Good morning, everyone. Thank you for joining us either in person or via the audio cast for our analyst meeting covering results for the full year 2018. I'd like to introduce our speakers, Bert Habets, the Group CEO, and Elmar Heggen, our CFO and Deputy CEO. Looking now at the agenda on slide two. We will start with the highlights of 2018. This section will also include both more information and greater transparency on our business with a new set of KPIs. We will then proceed with a review of the group financials, followed by a business and strategy update. We will finish today's presentation with the outlook statement before moving on to a Q&A session. I will now hand over to Bert to begin the presentation.
Thank you, Andrew. Good morning to all of you. Last year, I stated that our goal was to maximize consumer attention to all of our video offers, across all platforms and across all screens. With continued growth in our content and digital businesses, I can truthfully say that we have achieved some of that ambition in 2018. The group's diversified portfolio has delivered another record high in revenue and solid EBITDA performance in line with expectations. This has been achieved thanks to growing revenues in our content business, Fremantle, after having delivered EUR 1 billion of digital revenue. Our core TV business continues to report high profitability despite weak advertising markets, which were impacted by the sporting events and an unusually warm summer. This operational performance has resulted in another strong financial year, as can be seen on slide number four.
As I just mentioned, the group is in good financial health. Profitability is strong, we have low financial leverage, and a clear set of organic growth initiatives. Revenue grew by 2.1% to EUR 6.5 billion, with EBITDA in line with guidance at a level of EUR 1.38 billion. On a reported basis, we were, as announced, below the record level of 2017, which was to be expected given the positive one-off books last year amounting to EUR 94 million. The operational EBITDA was therefore slightly up 4.7%. Following another strong financial performance and in line with the group's dividend policy, the board is once again proposing a final dividend of EUR 3 per share. This results in a total revenue for the year of EUR 4 per share, which is equivalent to 92% of the group's earning per share.
To summarize, the group has successfully come through a set challenging year with higher revenue, strong EBITDA, and cash flow while continuing to invest in order to deliver on our Total Video strategy. Two years ago, in March 2017, we announced our digital targets for the next three to five years. We stated that digital revenue would be at least 15% of the group's total revenue and would present EUR 1 billion in revenue. Now, in 2018, we achieved these targets, two years ahead of plan. As you can see, we have broken out the EUR 985 million in digital revenues, showing the split across our MPNs, our video on-demand activities, and our digital activities generated by Fremantle and our global ad tech business.
The pie chart on the right-hand side shows the effect of the diversification of the group's revenue, with TV and radio advertising now combined for the first time below 50%. The group's transition is far from finished. Look at the next slide. Our strength as Europe's leading free-to-air broadcaster and as a global content producer are well-known. Our digital activities have been investment priorities for the last four to five years, and they have now reached a stage where either through necessity or because of the scale reached, they will be clearly at the center of the group's attention as we drive further collaboration and push for organic growth initiatives within the group.
Today, I want to address a number of these points with you by providing a new level of transparency and a new set of KPIs by which you can measure our progress as we drive the group's transition to Total Video 2.0. Over the next two pages, we will have a clear set of our performance measures and our expectations across the KPIs, I will now take you through them. Starting on slide number eight. Starting on the left-hand side, broadcast, and working ourselves through to the right-hand side to digital. The first line provides a quick summary of the revenue split by activity. Of more interest are the lower lines. For our broadcast activities, these include platform revenues, the number of paid subscribers on our video-on-demand activities in Germany and in the Netherlands, and the total digital revenues for the broadcast business.
As you can see in these new KPIs, the group has experienced significant subscriber growth over the last year, up 77%, even though the major relaunch of TV Now only occurred mid-December 2018. In total, this means that we have already reached a number of 1 million paying subscribers. The subscriber development across both platforms remains strong, with a 74% increase in paid subscribers at the end of January versus the January results in 2018. Looking at content, the new KPIs reflect the growing importance of Fremantle's drama business. International drama now represents 19% of total revenue and is only down year-on-year due to the successful relaunch of American Idol in 2018. Fremantle's digital revenues has also grown significantly, thanks to better monetization on Facebook and YouTube and drama sales to the OTT platforms.
It also reflects the success of the Jurassic World franchise from our gaming business, Ludia. Turning now to digital, which in this instance encompasses the group's MPN and ad tech activities. For the first time, we have clearly split out the revenues of its business lines. Our MPNs, consisting of BroadbandTV, StyleHaul, Divimove, and United Screens, have delivered strong revenue growth, but are still facing challenges converting this into operating profits. This is especially true for StyleHaul, and is one of the reasons why we have booked an impairment of goodwill in the 2018 accounts. The RTL Group ad tech business, SpotX, and the now integrated smartclip reported slight revenue increases on the back of a very solid performance in the last six months of the year 2018. This follows the repositioning of SpotX in the premium connected TV market and the onboarding of new clients throughout the year.
On the next slide, we will set out some key strategic goals and ambitions for the next three years. For our broadcast activities, these include continuing to drive our video-on-demand revenues, which we expect to grow by more than EUR 150 million in the year 2021, largely thanks to a tripling of our paid video-on-demand subscriber base. For Fremantle, the focus remains firmly on delivering on the drama plan. This plan aims to reach between 25% and 30% of Fremantle's total revenue from this genre. If achieved, this would mean that more than EUR 500 million revenues would be generated from drama in the year 2021. This is challenging given the competition for talent, but Fremantle's global presence, recent success rates, and growing reputation in this market makes this target achievable.
