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 Haberts, the Group's CEO and Elmer Heggen, our CFO and Deputy CEO. Looking now at the agenda on Slide 2, 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 and A session. I will now hand over to Bert to begin the presentation.
Thank you, Andrew, and 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 and after having delivered €1,000,000,000 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 4. As I just mentioned, the group is in good financial health. Probability is strong. We have low financial leverage and a clear set of organic growth initiatives.
Revenue grew by 2.1 percent to €6,500,000,000 with EBITDA in line with guidance at the level of €1,380,000,000 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 €94,000,000 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 €3 per share. This results in a total revenue for the year of €4 per share, which is equivalent to 92% of the group's earnings per share. To summarize, the group has successfully come through a challenging year with higher revenue, strong EBITDA and cash flow, while continuing to invest in order to deliver on our total video strategy. 2 years ago in March 2017, we announced our digital targets for the next 3 to 5 years.
We stated that digital revenue would be at least 15% of the group's total revenue and would present $1,000,000,000 in revenue. Now in 2018, we achieved these targets, 3 years ahead of plan. As you can see, we have broken out the €985,000,000 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. And 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%. But 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 4 to 5 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 set a clear set of our performance measures and our expectations across the KPIs. And I will now take you through them. Starting on slide number 8. 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 1,000,000 paying subscribers. The subscriber developments across both platforms remain strong with a 74% increase in Looking at content, the new KPIs reflect the growing importance of Free Mental'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 broadband TV, Stylehall, Divi Move and United Screens have delivered strong revenue growth, but are still facing challenges converting this into operating profits. This is especially true for Stylol and is one of the reasons why we have booked an impairment of goodwill in the 2018 accounts. The RTL Group Adtech Business, SpotX and the now integrated SmartClip reported slight revenue increases on the back of a very solid performance in the last 6 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. And on the next slide, we will set out some key strategic goals and ambitions for the next 3 years.
For our broadcast activities, these include continuing to drive our video on demand revenues, which we expect to grow by more than €150,000,000 in the year 2021, largely thanks to a tripling of our pay video on demand subscriber base. For Fremantle, the focus remains firmly on delivering on the drama plan. This plan aims to reach between 25% 30% of Fremantle's total revenue from this genre. If achieved, this would mean that more than $500,000,000 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 AdTech, the group expects this revenue stream to grow by more than $100,000,000 over the coming 3 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 2 main strategic priorities within the group, media 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 VideoLAN in the Netherlands back in 2015. And 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. And these priorities will be enhanced for the coming years. The development of a joint tech platform for our video on 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, but 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 $350,000,000 over the next 3 years.
Dollars 300,000,000 will be spent in content and the remainder in technology. These content investments will cover both the streaming video on demand activities in Video Land 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. And these original 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 Massapeel.
The cumulative negative EBITDA impact of these investments in video on demand is estimated to be below €10,000,000 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 period. Clearly, the EBITDA impact is more weighted through the early years and we assume that a negative EBITDA impact this year around about will be in the region of €20,000,000 As a group, we will explore all possibilities to jointly develop strong brands and formats between our broadcasters as well with Fremantle. And this is the great lead into slide number 13. The second group priority is the continuing development and role of Fremantle within the new total video worlds.
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. Endrama, the current HBO Fremantle relationship is quite remarkable with Fremantle now one of the largest independent suppliers to their platform with 3 deals already being announced. And there's more to come.
Exclusive first look deals such as the most recent with the Oscar winning production company Fabula, Fabula Pictures, 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. And lastly, our client base continues to expand with the most recent player being Facebook, where the show Confetti has been sold to 5 territories and we are quite confident that other markets will soon follow.
Discussions with new OTT platforms such as Apple are also being held And 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 6,500,000,000 as already mentioned by Bert, thanks to higher revenue from Fremantle, RTL Netherlands 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 62,000,000 and the rather limited positive scope changes, which were also partially compensated by scope exits, notably MAP, Mon Amour Foteau and the Football Club, Jerome Lande Bordeaux at the level of GroupMCC.
