in 2020 and VideoLAN in the Netherlands. As announced this morning, RCA Group has agreed to become a 50% shareholder bedrock, which will be European platform open to 3rd parties.
And finally, within the area of data, the open log in standard NetID was developed by the European NetID Foundation, initiated by Medigroper, Ade, Dorschland, Prosehaven. Eind and United Internet. The standard offers single sign on, which can be used on numerous German websites by 35,000,000 users. Our targets are very simple. We are aiming for leading positions in both advertising and streaming technologies to use data more extensively.
Turning to Slide 20. The group's last focus area on the growth is around Fremantle and digital content. With Fremantle, we aim to further strengthen its abilities in content creation and production by exploring all possible ways to develop and own new hit formats. At the same time, and just as importantly, Fremantle's existing brands are being carefully managed, refreshed and nurtured to ensure that they remain long running. And we will, of course, carry on investing in high end drama productions to further develop Fremantle's scripted strategy, which now represents 23% of Fremantle's total revenue.
DidiRoo is a leading digital studio and home for digital content creators in Europe. They represent more than 1300 social influencers in 8 European countries, currently generate on average 34,000,000,000 online video views per month. We have put in place a growth plan to significantly expand the LGV Group's capabilities and talent management, production of short form video content, advertising sales and technology and data. I'll now turn to Slide 21 on Alliances. RTL has been and will remain active with respect to alliances.
We believe partnership opportunities based on the philosophy of funding resources of European broadcasters to establish open and mutual platforms are necessary to compete with the U. S. Studios and tech giants. We see partnership opportunities in 3 areas: advertising technology, streaming technology and international advertising sales. In technology, whether advertising or streaming, we're exploring multiple forms of partnerships from software licensing to partial ownership options.
In terms of international ad sales, RTL Ad Connect already works with several partners, including ITV in the UK and RY in Italy. Thanks for these partnerships, RTL, the Sella Group is one of the only media companies in Europe that can offer advertisers Pan European TV and digital video campaigns. Another example is Adelines in Germany, the only sales house in Germany that can offer and offers complex campaigns across all media from a single point of contact. RCA Group is also part of Badelsmann's content alliance, which was launched in 2019 along with other Badelsmann divisions like BMG, Grodag, and Random House to develop content and use the talent within the group across the various media platforms. Within Germany alone, this content alliance invests more than €2,000,000,000 annually in original content.
I will now take you through the group's outlook statement for 2020 as outlined on Slide 22. RTGroupe expects 2020 to be another challenging year for commercial television advertising, especially in the year with major sports events that will mostly be broadcast on public channels. The recent COVID-nineteen outbreak is also presenting many companies with unexpected challenges. At Arte Group, we will see the first cancellations of advertising bookings and impact on productions, but the Q1 will be broadly stable and in line with our expectations. We're taking all appropriate measures to protect our people and to protect our businesses.
We will continue to invest in our businesses. We will not cut into the substance of our businesses, and we will stick to our streaming boost plans as just presented. Importantly, in times of crisis, including COVID-nineteen, television viewing is increasing as is streaming. The following outlook does not reflect the COVID-nineteen outbreak as it is currently too early to quantify the impact on RT Group's results. So On this basis, RT Group expects organic revenue growth for the fiscal year 2020 of between 2% and 3%.
This revenue guidance excludes any impact from foreign exchange movements and changes in scope. Within this overall picture, the RT Group plans on stable to slightly down television advertising revenue. Fremantle, the Group's content division will continue to benefit from the growing drama pipeline and we therefore expect revenue to grow between 4% 6% with EBITDA once again progressing. In terms of EBITDA, ASE Group currently expects the group's adjusted EBITDA before additional streaming start up losses to be broadly stable. After these start up losses, adjusted EBITA is expected to be down by up to 7% with the group delivering at least €1,075,000,000 in adjusted EBITA.
This brings us to the end of the presentation. Thanks for your
your
The first question is from Anik Mas of Exane BNP Paribas. Your line is now open.
Good morning. My first question is with regard with your streaming investment plan. If you could please break it up as to how much is going to be coming from Germany and how much is coming from Denaliel. My second one is with regards to the virus. You mentioned that you've seen some impacts.
Could you just maybe give us a bit more clarity in which markets has the impact been? Which advertising categories have cut their investment? And then thirdly, just a clarification. So you mentioned Q1, the ad market is pretty stable. I assume that's been driven to Germany.
Thank
you. Yes. The first point on the streaming guidance. We're not breaking down the guidance by country as same way as other companies don't break down the guidance by country. As I said, 5,000,000 to 7,000,000 subscribers for Germany and the Netherlands.