With respect to ad tech, the group expects this revenue stream to grow by more than EUR 100 million over the coming three years. These initiatives are all organic and will continue to provide solid revenue growth opportunities and attractive earnings for the group as a whole. I will now take you through the two main strategic priorities within the group, video-on-demand and content. Moving on to slide 11. With the acquisitions we made over the last past year in digital and content production, we have clearly improved our growth profile. In the next phase, we will focus on stronger organic growth by expanding our video-on-demand services through significant investments into more local, exclusive content and by continuously improving our capabilities within the group in running a direct-to-consumer business.
We have learned a number of lessons since the launch of Videoland in the Netherlands back in 2015, these learnings are now being acted upon with a clear set of priorities for our video-on-demand offers, with a focus on local offers around a hybrid model and an increasing amount of local exclusive content. These priorities will be enhanced for the coming years. The development of a joint tech platform for our video-on-demand services with the intention that all streaming platforms will migrate to it is one of such initiatives. On the content side, drama series are key for RTL Group's video-on-demand expansion plans. To ensure supply and exclusive IP, we have established a video-on-demand content working group with Fremantle and the RTL Group's major broadcasters to explore the joint development of high-end drama series.
This working group in no way challenges or even replaces Fremantle's existing arm's length basis relationship with the RTL broadcasters, it does provide us more optionality as a group. In order to achieve our goals with respect to the subscriber numbers, the group will need to invest both in content and technology. Accordingly, the group is currently planning an incremental spend of EUR 350 million over the next three years. EUR 300 million will be spent in content and the remainder in technology. These content investments will cover both the streaming video-on-demand activities in Videoland, in the Netherlands, and the hybrid video-on-demand offer of TV NOW in Germany. As an example, there are plans for multiple original formats on TV NOW this year, with the intention to launch even more in 2020.
These originals will cover a variety of genres, from spin-offs of the current linear brands to comedy, to drama series, to documentaries, and to factual entertainment. In short, a very wide offer for mass appeal. The cumulative negative EBITDA impact of these investments in video-on-demand is estimated to be below EUR 10 million by the end of 2021. This is only possible because we can leverage the existing infrastructure within our broadcast operations, whether this is program libraries, whether this is technical staff, and obviously backed up with the incremental revenues that we will gain in the intervening periods. Clearly, the EBITDA impact is more weighted to the early years, and we assume that the negative EBITDA impact this year around about will be in the region of EUR 20 million.
As a group, we will explore all possibilities to jointly develop strong brands and formats between our broadcasters as well with Fremantle. This is the great lead into slide 13. The second group priority is the continuing development and role of Fremantle within the new total video world. These priorities reflect the transition that Fremantle has been undergoing over the last few years. Drama, content, co-development, and a growing digital revenue stream are at the heart of this priority. To put some flesh on the story, we will share with you the following. In drama, the current HBO Fremantle relationship is quite remarkable, with Fremantle now one of the largest independent suppliers to their platform, with three deals already being announced. There is more to come.
Exclusive first-look deals, such as the most recent with the Oscar-winning production company, Fabula, which continue to ensure a strong pipeline of high-end drama with strong international sales potential. In addition, we are pursuing co-development models within RTL Group. This reflects the increasing demand for local scripted content at RTL Group's broadcasters for their own video-on-demand platforms. This demand coincides with Fremantle having successfully branched out into the genre and making it an obvious collaboration play. Lastly, our client base continues to expand with the most recent player being Facebook, where the show "Confetti" has been sold to five territories, and we are quite confident that other markets will soon follow. Discussions with new OTT platforms such as Apple are also being held, so the range of our activities continues to expand.
I will now hand over to Elmar, who will take you through the group's financial results.
Thank you, Bert, and good morning from me as well. I'll try to be fast and not overly repetitive. Group revenue on a full year basis was up 2.1% at EUR 6.5 billion, as already mentioned by Bert, thanks to higher revenue from Fremantle, RTL Nederland, and our digital activity. Underlying revenue, which is at constant scope, and at constant exchange rates, was up 2.8%, fully in line with the guidance that we've given to you earlier. This higher growth reflects both the negative foreign exchange impact, which amounted to EUR 62 million, and the rather limited positive scope changes, which were also partially compensated by scope exits.
Notably, MAP, Mon Abonnement Photo, and the football club, Girondins de Bordeaux, at the level of Groupe M6. The group's operating cost base rose 2.3% year-on-year, mainly as a result of increased costs linked to the MPN business and higher content costs linked to the revenue development of Fremantle. Reported EBITDA was in line with our guidance at EUR 1.38 billion, down 5.7% when compared to the report 2017, which, as you all remember, benefit from the sale of the buildings in Paris that amounted to EUR 94 million. Operational EBITDA was slightly up by 0.7%, with the increase mainly driven by higher contributions from Groupe M6, Fremantle, RTL Nederland, and Belgium. The group's net debt at the end of 2018 was EUR 470 million, resulting in a net debt to EBITDA ratio of 0.34x . Let's now have a look at the items below EBITDA down to net profit.