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 FreeMetal. Reported EBITDA was in line with our guidance at EUR 1,380,000,000 down 5.7% when compared to the reported 2017, which, as you all remember, benefit from the sale of the buildings in Paris that amounted to €94,000,000 Operational EBITDA was slightly up by 0.7% with the increase mainly driven by higher contributions from Group MCs, Fremantle, the Netherlands and Belgium. The group's net debt at the end of 2018 was €470,000,000 resulting in a net debt to EBITDA ratio of 0.3 4 times. Let's now have a look at the items below EBITDA down to net profit. Our net financial expense totaled €13,000,000 and is made up of a net interest charge of €20,000,000 and a positive €7,000,000 from financial results other than interest.
We have also recognized a noncash goodwill impairment against Tahoe, one of the group's MPNs. This amounts to €105,000,000 and reflects the decision to reposition this asset by focusing on higher margin branded entertainment and reducing our exposure to loss making talent integrating and developing Stylehall's operations with those of TVMoves and United Screen. In connection with this, the repositioning of Stylehold operations is likely to result in a scale back of the operations with some onetime restructuring costs to be occurred during the course of 2019. The group's tax charge came in substantially lower at €278,000,000 down 27.8% against last year. This is the result of mainly 2 effects.
The first of these relates to the commission income, which came in at €28,000,000 compared to only €2,000,000 in 2017, whilst the second effect is linked to a deferred tax asset amounting to €67,000,000 which was recognized in the last quarter of 2018. With the lower EBITDA, the impairment and the higher minority interest only being partially offset by the lower tax expense, the net profit decreased by 9.6 percent or €71,000,000 to €668,000,000 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' 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 Street.
The inflows seen from the other financial assets relate primarily to the proceeds received for the sale of the Football Club and Mondeleven Futures 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 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 RTI Group shareholders remains the starting point of the exercise. The adjustments this year concern, 1st, good bill impairment second, the deferred tax asset and third, the commission income. This result in an adjusted net profit of EUR 678,000,000 Given these the results, the Board has decided to maintain the final dividend at €3 per share.
This equates to a payment of €461,000,000 or 68 percent of the adjusted net profit, which is in line with the guidance given and dividend policy, I. E, a payout ratio of between 50% to 75%. The total amount of dividends for 2018, therefore, amounts to €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 Bernd for the start of the business period.
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% and 2.5%. The last quarter of 2018 was particularly tough given the market falling based on our estimates between 6 0.5% 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 $728,000,000 resulting in an increased margin of 33%. In terms of audiences, our family of channels reported a combined audience share of 27.3 and our target group 14 to 25. Admittedly, we have lost audience share, partly because 2018 was 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 Almar, who will take you through group MCS.
Thank you, Wirt. We start on Slide number 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 MCs 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 Group MCs was slightly down by 1.3 percent to EUR 1,480,000,000 largely due to lower revenue from rides and business selling and the deconsolidation of the Football Club and earlier. Reported EBITDA came in at a record level of €400,000,000 up 2.8%
year on year.
The group's priorities for 2019 and beyond include the finalization of the deal with Lagardere, which financially and strategically will be the most important deal this year. In the medium term, MCs hopes to double the operating performance from these acquired channels to €40,000,000 through revenue and cost synergies. Secondly, to obtain regulatory clearance and then to launch the VOD platform, SALTO and 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 twenty nineteen or into even early next year. Now back to Wirt for the rest of the businesses and the strategy.
Yes. 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 2 years of quite significant decline. We estimate that the market grew just over 3% with TV ad revenue with the RTL ad revenue being up 1%.
The combined Dutch family of channels delivered an audience share of 27.2 compared to 2,000 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 nonlinear offerings. Platform revenue following new deals in 2018 and growth from the VideoLAN SVOD platform helped drive overall revenue within the year finishing up 6.5% at the level of €508,000,000 EBITDA was up 2% at the level of €89,000,000 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 video land subscriber base and the implementation of the new sales house strategy following the acquisition of Brandedly. 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 primetime slots.