We will add the subscriber target for France and SAITO when the service launches. On coronavirus, as I said, Q1 limited impact, limited cancellations, most cancellations in the areas of travel and tourism and life entertainment, some cancellations in the areas of luxury goods and automotive, but small scale at this stage. In Germany, we expect RTL to be flat in advertising in the Q1, outperforming the market. The same applies to Elbit with and without the duly consolidation impact. And we have a similar pattern in other countries like, for example, the Netherlands.
Q2 is much more, much harder to read. Again, all I'm going to tell you today is based on facts and not based on speculations. We don't see significant cancellations for Q2 at this stage. But bear in mind that the advertising booking behavior of our customers has become shorter and shorter term over the last years. And therefore, the reliability of bookings even 4 to 6 weeks out is limited, in particular in terms of crisis.
What we believe is happening is that customers are looking at different types of scenarios on the impact of the coronavirus on their business and will adjust their cost base accordingly. Advertising are important investments, of course, for our customers, but are also soft costs in times of crisis and can be adjusted within limits, of course, because we have contractual agreements and annual agreements and commitments with our customers at relatively short notice. But as I said, based on facts, limited cancellations so far.
Great. Can I just ask one more question? I think at the 9 months, you gave a bot number, which I didn't find out fully released. Maybe I'm
I couldn't just
find it. If you could give us that number, that would be great. Because I think you
just give a streaming number
now as opposed to both, which I assume also includes. I mean it's I'm
not sure. I'm sorry. You're very difficult to understand. I don't know whether it's your phone or whether it's our phone, probably yours. If you could just repeat, I'm not sure I understood what you are looking for.
A VOD number that you gave in the 9 months press release, a VOD number revenue number, which I could find in the full year release.
Yes. Well, the VOD revenue in the 1st in the full year 2019 was €135,000,000 But that's streaming services only, right, That is video land and TV, TV Now. And the total number of video, including in stream video and like on different platforms,
is EUR 266,000,000.
Okay. Thank you.
Yes. Welcome.
The next question. We
actually provide this number in our press release. You want to look at this, the first page press release, streaming revenue and TV now on video land, euros 135,000,000 up EUR 46,700,000, yes?
Because it was just with reference to the one that you gave in the 9 months?
Yes, that's right. We slightly changed the definition because we want to make sure that the revenue numbers we provide you for streaming correspond to the subscribers and the number of €135,000,000 fully corresponds to the number subscribers of €1,440,000 for Germany and Netherlands combined at the end of 2019, okay?
Okay. Okay. Thanks.
The next question is from Julien Roch of Barclays. Your line is now open.
Yes. Hopefully, you can hear me. I might have a bad line like I think because I think everybody is working from home these days. So coming back on COVID-nineteen, some people can't read cursory. The answer you gave to Henrik on saying that it is limited cancellation, mostly travel and a few to the luxury and Q1 flat.
I know it's very early days and nobody knows how it's going to how long it's going to last and the impact will be different country by country. But to try to help us do some scenarios, if you could give us some, I don't know, some weekly color on one country, I mean, the most impacted country for you, I don't know whether it is France, Netherlands or Germany, but kind of what was the growth before? What's the worst week looking like so we can run some scenarios, a bit more color, that would be great. That's the first question. The second one is on operating profit, down as much as minus 7%.
So if you could give us a bit maybe a narrow range, is it minus 3 to minus 7? And explain what drives this range, only the number of subscribers or is there anything else? That's my second question. And then the last one is, if I look at your strategy priority, one of them is alliances, and there's a couple of slides on that. But the most obvious one is with Pruzibern and merging Altria now and joined in Germany.
So why is this not happening? Thank you. Okay. Okay.
Very good. Listen, on COVID, again, what I can tell you, to be more precise, is that the total volume of cancellation so far across our footprint is €8,000,000 which is frankly fairly limited given that our total advertising revenue per annum is approximately €3,200,000,000 and that's what we see. I gave you the sectors or you call it the sectors which are most affected and I think they're pretty obvious. Everything beyond that to be honest is pure speculation and I don't want to participate in speculation. I communicate the facts I see.
Nobody knows how this virus is going to play out. Nobody knows what the lockdown of countries fully or partly will mean for advertising spend. What we're seeing is a significant pickup in TV consumption. We also see a significant pickup in streaming consumption. TV consumption primarily around news and magazines, which is an area of significant strength, for example, RTL Germany.
Based on all statistics and market reviews available, RTL's credibility in news is at least at par with the public broadcasters. And as I said, we see significant pickup. So in terms of fundamentals, COVID, I. E. TV viewing and TV consumption, same applies to streaming, the impact of COVID is positive.