Our net financial expense totaled EUR 13 million, and is made up of a net interest charge of EUR 20 million and a positive EUR 7 million from financial results other than interest. We have also recognized a non-cash goodwill impairment against StyleHaul, one of the group's MPNs. This amounts to EUR 105 million and reflects the decision to reposition this asset by focusing on higher margin branded entertainment and reducing our exposure to loss-making talent deals. Moving forward, there will be a clear focus on integrating and developing StyleHaul's operations with those of Divimove and United Screens. In connection with this, the repositioning of StyleHaul operations is likely to result in a scale back of the operations, with some one-time restructuring costs to be incurred during the course of 2019. The group's tax charge came in substantially lower at EUR 278 million, down 27.8% against last year.
This is the result of mainly two effects. The first of these relates to the commission income, which came in at EUR 28 million compared to only EUR 2 million in 2017. The second effect is linked to a deferred tax asset amounting to EUR 67 million, which was recognized in the last quarter of 2018. For the lower EBITDA, the impairment, and the higher minority interest, only been partially offset by the lower tax expense, the net profit decreased by 9.6% or EUR 71 million to EUR 668 million. Let's now look at the cash flow statement. The group's EBITDA to free cash flow was strong, reaching 90% in 2018. This reflects the business's continued focus on balancing working capital needs, investing for the future, and maintaining profitability. The acquisitions line is relatively modest as the main investment made in 2018 was the acquisition of United Screens.
The inflows seen from the other financial assets relate primarily to the proceeds received for the sale of the football club and Mon Abonnement Photo in France. The lower cash conversion in 2018 is largely due to the buildup of inventory at the level of Fremantle, ahead of the delivery of some large drama productions in the first quarter of 2019. On the next slide, we show the adjustments made to arrive at the adjusted net profit, which, as you will all remember, is the base for the ordinary dividend payout. The reported net profit attributable to RTL Group shareholders remains the starting point of the exercise. The adjustments this year concern, first, goodwill impairment, second, the deferred tax asset, and third, the commission income. This result in an adjusted net profit of EUR 678 million.
Given the results, the board has decided to maintain the final dividend at EUR 3 per share. This equates to a payment of EUR 461 million or 68% of the adjusted net profit, which is in line with the guidance given and the dividend policy, i.e., a payout ratio of between 50%-75%. The total amount of dividends for 2018 therefore amounts to EUR 4 per share once you add the interim dividend already paid in September. Based on the average share price for 2018, this translates into a dividend yield of 6.3%. I will now hand you back to Bert for the start of the business review.
Thank you, Elmar. We start at slide 22. 2018 was a difficult year for the TV advertising market in Germany. Major sectors such as healthcare, pharmaceutical, auto, telecom, and household cleaning products all cut their gross spend, ad spend with the effect that we believe that the net advertising market fell between 2%-2.5%. The last quarter of 2018 was particularly tough given the market falling based on our estimates between 6.5%-7%. Digital and platform revenues helped partially offset lower the ad revenue, but our biggest profit center nevertheless finished 2018 with a decrease in revenue by some 2.8%. Cost control helped protect the EBITDA, which finished only slightly down at EUR 728 million, resulting in an increased margin of 33%. In terms of audiences, our family of channels reported a combined audience share of 27.3% in our target group 14 to 25.
Admittedly, we have lost audience share, partly because 2018 was a sports year, but also in the morning and afternoon slots as the new daytime lineup of RTL needed time to find its audience. We are confident that the positive trends we currently see will continue in 2019. Our strategic priorities in Germany include an acceleration of local program development, continuing the rollout of TV Now, and becoming the destination of choice for talent. All of these elements will be crucial for the continued success of the business. I will now hand over to Elmar, who will take you through Groupe M6.
Thank you, Bert. We start on slide 23. Looking at the audience share of the family of channels. This was down slightly to 21.4% in 2018. This is mainly the result of the main channel, M6, due to the last sports events being broadcasted on the competitors. The net advertising market in France was estimated to be up 1% over the whole year, despite the negative impact of the demonstrations in the last quarter of 2018. Revenue for Groupe M6 was slightly down by 1.3% to EUR 1.48 billion, largely due to lower revenue from rights and business selling and the deconsolidation of the football club and, as mentioned earlier. Reported EBITDA came in at a record level of EUR 400 million, up 2.8% year-on-year.
The group's priorities for 2019 and beyond include the finalization of the deal with Lagardère, which financially and strategically will be the most important deal this year. In the medium term, M6 hopes to double the operating performance from these acquired channels to EUR 40 million through revenue and cost synergies. Secondly, to obtain regulatory clearance and then to launch the VOD platform, Salto. Lastly, to keep a vigilant eye on the planned regulatory changes in France. These reforms seem to have slipped backwards into the second half of 2019 or into even early next year. Back to Bert for the rest of the businesses and the strategy update.
Thank you, Elmar. I will continue with the Dutch operation on slide 24. 2018 was a better year for RTL in the Netherlands, thanks to an improving TV market following two years of quite significant decline. We estimate that the market grew just over 3% with the RTL ad revenue being up 1%. The combined Dutch family of channels delivered an audience share of 27.2 down compared to the year before. Lower viewing time impacted all broadcasters with viewing in the target groups 24 to 54, and the younger target groups, 20 to 34 range, going down by 4% and 6% respectively. These performances show the importance of the group's investments in its non-linear offerings. Platform revenue following new deals in 2018 and growth from the Videoland SVOD platform helped drive overall revenue within the year, finishing up 6.5% at the level of EUR 508 million.