I now turn over to the content business, Fremantle on Slide number 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 the Fremantle's customers.
International drama as you are aware has been at the center of Fremantle's strategic priorities for the last 5 years. Through smart acquisitions, talent deals and investment in local teams and structures, we have built a new business, a strong new business. And Fremantle's reputation in the genre has gone from strength to strength. As an example, this year all of the channels in the of the larger channels in the U. S.
In the UK, sorry, namely BBC 1, BBC 2, 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 Rihanna 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 $1,600,000,000 in 2018, thanks to a continuing rollout of Free Mental'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 €41,000,000 are taken out. The higher revenue was reflected in an improved EBITDA, which rose 5% to 147%, resulting in a margin of 9.2%.
In 2018, there were 12,738 hours of free mental 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, Beacham House for ITV, Bagdad 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 2nd season of the Ferrante novel, The New Pope in the last quarter of 2019.
Now turning to slide number 29 on digital revenues and digital activities. RTL Group's MPMs delivered another very strong revenue performance, up 28% year on year. This was led by broadband TV and Diffimove, who reported growth of 31% 50% respectively. In terms of video views, RTL Group's MPM 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 2 major ad tech investments, SpotX and SmartClip into one business with a unified management structure. In addition, 2 minority shareholders in the U. S, clipped and video amped are included in these numbers at EBITDA only. Reported revenue grew just 2% in 2018 because but 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 on year impact of $10,000,000 and therefore an organic growth of 12%, which is substantially higher than the reported 1.8%.
And this growth follows a major repositioning of the business in the premium connected TV segment and the over the top video environment. The United States remains SpotX primary market with over 60% of the revenue now coming from major media owners and platforms like Discovery, like Roku, like 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. YoSpace Technology is deemed to be one of the best technical solutions for so called server side dynamic add 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 AdTechStack. 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 2 main competitors for Spodex, namely Google and Comcast. So 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. And RTL's group's next challenge is how we handle this transformation as video moves away from linear into nonlinear environment.
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 view and 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.
These will be the 1st 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. So to summarize, the group is surely but steadily implementing its total video strategy. For our core TV business, this results mainly around focused 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 investments, but 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 out 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.
And 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 Almar, 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 book. The group's digital revenues are expected to continue to show a revenue growth of around 10% in 2019. In summary, Partier Group expects its total revenue for the fiscal year 2019 to grow moderately, I. E, between 2.5% and 5 percent, excluding foreign exchange effects, driven by the group's digital businesses and Fremantle. Bartel 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 group's the company will continue to focus on EBITDA cash conversion and target levels not below 85% to 90%. Given the group's low leverage at the start of 2019 and the M and A intentions over and beyond the activities that we already announced in the Q1. 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, Harteier 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, Medellin Gopertel Dorchland will add 10 football matches of the German national team this year, 8 qualifying games and 2 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, and these are expected to only slightly impact EBITDA negatively. In terms of upside, we expect the absolute amount of Fremantle's 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 Starhold, are also expected to improve.
These improvements reflect lower overall operating losses at the MPNs and higher profits of the group's EdTech activities. Overall, RTA Group currently expects the group's EBITDA for 2019 to be moderately down, I. E, to be within the range of €1,111,000,000 to €1,140,000,000 2019 should therefore 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, and we are now available to answer any questions you might have.
Hi, good morning. Sophie Julien from Bank of America. Thank you for taking my questions. 3 for me. While we'll make the TV Now and video land 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? And finally, will 2019 be the earnings trap? Or might we see EBITA decline in 2020?
Maybe 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. And I think also in the nonlinear streaming video on demand markets, this will be our long term unique selling points 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. And I think 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 have shared now 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, are the market in Germany is up in January February, but March is down. Now 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. So I think it would be more appropriate to look at the development of March April combined for the German market specifically.
But 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. And for the other markets, we normally refer to especially for the MCs market, we normally refer to the French colleagues who make their own assets.