The question is how to monetize. On streaming, it's pretty clear monetization is increasingly via subscription. On television, it's primarily via the advertising. And we've looked obviously at the sectors, composition of advertising revenue by sector and have started to make first estimates on which sectors could potentially be most affected. We also looked at 2,009 and what happened in 2,009, who canceled and when and when did we see first signs of recovery.
Honestly, I don't think that the financial crisis 2,009 can be compared to the coronavirus crisis of 20 20. 1st, because it's of a completely different nature and secondly, because of our business in 2020 is a very different one than in 2,009. The competitive landscape is a very different one. And therefore, as I said, everything I tell you today is based on facts and not based on COVID impact. On the 7% EBITA, I mean, to put this into perspective, and we provided this in the presentation.
The total start up losses for our streaming businesses in 2020 will be €19,000,000 and it was €25,000,000 in 2019, which shows that we're increasing the start up losses by €65,000,000 and this goes primarily into content. Elmer mentioned before that we've made significant investments in content for streaming already. We've just commissioned 11 originals, which will become available in the course of this year and next year. And we have also very importantly acquired the exclusive rights to the Europa League starting in season 2021 for 3 seasons for both free and pay. That would be a big driver, we believe, of our subscriber base at TV Now.
This also shows, by the way, that, a, we're focusing our streaming businesses on local content, as we said all along And secondly, we don't focus our content strategy on series and films. The streaming service, which we are providing will increasingly look like general interest. They will include films. They will include series. They will include different types of entertainment.
They will include sports, as I just said, but they will also, of course, include licensed products from third parties, including American Studios. So the 7% corresponds to the €60,000,000 approximately to the €65,000,000 of additional investments in form of startup losses for streaming in 2020 compared to 2019 and will then build up in the subsequent years until we break even in 2025, as we said. On partnerships and alliances, We, as you know, have entered into a partnership with 2 partnerships to be more precise with ProSieben in the last years. The first one which we announced last year is around advertising technology, a project called V Force, which is a joint booking platform of RTL and ProSieben for booking addressable TV campaign and online video campaigns. The second big part and alliance is around data with Net ID, of which, as I said before, RTL and ProSieben are founding members.
We are exploring other ways of cooperating with ProSieben, in particular in the area of advertising technology, as I mentioned in my presentation. We have at least 3 areas of partnerships, which we make available to third parties, COSIN and others advertising technology, VOD technology and international ad sales. VOD technology is a pretty obvious area for cooperation with Prosim and also with many other broadcasters in Europe. We have presented our plans for AdTech and VOTECH, the European broadcasters in an extensive roadshow in the Q4 of last year. The response is positive.
We are the 2nd round of deep dives to determine exactly in which areas and which partner and which partnership model we are going to operate going forward. As far as streaming services in Germany are concerned, TV Now, our streaming service is off to a very good start, as I said, and we are significantly ramping up our investments. Join, if you look at Join, it's a slightly different business model than TV Now. But more importantly, we believe that in streaming and building national streaming champions, time is of a big of essence because competition is intensifying. And frankly, a joint venture with Pauline would take quite a bit of time to negotiate and would take even more time to get approved by the regulators and potentially not be approved by the regulators.
And that's a risk which I'm not and we are not prepared to take. We will continue to invest in TV Now, as I explained, along the guidance, which I provided. Unfortunately, a full cooperation was joined for the reasons I mentioned. It's unlikely to be possible at this stage. And the last thing I want is to get defocused on the key area of the future of RTL in the years ahead.
This position, by the way, is underscored by the fact that I said earlier that despite corona and the impact of corona, we will make the investments in streaming as planned. We're not going to cut back on these investments because we believe that now is the time to build a market position of strength to become the leader in local streaming and we're incredibly well placed to achieve this objective.
Okay. Thank you very much. That was extremely clear. Thank you. Super.
Thank you.
The next question is from Adrien Veranoelier of Bank of America. Your line is now open.
Yes. Good morning, everyone. I also hope you can hear me well. So I've got a few questions for you, please. Thomas, when you mentioned comparison to DUSION 9, how flexible today is your P and L compared to 29?
Because in 29, you have been able to protect very well the bottom line and cash flows. Do you think you have the same flexibility today? And that's beyond the investments, sorry, that you have mentioned in streaming? The second question is, how resilient would you expect TV to be if there is indeed an economic recession in Europe? Because one could argue that in 29, there was still a big buffer because of prints, but maybe that buffer doesn't exist anymore.