EBITDA was up 2% at the level of EUR 89 million. In terms of the group's strategic priorities in the Netherlands, it's really about focusing around IP and talent, given the very fierce competition with Talpa, the continuing to drive up the uptake of the Videoland subscriber base, and the implementation of the new sales house strategy following the acquisition of BrandDeli. This strategic step allows RTL to sell the advertising space for the brand portfolio of Discovery, Fox, and Viacom, enabling advertisers to have access to a greater overall reach, in particular, in respect of the younger target groups in daytime and prime time slots. I turn over to the content business, Fremantle, on slide 26. Before turning to the numbers, I want to provide an overview and recap of Fremantle's strategy and its businesses.
While the recent focus has been on building and growing international drama, Fremantle's core business within entertainment remains fundamental. Whether these are the daily soaps, the big entertainment formats, the game shows, or the factual programs, these shows remain vital to the overall health of the business. A lot of effort goes into making sure that these formats stay fresh, relevant, and continue to deliver good audiences to Fremantle's customers. International drama, as you are aware, has been at the center of Fremantle strategic priorities for the last five years. Through smart acquisitions, talent deals, and investment in local teams and structures, we have built a new business, a strong new business. Fremantle's reputation in the genre has gone from strength to strength. As an example, this year, all of the larger channels in the U.K., namely BBC One, BBC Two, ITV, and Channel 4, will broadcast Fremantle dramas.
This is a solid validation of the strategy and the talent within the group. In digital, Fremantle has been steadily increasing its operation through improved deals with YouTube and new commissionings from Facebook. As an example, the videos from "Asia's Got Talent," Sacred Riana, became a worldwide phenomenon and currently are the most watched on the Facebook platform. These successes prove that good storytelling and strong production values can be transferred into creating a valuable digital business. Looking now and what that means in terms of numbers. Let's go to the next slide. Revenue increased by 8.2% to almost EUR 1.6 billion in 2018, thanks to a continuing rollout of Fremantle's drama plan and the return of American Idol. Organic growth came in at 10% in 2018, once the negative exchange rate effects amounting to EUR 41 million are taken out.
The higher revenue was reflected in an improved EBITDA, which rose 5% to EUR 147, resulting in a margin of 9.2%. In 2018, there were 12,738 hours of Fremantle content broadcasted, of which 2,400 were new. Looking ahead in 2019, 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 very strong pipeline led by shows such as "American Gods" Season 2, "Beecham House" for ITV, "Baghdad Central" for Channel 4, and "Dublin Murders" for the BBC. These are all expected to be delivered in the first half of this year. The revenue guidance is also based on a production schedule which includes important deliveries such as the Season 2 of the Ferrante novel, "The New Pope" in the last quarter of 2019. Turning to slide number 29 on digital revenues and digital activities.
RTL Group's MPNs delivered another very strong revenue performance, up 28% year-on-year. This was led by BroadbandTV and Divimove, who reported growth of 31% and 50% respectively. In terms of video views, RTL Group's MPN are responsible for 15% of YouTube's global views, which is an incredible statistic. Our priorities in this field are clear. A better financial performance through a clear integration plan for the group's fully owned MPN businesses, while we continue to invest in content creation and IP ownership. In 2018, RTL Group combined its two major ad tech investments, SpotX and smartclip, into one business with a unified management structure. In addition to minority shareholders in the U.S., clypd and VideoAmp are included in these numbers at EBITDA only.
Reported revenue grew just 2% in 2018. This is rather misleading as the new ad tech group realigned its revenue recognition policy in the reporting period. This resulted in a negative year-over-year impact of EUR 10 million, therefore an organic growth of 12%, which is substantially higher than the reported 1.8%. This growth follows a major repositioning of the business in the premium connected TV segment and the over-the-top video environment. The U.S. remains SpotX's primary market with over 60% of the revenue now coming from major media owners and platforms like Discovery, Roku, Sling TV, and Vudu, which is a Walmart company.
To enhance SpotX capabilities in this premium marketplace and to help drive the group's video-on-demand platforms, we completed the acquisition of a U.K.-based company called Yospace in February this year. The Yospace technology is deemed to be one of the best technical solutions for so-called server-side dynamic ad insertion in this market. The company is therefore well-positioned to benefit from an expected acceleration of the market adoption of this technology. Acquiring Yospace expands and complements SpotX ad tech stack. SpotX aims to develop the Yospace technology so that it can launch a more integrated and innovative solution and to further close the gap to the top two main competitors for SpotX, namely Google and Comcast. To summarize, we are very excited to have made this acquisition, which strengthens the group ad tech technology, in particular in the world of OTT.
RTL Group's next challenge is how we handle this transformation as video moves away from linear into non-linear environments. Clearly, our business is becoming increasingly challenging. With rapidly changing consumer behavior and the emergence of global tech giants that capture an ever-growing share of advertising spend and audience attention, we have moved from a local to a global competitive landscape. This is a seismic shift in our industry. Total Video 2.0 really means that we will focus our strength as we will fully embrace the rapidly changing viewing pattern and build the new RTL. More than ever before, RTL will focus on fostering creativity, becoming closer to our audiences while taking more risks and ensuring closer cooperation forms within the group.