Thanks. Just to come back on the first question, having an ad funded to or an ad VOD funded funnel to your SVOD service is pretty much the same as 7 TV. They've got Discovery content. They've got ARD content. Netflix has got a better brand.
Amazon has got a bigger installed base. So can you just outline why you think you're going to get 3,000,000 subs? And why every time we've seen broadcast launch as they've always failed to reach breakeven? Secondly, can you just give us the revenues to get to your under $10,000,000 EBITA by 2020? And then thirdly, just to come back on the question that was asked about whether 2019 will be earnings trough.
Can you just outline on the group level, whether you think that will be the case? Thanks.
Our plans in the streaming feed on demand efforts have started 4 years ago in the Netherlands, where we did a relatively small acquisition of a company called Video Land, 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 one pay per view offer in the Netherlands. And when we acquired the company, there was a clear ambition to rebuild that business into a streaming video on the month 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. So 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.
So we are confident with the 2 initiatives that are out there. Both initiatives are firmly ahead of plan. And as you have seen in the presentation showing strong growth. And we will add in the coming years exclusive local content besides the leverage that we have by the 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. So 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 8 originals for 2019, but this number should go up substantially in the years afterwards. And what we see and are really encouraged is that the customer adoption and viewing time of the paying subscribers is substantially increasing. So 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. But I think right now we have taken the decision to go and build on our own strength and to build a sizable business in this important strategic domain for the years to come.
The incremental revenue part, maybe Elmer can take
up on that.
Yes. We did
2018 when we look at our video on demand activities, we were basically departed from a base of €216,000,000 and that's the total for all video on demand activities. So 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 €150,000,000 is expected to be done in the area of SVOD. So we would like to grow from EUR 2.16 million in 2018 to EUR 360,000,000 plus by 2021. There was a question whether we believe that 2020 might be better or worse compared to 2019.
So typically, we don't give any guidance over and beyond 2019. But if you just look at what we would like to target with regard to 2021, we said that we would like to grow our bot business by €160,000,000 revenue. Now 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 €300,000,000 to a target of €500,000,000 that would come with an extra margin.
And also, if you look at our ad tech business that we target to grow from currently €112,000,000 in 2018 for an additional €100,000,000 it would also come with a margin. Now what is yet rather alone is what will be the state of the advertising 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. So that is why you probably need to look at it from that perspective. So there will be the unknowns around the launch plan and the TV advertising market. But 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.
And I know your payout ratio that you've targeted is linked at for the final dividend. The interim dividend, as I understand it, is based more on your preference to your leverage ratio. If you were to see significant M and A required to boost either the French operations in Borde or any of the other areas you've talked about, would the interim €1 dividend be reviewed in that context, even if you keep final €3?
Our current plan is to maintain the payout unchanged compared to prior year, I. E, we still continue to target for the 4 years. I don't believe that we will run into very meaningful M and A in the years in the quarters to come because we already invested significantly in the Q1. Don't forget that MC Sport Gully or is it bound to buy Gully subject to regulatory approval. And we already invested into your space.
So 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 and A would play such a major role that we will see significant deviation from our targeted 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. And then just last question. How much did the reversal of the specific legal provisions boost RTL Deutschland in 2018?
We always have no 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. So 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, because they will always move back and forth to release the reversal of provisions, but also the necessity to build new provisions, the net being very
Good morning. Annik Maas from Exane. My first question is just on the Vod number, the $216,000,000 how much has that grown from last year? And then my 2 others on Fremantle. You gave a 4% to 7% organic revenue growth for this year.
How is that going to change if Ferrante and the young Pope is the new Pope is not coming through or is only coming through the next year? And my last one, just in terms of the free merch revenue mix, how much of your revenues are now generated from newer export platforms versus traditional broadcasters? And how has that changed over the last 5 years, let's say?