And thirdly, perhaps following up on your previous observation about potential alliances, You made some comments in the press about regulators should authorize a full blown merger with ProSieben, for example. But ultimately, is that your intention? Thank you very much.
Okay. Thank you. On the first question on 2,009. In 2,009, the television advertising at Altria was down by approximately 10%. That's north of €300,000,000 We're able to compensate approximately 50% of that by program and marketing cost savings.
The world has changed since then in 2009. RTLs and also in thesis program schedules include significant U. S. Product films and series. And one way to reduce program costs was quite simply to reduce the number of 1st and second runs and increase the number of repeats.
Our program schedule now is much less dependent on U. S. Products. It's much more local, much more in house. There is flexibility in our program spend.
We will look at program spend quite frankly. I believe that coronavirus would have the impact, that the number of productions and shows will actually get postponed, which will have an immediate impact on our program costs. But what I said before is our policy in 2020 beyond. We want we certainly don't want to come out of this corona crisis weaker than we got into it. We want to come out of it stronger.
So if anything, our intention is to increase market share and not to lose market share. So we would take, as I said before, the tax to protect our business, but also to protect our people. We'll work on our cost base, but we are not going to cut into the substance of the business, neither in linear television nor in nonlinear television. On the second point, TV recession, it really relates to what I just said. Recession is one thing.
Coronavirus is something quite different. I mean, it's a matter of definitions, of course. But 2,009 financial crisis was not a recession. It was a crisis with a significant drop in advertising revenue. But the V shaped recovery, I mean, I remember this exactly, I was pretty close to the business.
At the time as well. We had a huge drop in advertising revenue in the Q1 of 2019. It continued into the 2nd quarter, but slightly, slightly kind of lower level. And then actually stabilized in the course of the year, and we came out at minus 10%. But no way of telling whether coronavirus will be similar in terms of impact or will be similar in terms of recovery.
The number of people out there who think that corona could be, I mean, crisis and then V shaped recovery. If V shaped recovery would be the same as in 2,009, then Q2 would probably be affected, potentially significantly affected at RPL, which we would see for its signs of recovery in the 3rd and more importantly in the very important 4th quarter. The problem which we would then face, but all of this is hypothesis of course, is that we already have significant load factor, I. E. The advertising if a V shaped recovery would incur.
There would potentially be an impact on pricing, but that is hard to tell. On alliances, what I said a few weeks ago in an interview with the Frankfurter, Algemeine and Zwarts Sachsen was not a statement that Bertelsmann or RTL want to merge with ProSieben. What I said was that in time, we will have to if we want to compete with the U. S. Platforms and the big U.
S. Media companies like the Disney Plus and so on, have to consolidate the national market and create national champions, which today would not be possible because regulation is such that the market definition, the definition of relevant markets by regulators is incredibly restricted and so it doesn't reflect the new reality which we are facing of more competition, significantly more competition and many options for advertisers who substitute TV advertising versus against other forms of advertising, for example, on YouTube, Facebook and the like. So I'm actually preparing the ground for a bigger discussion, which I think will be necessary. In the meantime, while a fully blown combination for Asian champions is not possible, we will cooperate with broadcasters on a national basis and European basis to the extent possible in the areas which are outlined. And I believe that this would be a very, very good start and potentially could potentially lead to something bigger at some point down the
road. I appreciate the very detailed answer, Thomas. Thank you very much. And if I could just ask one follow-up. You've mentioned cancellations.
Have you seen any postponements of advertising campaigns? Or is that the same
thing to you,
just to be very clear?
Yes. Probably the same thing. I mean, that was corona sometimes of a few days to accommodate advertising campaigns, but we've not that is kind of day to day business. We've not seen much of this as a result of corona. So what we're seeing is it's kind of the usual kind of shifting of advertising slots.
The next question is from Conor O'Shea of Kepler Cheuvreux. Your line is now open.
Yes, thank you. Thank you for taking my questions. Good morning, everybody. Just a follow-up, Thomas, on your previous comments on your cost flexibility. Just to be clear, are you suggesting that your cost flexibility is greater now than it was in 2,009 with the shift in program type?
First question. 2nd question on the streaming investments and the number that you outlined, €90,000,000 for 2020. Do you expect this for free to be the peak of net operating losses for streaming? Or would you consider think that that number might go higher in 2021? And related to that, if you could just confirm and maybe a question for Elmer on your accounting policy for CELTO M6, which is being consolidated below the operating profit line at the M6 level.
How will you reflect those losses in the RPL accounts? And then the final question just on consolidation. Just a broader question. Obviously, the share prices hit hard year to date again. Just can you maybe say something about the logic of free to web broadcasters still being listed?