This will be the first step on a path that will lead us to the next generation of video offers, regardless of the platform on which it will be viewed. To summarize, the group is surely but steadily implementing its total video strategy. For our core TV business, this revolves mainly around focus on local program offers and investing into our direct-to-consumer streaming services. These new offers are still in an early stage of their development and will need investment. This is expected to have a minor impact on the group's EBITDA. In terms of Fremantle, our content business, the next few years are all about a mix of continuation with their drama initiative while adding another leg to it with the initiatives and activities within the group collaboration.
In digital, we will need to continue to invest in our video offers, work on new monetization opportunities across all forms of video, and develop more original IP. I will now hand over to Elmar, who will take you through the group's outlook statements.
Thanks, Bert. Given the current economic climate, RTL Group expects 2019 to be another challenging year for the TV industry. Accordingly, RTL Group plans on an overall stable to slightly down growth for the group's TV advertising revenue. Fremantle, the group's content division, will continue to benefit from the drama pipeline, which contains a number of new and second season commissions. Accordingly, RTL Group expects Fremantle's organic revenue to grow between 4%-7%, with EBITDA once again progressing. For the sake of clarity, this revenue guidance excludes any impact from foreign exchange pools. The group's digital revenues are expected to continue to show a revenue growth of around 10% in 2019. In summary, RTL Group expects total revenue for the fiscal year 2019 to grow moderately, i.e., between 2.5%-5%, excluding foreign exchange effects driven by the group's digital businesses and Fremantle.
RTL Group will continue to target a leverage ratio of between 0.5x and 1x net debt to full year EBITDA for the fiscal year 2019, as in prior years. The company will continue to focus on EBITDA cash conversion and target levels not below 85%-90%. Given the group's low leverage at the start of 2019 and the modest M&A intentions over and beyond the activities that we already announced in the first quarter, the group will maintain its current dividend policy and expect the payout for 2019 to be in line with prior years. In terms of profitability, as measured in EBITDA, RTL Group believes it will be able to deliver another good year in 2019, despite the investments in programming and the launch of our new direct-to-consumer streaming services. Our broadcasters will continue to invest in their TV schedules.
For example, in Germany, Mediengruppe RTL Deutschland will add 10 football matches of the German national team this year, eight qualifying games, and two friendlies. This will come with a certain cost and will weigh on EBITDA.
In addition, the group will accelerate its investment in its video-on-demand activities. These are expected to only slightly impact EBITDA negatively. In terms of upside, we expect the absolute amount of reinvented EBITDA to be higher again in 2019 on the back of the drama successes and lower development costs. The EBITDA from our digital activities, even with some restructuring at the level of StyleHaul, are also expected to improve. These improvements reflect lower overall operating losses at the MPNs and higher profits of the group's ad tech activities. Overall, RTL Group currently expects the group's EBITDA for 2019 to be moderately down, i.e., to be within the range of EUR 1.11 billion-EUR 1.14 billion. 2019 should be another year of good organic revenue growth, strong cash flow generation, used to finance our operations while ensuring a solid return to shareholders through an unchanged dividend policy.
This brings us to the end of our presentation. Thank you for your attention. We are now available to answer any questions you might have.
Hi, good morning. Sophie Julienne from Bank of America. Thank you for taking my questions. Three for me. What will make the TV Now and video on platform special? As in, why would consumer take your platform instead of the competition? What ad growth assumptions are you factoring in for 2019 in your key markets? Finally, will 2019 be the earnings trough, or might we see a decline in 2020?
First question on TV Now, we have developed our video-on-demand services on the back that we want to distinguish ourselves from the competitors by focusing on local content, local programs, which has been a strategy that we have followed already within our linear footprint, the family of channels that we've built in all the markets for many, many years. I think also in the non-linear streaming video-on-demand market, this will be our long-term unique selling point to distinguish ourselves from the competitors. We've worked on the basis of a hybrid model in which we have an advertising-funded part, which will be used as an upsell funnel to the more premium offer to the consumers, which is a paid version.
Given the huge reach that we've built with these platforms over the last couple of years, we are confident in boosting the number of paying subscribers substantially. As you say, for the first time, we've shared now a concrete ambition level of tripling the number of paying subscribers in the next few years with the investments I mentioned. Ad growth, I think to add a few words on the start of the year, we had an okay start of the year. Markets, let's say, the market in Germany is up in January and February, but March is down. The impact of March is really difficult to assess because we always have a shift. This year, Easter is moving to April, which by nature has a shift of advertising volume.
I think it would be more appropriate to look at the development of March and April combined for the German market specifically. Depending on the last development in March, we estimate that the quarter might be slightly down. For the Dutch market, we are off to a softer start of the year, with the market declining. Also us losing a bit of market share. For the other markets, we normally refer to, especially for the M6's market, we normally refer to the French colleagues who make their own estimates.
Thanks. Just to come back on the first question. Having an ad VOD-funded funnel to your SVOD service is pretty much the same as 7TV. They've got Discovery content. They've got ARD content. Netflix has got a better brand. Amazon's got a bigger installed base. Can you just outline why you think you're going to get to 3 million subs, and why every time we've seen broadcasters launch SVOD, they've always failed to reach breakeven? Secondly, can you just give us the revenues to get to your under EUR 10 million EBITDA by 2020? Thirdly, just to come back on the question that was asked about whether 2019 will be earnings trough. Can you just outline on a group level whether you think that will be the case? Thanks.