Are there any wheels in theory why bookings could not buy out to the minorities of RPL, other public service channel requirements that require the group to be listed and or the other consolidation opportunities in the industry. You've got Artsize Media, which you have a stake that it's on a ridiculously low market capitalization. Can you maybe talk around that a little bit more? Thank you. Yes.
Okay. On cost flexibility, good you're asking. I actually think that our flexibility is
a bit lower than it was in
2019 because a significantly higher proportion of local programming. On streaming, it would be minus 90 in 20 20. We will peak in 2020, 2021, 2020, 2022. The number will then be above €100,000,000 to €100,000,000 but we've got every intention coronavirus set aside to maintain our level of profitability at the current level, which means that I mean just to take it through the logic, first of all, we're obviously looking at ways of reducing our cost base across the board and we're making progress. And we have made a significant cost reduction in administrative costs in the corporate center of RGL, significant and fully implemented.
We will significantly reduce the losses coming from the NPN businesses next year and then the following years. We expect Fremantle to continue to contribute profitability and growing profitability and mix of all of this in normal market conditions, I should say, even if advertising markets would continue to slightly decline for linear television, we are very confident to be able to maintain our current level of profitability despite the high investment in streaming. That's our firm commitment. We want to maintain profitability while investing, and this would allow us to build a future for the company and at the same time pay attractive dividends to our shareholders. On the accounting of CITO, it's I mean CITO is a joint venture, onethree, onethree, MCS, Faucilizion and CF1.
RTO will account for this at equity and the equity pickup will be included in our operating results and not below the line. And on Bedrock, which is the streaming platform, the technical platform, which started using Webento fully consolidate and there will be some startup losses related to building the building of Bedrock. On the free to air broadcast, list of free to air broadcasters, I agree with you that the share prices are ridiculous, particularly in light of what I just said. But frankly, I mean, everybody's seen a kind of you can have a view on this. But we believe that we have fantastic opportunities to transform our business.
I mean we are and we have outperformed the French and German markets last year. We've got every intention to continue to do that. As I said, we're addressing our cost base in linear television. We're investing in data and technology to personalize advertising, which will drive CPM. We are building streaming services, significant investments upfront, but profitability down the road.
We're addressing weaknesses in our portfolio by divesting non core and loss making businesses. So as I said, normal kind of economic times, I'm actually quite optimistic about our business and its ability to grow profitably and to transform. That is clearly not reflected in the current share price. Current share price includes all the downsides, but none of the upside. And that's my view.
Waddesman, I mean this is an RDL call, not a Waddesman call, but Battelsmann's position is as follows. We consider RDL to be undervalued. We have therefore, and I said this a an interview and bought RTL shares in the market, but we have no intention to make an offer and to take RTL private. So RTL will continue to be a listed company in the future.
Okay. Many thanks.
The next question is from Christopher Nackin from Value Square. Your line is now open.
Hi, good morning. Thank you for taking my questions. I've got 3 maybe small questions. The first one would be, could you break out the part of revenue that comes from or the part in advertising revenue that comes from the sectors that will be harder hit, like you mentioned, tourism and others? And then the second question would be, it's not always easy.
You have 2 sort of segmentation in parallel now. You have the segmentations that are in the report, STM Meeting Group according to the channels. And then also now you have the segmentation in TV, digital and streaming. I was wondering if you're thinking of making a different segmentation and to putting it more streamlined to this TV, digital and streaming revenues? Because it's not always clear where some of the costs are, in which segments the digital costs come and in which segment the streaming costs come?
And then the third question would be, you mentioned in the presentation when you expect breakeven for the streaming platforms, but would you also do that for the digital platforms when you expect to have a breakeven there? Thank you.
Well, I mean, on the sectors, currently, I'm hardest hit by corona and on cancellations, which I mentioned, tourism, travel, etcetera, in the broader sense. The exposure of our TV channels differs, but it's in the range of 2% to 4% to 5%. So the exposure is not particularly high. And frankly, some of the advertisings have already been placed and booked in the Q1, which as I said is stable. In terms of providing more transparency on streaming, we do show on Page 1 of our press release the streaming revenue for TV Now and VideoLAN.
We'll continue to do this. And we will, of course, provide you with information about the number of subscribers, provide you with information on revenue, and we'll provide you with details on the EBITA and the start up losses year by year and half year by half year. So we will, in line with the guidance we provided today or the long term outlook we provided today, give you what you need. So it's going to be broadly what you see on Page 5 of the press release. So we show the paying subscribers, 2019 and the outlook for 2025.