Yeah. Our plans in the streaming video on demand efforts have started 4 years ago in the Netherlands, where we did a relatively small acquisition of a company called Videoland. Which at that time was the Netflix of the Dutch landscape, selling videotapes to the customers and having a video rental chain. This company had developed itself into a digital offer, the number 1 pay-per-view offer in the Netherlands. When we acquired the company, there was a clear ambition to rebuild that business into a streaming video on demand platform. This activity is now growing at a very fast pace, and we have taken on board a lot of learnings on what type of content genres work and what type of size in the respective genres really work.
I think we can tap into the relevant experiences of the Dutch landscape, and we also see initial signs in the relaunch of TV NOW that the same formats and the same categories really work in ramping up this business significantly. We are confident with the two initiatives that are out there. Both initiatives are firmly ahead of plan. As you have seen in the presentation, showing strong growth. We will add, in the coming years, exclusive local content, besides the leverage that we have, but a huge library that we have in local content in the respective markets. We will add premium original content across the various categories towards the consumer. That you can really have a streaming video-on-demand service that brings pleasant new surprises in many content categories on a monthly basis to the audience there.
To be very concrete, for TV NOW, we plan eight originals for 2019, but this number should go up substantially in the years afterwards. What we see and are really encouraged, is that the customer adoption and viewing time of the paying subscribers is substantially increasing. We become more confident that we should build these initiatives across the footprint that we have. That doesn't mean that we are not open-minded for partnership options in the future. I think right now we have taken the decision to go and build on our own strengths and to build a sizable business in this important strategic domain for the years to come. The incremental revenue part-
Yeah
maybe Elmar can pick up on that.
If you look at 2018, when we look at our video-on-demand activities, we were basically departing from a base of EUR 216 million, and that's the total for all video-on-demand activities. It contains not only SVOD, but also AVOD, in-page, in-stream, and TVOD events. Now, the bulk of the growth that we mentioned for 2021, the additional EUR 150 million, is expected to be done in the area of SVOD. We would like to grow from EUR 216 million in 2018 to EUR 360 million plus by 2021. There was a question whether we believe that 2020 might be better or worse compared to 2019. Typically, we don't give any guidance over and beyond 2019. If you just look at what we would like to target with regard to 2021, we said that we would like to grow our VOD business by EUR 150 million revenue.
That is meant to be coming at a low margin by 2021, as we just mentioned. 2020 should be a year with little impact on EBITDA. If you look at our ambition to continue to grow international drama at the level of Fremantle, basically to grow from currently roughly EUR 300 million to a targeted EUR 500 million, that would come with an extra margin. If you look at our ad tech business that we target to grow from currently EUR 112 million in 2018 by an additional EUR 100 million, it would also come with a margin. What is yet rather unknown is what will be the state of the advertising markets in which we operate and what will be the launch plan of potentially additional video-on-demand activities, such as, but not limited to, France.
That is why you probably need to look at it from that perspective. There will be the unknowns around the launch plan and the TV advertising market. When we look at the organic growth initiatives that we have now triggered, we expect them to yield positively already in 2020 to our EBITDA performance.
I know your payout ratio that you've targeted is linked. That's for the final dividend. The interim dividend, as I understand it, is based more on your reference to your leverage ratio. If you were to see significant M&A required to boost either the French operations in VOD or any of the other areas you've talked about, would the interim EUR 1 dividend be reviewed in that context, even if you keep the final EUR 3?
Our current plan is to maintain the payout unchanged compared to prior year, i.e., we still continue to target for the EUR 4. I don't believe that we will run into very meaningful M&A in the quarters to come, because we already invested significantly in the first quarter. Don't forget that Groupe M6 bought Gulli, or is about to buy Gulli, subject to regulatory approval, and we already invested in Yospace. I think that for the rest of 2019 and for 2020, we'll strongly focus on organic growth initiatives. Hence, I would be surprised that M&A will play such a major role that we will see significant deviation from our target for cash flow. I'm confident that we will be able to keep up with the dividend payments that we have been able to achieve in 2018.
Okay, then just last question. How much did the reversal of the specific legal provisions boost RTL Deutschland in 2018?
We always have reversals and the necessity to build provisions here and there. They were not very significant, otherwise we would have singled them out when it comes to the computation of the adjusted net result. If I take the bulk, it is not sufficiently material as to make it an item when it comes to adjusting for the net result. They were always moving back and forth, the reversal of provisions, also the necessity to build new provisions. The net being very small.
Understood. Thank you.
Morning. Annick Maas from Exane. My first question is just on the VOD number, the 260, how much has that grown from last year? My two others are on Fremantle. You gave a 47% organic revenue growth for this year. How is that going to change if Ferrante and The New Pope is not coming through, or is only coming through the next year? My last one, just in terms of the Fremantle revenue mix, how much of your revenues are now generated from newer SVOD platforms versus traditional broadcasters, and how has that changed over the last five years, let's say?
Maybe to pick up on the first one. Last year, we started, as Elmar laid out, at the 2018 revenues in VOD of EUR 260 million, which was up 21% of the year before, which brings you a number of EUR 178. I didn't understand the last question on the VOD you mentioned.
No, that was it on VOD. On Fremantle, two others. On Fremantle, the first one, how would the organic revenue growth guidance change if the Ferrante and the Pope are not coming through in Q4? As in, is it big or not?