In 2020, we show paying subscribers for 2020. We show the streaming revenue. And we show the content spend per annum, which was €85,000,000 in 2019, and which we expect to increase to €350,000,000 in 2025. That is for RTL now and for VideoLAN combined. That excludes Bedrock and Zylo with the exception of the development cost for the Bedrock platform.
And on digital on the other digital platforms, I mean the other digital businesses are in large part profitable. You think about our ad tech business, Spodex, in the U. S, that's growing significantly at a high double digit rate and it's profitable and scaling. This is quite a lesser extent to our what we call MPN businesses in the past, which we now call digital studio businesses because we have transformed these businesses. These are business with significant revenue growth, but low margins in particular for those businesses which heavily depend on YouTube revenue where the terms of trade are not particularly favorable and the gross margins are often in the area of 10% or less, which makes it very difficult to earn a living.
Okay. Thank you very much.
The next question is from Catherine O'Neill from Citi. Your line is now open.
Thank you. I had a couple of questions. 1 on Fremantle. In the release, you mentioned production delays. I just wondered if
you could give us a
bit more detail on what you're seeing around delays in the production side and how we should think about that going forward. And then the other is on Ad Tech. There's Google's put in 3 changes and more broadly, there's a move away from cookies, which I assume may help your AdTech businesses because they seem to be less reliant on that. How should we think about the potential benefit or implications for your Adtech businesses from the change to how the Adtech industry is going to be operating?
Okay. Well, on Screenmetal and the Studio business, it also applies to the broadcasters and their live shows like Let's Dance or what have you. I mean clearly, I mean, we first of all, I mean, what we've decided to do and what we've implemented is that if and these shows take place without live audience, That's the first change. Some of these formats work better and some less well without audience. So we'll have to take a view.
What we don't know is, of course, what the authorities are going to tell us and what the restrictions they're going to impose on us. But so good so far. So it really largely depends on the extent to which the respective countries will be locked down in the next days or weeks and the measures which we are would be taking to protect not only our people, but also the, for example, singers in American Idol and the jury and the crew members and and so on. So frankly, I mean, these are people businesses. These are businesses, people coming together.
And the question is, to extent this will continue to be possible in the next days and weeks. But as I said, no cancellations so far, some performance and potentially some impact on live shows with audiences, which as I said, we have cut back significantly already. On that Pecan and the cookies, I mean, I think we I think in our mindset, we're getting and with respect to data, we're getting ready for words where consent will be required and where cookies will not be will no longer be available or will not be used. And that will, of course, have an impact on advertising and technology and businesses and the ability to personalize advertising. And what is necessary is to generate 1st party data and to get content from the users to be able to use the data and we're working on Snapshot solutions.
Thank you. Could I just ask on the Fremantle on the live shows? Over the next course of the next couple of months, 2 or 3 months, what proportion of your big live shows tend to feature?
Listen, I mean, I think we've got American Idol, which is ongoing. We've got talent, I believe, for the later this year. But we've got a number of live shows on German television, French television, and they could be affected in a similar way depending on the restrictions you apply. I mean, the new world of the week is social distancing. And if you want to apply social distancing to live shows like dance formats and the like, I can imagine what it would look like and imagine whether this is something which people are prepared to do given the circumstances.
And what are so frankly, I mean, this is very, very close to kind of as close as you get to reality of coronavirus and the measures to take. I really don't want to speculate on individual shows and their impact. We are in a constant and very good dialogue with the broadcasters, with the networks in the U. S. To determine what the right course of action is.
I think we all agree that this is a time where television has an important role to play in terms of informing our audiences, but also entertaining our audiences. But at the same time, we have a duty to protect our people and to protect the people involved in these shows. And that's a fine line and will be decided on a case by case basis between Fremantle and the broadcasters and the networks in the U. S.
Catherine, just to from my side, one a little bit of information. For example, Fremantle used a studio space in Maidstone, and there was a third party company also working on site and there was a confirmed COVID-nineteen outbreak there. So now whether that studio is going to be used by Fremantle in the future to be seen, what shows can be moved to other facilities to be seen. But clearly, there are ongoing impacts within industry, which we need to adjust to as Thomas has alluded to.
Okay. Thank you.
Thank you.
The next question is from Ned Bodoson of Goldman Sachs. Your line is now open.
Hi, good morning. It's Patricia Yang from Goldman. A few questions, please. So internally, you guys seem to be continue to take share from ProSieben despite their investment in content and the time to invest more of €50,000,000 in 2020. So I'm just trying to like, is there anything like any structural reasons that explain that?
And how do you think about your share in 2020 and beyond? Secondly, in terms of your investments on the different streaming services, I'm just wondering how much of those investments are actually shared between those platforms? Like how much of basically is like local as opposed to like what amount of synergies you're actually getting? And could you think of rolling out some of those initiatives in other markets as well? Thirdly, on Financial.
Just wondering, I think you gave the revenue guidance. Could we also have a sort of guidance for margins? I mean, those margins have been basically flat for full year is at around 8%. So just wondering like we should start to see them picking up. And the last question is related to sports events.
Just wondering if you do get some football games canceled because I think you're broadcasting some games in Germany and obviously you have the year in France. What would be the sort of profit impact? I guess the other question is like do you actually make money on those on the spot events? Did they get canceled with the infection positive? Thank you.
All good. Yes. Well, on ProSieben and RTL in the German market, as I said, we outperformed the TV advertising markets quite significantly last year. Advertising market share is up. I mean, all of these all of these are based on estimates because there's no official market data, as you know.
And the outperformance of our tier, both in terms of audience, but also in terms of advertising market share continued in the Q1 of 20 20. In terms of content and content synergies, FC Group, which is the vehicle I mentioned earlier, is jointly owned by the broadcasters. It focuses on entertainment formats with a view to broadcast them at the broadcast with shareholders of FC Group, but also to third parties, of course. So we're going to focus on this for the moment. We see first interesting formats coming out of FC Group, but we are at the beginning of this.
And if it works well, we could well decide in the course of this year to extend the partnership. As far as I mean synergies, maybe another point on content synergies. I mean there's significant content synergies between linear and nonlinear, I. E. Between linear TV and streaming services.
Look, for example, at RTL in Germany. All of the investments we're making in content for TV Now are investments that also, to some extent, will be used on our linear channel. So there are huge synergies by effectively looking at linear and non linear combined and looking effectively at 1 holistic program budget. That's also why it's quite difficult for us to give guidance on content spend on TV Now because it's a matter of how you allocate cost between linear and non linear. But the number we provided is reliable, but the way we look at content investments is really in a combined and holistic manner for linear and nonlinear offers.
On free metal margin, margin is going to stay broadly unchanged in 2020. So we see 4% to 6% revenue increase and a corresponding increase in profitability. And on sports events, I mean, the sports which we broadcast, I mean, in Germany is primarily a Europa League and Formula 1 and the World Cup and European Championship qualifiers. Our qualifiers are Don. The 2 friendly matches, Germany, I believe, Spain and Italy in the next 10 days.
Right now, the decision is that these matches take place, but with no spectators. That's a question mark. If these measures would not take place, we would get reimbursed. Europa League took place yesterday evening, and we broadcast 1 match. And generally speaking on sports, it's if you look at Sports and Isolation and not at the entire program grid, when you look at sports in isolation, it's very difficult to earn a margin.
But sports are necessary in a general interest program schedule. And so we definitely look at our profitability holistically. And as I said before, RTL Germany's EBITA margin last year was close to 30%, which I think speaks for itself. But sports isolated is generally loss making. So if sports events would get canceled or postponed, this would have and you can conclude that it's already a positive impact on the program spend.
Okay. That's very helpful. And just in terms of the synergies between the different streaming platforms, is it fair to say on the non content side, like could you quantify the level of synergies that you see as well?
Sorry, Lisa, the line was back. Can you repeat the question?
Sorry, I'm just wondering, you talked about the content synergies between your different streaming services and between the Nelomia, but if you think about the spend on like tech, like user interface, all those things for the streaming service in particular, could you maybe help us understand what are the sort of synergies you might have there as well?
Well, let's take Video on Demand Technology. Until we started to work together at RTL, MCS via Bedrock, TL, at Germany, at the Netherlands each spent approximately EUR 10,000,000 on building their ad tech platforms and operating them, but effectively build the same stuff. So if you would combine the 3 times €10,000,000 you actually would get €30,000,000 of benefit. But if you invest at €3,000,000 individually, the value trade is probably €10,000,000 to €12,000,000 because as I said, you're building the same stuff again. So by joining forces and bundling resources at RTL and beyond, will actually without spending significantly more than we do so far, be able to build something which is much more competitive, much more in line with customer requirements, which are largely set by the Netflix experience.
And that's why we are on VOS Technology, so keen to build a European standard around Bedrock. And as I said, we are in pretty good shape because Bedrock will be used by SaaS, which will be used by MCs and MCs replay. It will be used by VideoLAN. It's already being used for AVOD services by RTL in Belgium, Hungary, Croatia and Luxembourg. And as I said before, we're talking to a number of European broadcasters to join this effort because it just doesn't make sense for them to build their own streaming platforms.