They would be big deliveries. At the same time, right now we don't have any insights that this phasing should be jeopardized of the delivery of these big series. We're confident that we will make it.
We gave 47% knowing that there's always some noise in the delivery schedules to have a bit of a leeway. Yeah, they are rather big.
Okay. The other one on Fremantle. How much revenues are you generating now from Fremantle from newer SVOD platforms as opposed to traditional broadcasters? Is that a number that has meaningfully changed over the last five years or not?
We've been selling, as we call it, new OTT client base, a significant number of new shows, international drama series. I'm not sure whether we have these precise numbers available right now.
Obviously, will fluctuate from year to year depending on deliveries. For example, "American Gods" we sold to the Amazon platform, but it's been about two years ago since season one was delivered. It's going to be a little up and down depending on when those programs fall. Clearly, there are more platforms that Fremantle is working with and dealing with, and the business is clearly growing. To give a point in time percentage would almost be rather meaningless. You need to look at the growth profile of Fremantle's drama business and the number of new titles in production, et cetera. We talk about up to EUR 500 million of drama revenue by in three years' time from EUR 300 today.
That gives you, obviously, some indication as to where the growth of the Fremantle business is coming from, but also where those shows will end up, because a lot of them will be focused obviously towards the new OTT platforms, obviously some broadcasters as well, but the focus will clearly be on new platforms.
Yes. Hi, Chris John from HSBC. You mentioned earlier your willingness to go into partnerships on the OTT side eventually. Currently, most of the presentation looks like you're focused on local only. What's your current view on, let's say, if someone were to want to start a new European-wide OTT initiative among the broadcasters? How would you view that?
I think if you look at the competitive landscape, there will be plenty of new offers coming in, besides the existing ones. They are likely to focus all on having a rather global international content offer in the market. We would, as a group, really think that our long-term unique selling point is in distinguishing ourselves in the local program offer itself. Maybe some of them being accompanied with some of the pan-European content offers, for which we've launched some initiatives within the group. If new initiatives are being taken that would fit into that bucket, we would always be open-minded for partnership options going forward.
Coming to Germany on that. I'm wondering what really has to happen for you guys to consider moving in that with 7TV now, given the scope of things you're investing. It seems that they would have to be really successful to force you in. Otherwise, you'd rather go at it alone. Seems the probability of something happening here has declined. Am I reading this right?
Well, I think first of all, I've tried to lay out that we are confident in with our offers to the consumer market, and we see increasingly adoption and traction with the customers locally in the market. There's a market for our offers. I think we, as a group, believe we are strongly positioned in this local content play, also combining our own production efforts, Fremantle as a whole, in order to build this in a successful way. I think we would not exclude any partnership in the future, but I think we also believe that we want to start any partnership discussions from a position of strength, and we're trying to build towards this one on a standalone basis in the upcoming periods.
Thanks.
Julien Aguebec, Barclays. My first question is, you said that you wanted to launch a pay TV offer in more countries than the Netherlands and Germany. Could you give us a list? The second question is, in your 3 million target, do you include the Salto subscribers? That's my second question. My third question is, you gave us a very helpful 2021 target, ad tech VOD, but you didn't give us a target for MPN in digital. If we could get some indication of either the growth rate or an actual number by 2021, is my third question. The last one is, can you remind us what is the pricing of the various option for Videoland in the Netherlands and TV Now in Germany so we can translate your 3 million into revenue? Thank you.
The streaming offers, we've laid out that we eventually want to launch our streaming video-on-demand offers across all of our broadcast footprints. We've discussed Salto, which is still subject to antitrust approval. We are preparing for the launch in Belgium, Croatia, and Hungary. This is within the scope that we are looking at. We have a good cooperation with Antena 3 as well, although these discussions are less advanced. The 3 million target makes reference to the Dutch and the German market and does not include any numbers for Salto or the other markets. On the MPN space, we, as Elmar indicated, we have taken an impairment on StyleHaul, which also is accompanied with a reset of the business.
We've replaced management at StyleHaul in summer last year. Since then, we have engaged on a very intense reassessment on how to reset and reshape the business, moving towards more attractive margin profiles, but also having a very close look at the cost base of this company. We've also started an initiative to combine all the MPN businesses together under one digital video group. I think it's more appropriate to finalize these plans and talks with the local management, before we are actually able to give concrete guidance. We might come back on that once we've finished and done our homework, but right now it's too early to do so.
Your last question was on pricing of the VOD offers. In Holland, it's EUR 8.99. Remember to take off the VAT. Memory is 9%. In Germany, we've got effectively a legacy business, which is at EUR 2.99 still. With obviously the new TV Now premium offer of EUR 4.99. Again, remember to adjust for VAT, which if memory serves me right, in Germany is 19%.
Hi, it's Patricia Pare from UBS. My first question is on the EUR 300 million investment in content. If you could just give out the phasing across the 3 years and also the breakdown between Germany and the Netherlands. Also related to that, when are you expecting break-even for Videoland and TV Now as a standalone business?
We don't want to disclose separate numbers because of competitive reasons in the market space. We will report back on a consolidated basis of our video-on-demand efforts. The phasing of the EUR 300 million, I'm not sure whether it's actually doable because a lot of that depends on the creative ideas on the table and the availability of talent and production crews to realize that. Given the scarcity in the market, this is a real challenge to get high production value for our video-on-demand services retained, and to commission that to the market. As I indicated before, the cumulative loss or negative EBITDA contribution of these investments will be cumulative up to EUR 10 million up to 2021.
Needless to say, we're slightly higher in the starting point of this year, as we also significantly expect to increment the subscriber base at the rates just indicated by Andrew, I think there's a significant ramp-up of incremental revenues. Don't forget that this will be accompanied with potential additional advertising revenues in the online video domain, plus potential ramp-up of platform revenues as we also continue to offer these streaming video-on-demand services through our distribution partners.
Okay. Then the second question is on Yospace, whether you can give the revenue and EBITDA contribution for 2019 and other consolidation effects at a group level.
It's still a relatively small business, but it's profitable, and we really think that it's an important add-on in the total holistic video offer in the programmatic TV role that we want to contribute. We could give you the precise numbers. I'll leave that to Andrew to discuss with you.
I will take it offline.
Hi, it's Catherine from Citi. One question on the impact on linear. You talked about TV Now getting good traction and the users increasing their viewing time there. Do you have any views on what the impact is on linear viewing in terms of potential cannibalization, and how we should think about that? Next question, on SVOD, could you give us any idea of churn levels you've seen in Videoland over the last two to three years, and how you think about the customer acquisition cost? Also on the Netherlands, advertising last year was pretty good. You talked about viewing time falling in that market. Was there a particular reason why TV advertising saw an inflection, and how we should think about the correlation between advertising and TV viewing time? Finally on the MPNs, there's talk again about brand safety issues, et cetera.
Do you see any risk for the MPN channels from advertisers sort of dialing down their spend on YouTube?
On the impact of linear viewing time of our non-linear offers, what we really want to bring across with our Total Video 2.0 strategy is that we monetize towards the advertisers the combined reach of linear and non-linear offers combined. The total video market consumption of the consumer is still a growing market in all of our countries. We are preparing for new digital offers and new advertising offers both on a pan-European basis through RTL AdConnect as through our local sales houses in order to offset for the decline in linear. We also see an increasing trend that through the decline of linear TV, the scarcity on building net reach offers at scale becomes really a problem for some of the advertisers, which allows us to increase prices. We will try to continue to.
This is also an answer to the question with regard to the Netherlands, where we've been able to significantly increase prices in 2018. Churn at Videoland has decreased significantly. Viewing time has significantly improved on the platform. Churn will be a major continued point of attention, but we focus more and more on the real customer value, long-term value that we will bring by the acquisition. The level of acquisition cost per customer has gone down significantly. Last question on the brand safe environment of the MPN space. With our investments in the MPN space, we primarily focus on the higher quality segment of the video views that we want to bring to the advertisers. It's always been one of our main focus areas to act and sell in a brand safe environment with our partners.
Thanks. You mentioned you had further restructuring charges to undertake in 2019 on the MPN. Is that included in the guidance you've given, or is that additional outside of the adjusted number?
The restructuring that we currently see, that is included in the guidance.
The second question, just to be quite dull about the TV advertising outlook, the predictable one, can you give us any numbers for the first four months, including Easter or any early indications as to that?
It is already pretty difficult to give you a good enough picture for the rest of March. We expect April to be better, especially in Germany, given the Easter effect. We should be able to catch up with some of the ground lost in March. As Bert mentioned, it is always wise to look at the two months in combination. If due to Easter, March is expected to be down, against last year, April should be up. That is the expectation currently. I cannot really give you a good enough guidance on the other markets for April. It is too early. We do not really own that visibility. The first quarter, as Bert mentioned, is expected to be difficult, but that we knew because the comps last year were very high. We expect in the first quarter to see revenues being slightly down.
Over and beyond then, it is difficult to say. I would like to refer to the full year guidance, where we expect overall revenue to be moderately up, i.e., 2.5%-5%, largely thanks to the operations at the level of Fremantle and Digital.
Thank you.
I would just like to open up the call to people on the audio lines. If there are any questions from there, we are now free to take them as well.
To ask a question, that is star one. We will go first to Patrick Schmidt with Warburg Research.
Yes, hi. Thanks for taking the question. Would like to come back just what you have talked about, the TV outlook. In terms of your margin, it is a higher margin business, obviously. What have you included into your margin guidance for the full year of contribution from the TV? As I guess that the digital part and Fremantle will not make up the difference. Maybe get into the phasing. What kind of investments can we expect for 2019, and how will that weigh on your profitability? Thanks.
Very briefly on the margin, we told you that we expect the margin to be negatively impacted by investments in the program grid. We mentioned the sports rights at the level of Mediengruppe. Obviously, that means that we expect the margin to slightly decrease, because that is basically the main explanation for the slight margin erosion that we expect in 2019 compared to 2018. It is mainly linked to additional program investments. It is also linked, but this is far of a minor effect, to the investments in video on demand. Those two reasons are basically explaining why we now moderately guide down in 2019 compared to 2018.
Once again, that's star one.
Are there any further questions? Please go ahead, operator.
Once again, that's star one for questions.
No? Any other questions from the people in the room? No, I would like to thank you all for turning up today, for listening. Obviously, I am open for follow-up questions, modeling questions, that you might have later today or tomorrow or into next week. Obviously, we will be in touch around early May with the Q1. Thank you very much. Enjoy the rest of the day. For those of you in London, we are here still for a bit of time, and next door there is some light refreshment, so please come and join us. Thank you very much.