They would spend money without building the value which they could get out of a partnership with us. So that's the proposition. And same to a large extent applies to advertising technology. I mean advertising technology is like building a market infrastructure and a holistic advertising stack with demand side and supply side platforms and app service and the like. And that will allow the broadcasters in time to sell the advertising inventory, linear and nonlinear, at more attractive times.
And it doesn't make sense that, frankly, most of the broadcasters particularly don't have the resources to build their own ad stack. And if they don't want to rely on Google or others, but want to use a neutral European platform, then SmartClip is a good answer. And many broadcasters which we met on our road. So last year, which was a meeting on the deep dive, fully understand this concept and are very open minded on joining.
Thank you very much. Thank you. So the last question is now from Julian Roque of Barclays.
You were very clear on your streaming target, but I guess it's a different model. It's a pay model. Your historical business is an advertising model, which you need to adapt. And you mentioned several times targeted advertising. You have a very useful disclosure, but you actually don't give us AVOD revenue so we can have an idea of how much of a percentage of TV advertising it is.
And the other thing you don't do, which ITV does and President does, is give us total viewing, I. E, number of minutes, say, in Germany, broken down between linear and on demand. So we can have a view on how fast you're transforming your business. So could you give us some color today or maybe include that in future disclosure? That would be great.
Thank you.
Well, the number we provide and which we discussed before on the €135,000,000 in streaming for TV Now and VideoLAN includes some advertising revenue because as I said before, those models are hybrid models with advertising more or less advertising depending on the subscription fee. So it is a hybrid model and will remain a hybrid model, but the subscription component will become much more significant in terms of revenue share going forward. To be honest, I mean, I understand your question and I understand why you're interested in this. I'm just not sure whether this would not be a level of disclosure that would be commercially sensitive because we're not competing. I mean, we're competing with Corzine to some extent, of course, in streaming.
But we're competing with the Netflix's and Amazon Prime's and the business who hardly provide any detail. I mean, no detail at all, by the way, on the German market and on the Dutch market. And I'm just not sure whether it's in the best interest of the company and the shareholders if we disclose this information, which is potentially commercially sensitive.
Maybe if you do that at the group level rather than by country, then it becomes less sensitive. And also, I'm not sure that the viewing time would be commercially sensitive. I mean, ITV does it in the U. K. They're the only broadcaster in Europe at the moment that does break photo viewing, in their viewing and on demand viewing and could even give you a total viewing that they don't break down?
Okay. Well, let me give you the number then because you're so convincing. The TV viewing last year on RTL was minus 0.2%. That's the equivalent of 44,000,000 hours of viewing. The nonlinear viewing was up by 48,900,000 hours.
That's a plus of 21.2%. Therefore, we are to be flat in terms of total viewer, which shows that the substitution between linear and nonlinear works. Because in 2018, the total number of viewing and total viewing time measured in 1,000,000 hours was 19,066 and in 2019 was 19,071. So in reality, we are flat and total viewing slightly up. And the positive message is that we are able to compensate linear viewing decline in terms of consumption, powered by nonlinear viewing, and this trend will clearly continue as we invest heavily in our streaming services.
Yes, this is fantastic. And when you say RTL, this is RTL Group in Germany, so all the channels are not only.
No, not Germany.
Yes, not only.
But it's all the channels in Germany, not only RTO channel.
Yes, yes.
I don't know everything. All the IP channels, and that excludes RTO too, because they have their own advertising agency. So all IP channels and all digital offers of RTL. We think about a KPI which we could use going forward, but this would be including all of our broadcasters at group level, which is potentially not relevant, right? So let us think about how best to do this.
I understand your point because you want to understand how we're transforming our business and how you can measure this transformation, the success of the transformation. And viewing time, switching linear to nonlinear is a key performance indicator. You're absolutely right. So let us think about it and see whether we can come up with something that is meaningful without being commercially too sensitive,
okay? Yes. No, that's great. I guess you just gave Germany if going forward, you gave us Germany, Netherlands and France, for instance, and then an overall advertising number at the group level, that would be amazing.
Yes, I think about it.
Okay. Very clear. Thank you very much for that.
You're welcome.
Thank you, everyone, for your listening in. Thank you for your questions. I'm obviously around for the rest of the day. If you have any further questions, any follow-up, we'll be in touch anyway through hopefully some conferences, less probably through roadshows. And obviously, the numbers next numbers from us will be in early May with the Q1.
Thanks once again and have a good day.