Maybe to pick up on the first one, last year, so we started as Elmer laid out at the 2018 revenues involved of €260,000,000 which was up 21% of the year before, which brings you a number of 178. So I didn't understand the last question on the VOD
you mentioned. No, no, no, that was it on VOD. Then on Fremantle, 2 others. So on Fremantle, the first one, how would the organic revenue growth guidance change if the Carenpe 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. So we're confident that we will make it.
And we gave 4% to 7%, knowing that there's always some noise in the delivery schedule to have a bit of a leeway. But yes, they are rather big.
Okay. And then the other one, on Fremantle. So what's the how much revenues are you generating now from Fremantle from newer asset platforms as opposed to traditional broadcasters? And is that a number that has meaningfully changed over the last 5 years or not?
We've been selling, as we call it, new OTT client base, significant number of new shows, international drama series. So I'm not sure whether we have these precise numbers available right now.
And it obviously will fluctuate from year to year depending on deliveries. For example, American Gods, we selected the Amazon platform, but it's been about 2 years ago since season 1 was delivered. So it's going to be a little up and down depending on when those programs fall. But clearly, there are more platforms that Fremantle is working with and dealing with and the business is clearly growing. But to give a point in time percentage would almost be rather meaningless.
You need to look at the growth profile of Freemancers drama business and the number of new titles in production, etcetera, etcetera. We talk about up to $500,000,000 of drama revenue by in 3 years' time from $300,000,000 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. There's a lot of them will be focused obviously towards new OTC platforms, obviously some broadcasters as well, but the focus will clearly be on new platforms.
Yes, hi. Chris Johan 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. I mean, 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, I mean, 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. And we would as a group really think that our long term unique selling point is in distinguish 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.
And coming to Germany on that, I mean, I'm kind of wondering what really has to happen for you guys to consider moving in that with 7 TV now given the scope of things you're investing? I mean, it seems that they would have to be really, really successful to sort of force you in. Otherwise, you'd rather go at it alone. It seems the probability of something happening here has sort of declined. Am I reading this right or?
Well, I think first of all, I've tried to lay it 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. So 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 stand alone basis in the upcoming periods. Thanks.
Julien Roch with Barclays. My first question is, you said that you wanted to launch pet TV in more countries than the Netherlands and Germany. So could you give us a list? The second question is in your EUR 3,000,000 target, do you include the Salto subscribers? That's my second question.
My third question is you gave us a very helpful 2021 target, adtech VOD, but you didn't give us a target for MPN in digital. So if we could get some indication of either the growth rate or an actual number by 2021 is my third question. And then the last one is, can you remind us what is the pricing of the various option for VideoLAN in the Netherlands and TV9 in Germany, so we can translate your €3,000,000 into revenue? Thank you.
The streaming offers, we've laid out that we actually eventually want to launch our streaming video demand offers across all of our footprint, broadcast footprints. We've discussed SALTO, which is still subject to antitrust approval. We are preparing for the launch in Belgium, Croatia and Hungary. And this is within the scope that we are looking at. We have a good cooperation with Antenna Trust as well, although these discussions are less advanced.
The $3,000,000 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 install haul, which also is accompanied with a reset of the business. We've replaced management at Star margin profiles, but also have 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 1 digital video group. And 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.
So we might come back on that once we finished and done our homework, but right now it's too early to do so.
Your last question was on pricing of the VOD office. In Holland, it's 899, remember to take off the VAT, memory is 9%. In Germany, we have got effectively a legacy business, which is a 2.99% still, with obviously the new TV Now premium offer of €499,000,000 Again, remember to adjust for VAT, which if memory serves me right in Germany is 19%.
It's Patricia Pare from UBS. My first question is on the EUR EUR 300,000,000 investment in content. If you could just give out the phasing across the 3 years and also the breakdown between Germany and the Netherlands? And also related to that, when are you expecting breakeven for VideoLAN and TV Now as a standalone business?
We don't want to disclose separate numbers because of competitive reasons in the market space. So we will report back on a consolidated basis of our video on demand efforts. The phasing of the $300,000,000 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 markets, this is a reasonable challenge to get high production value for our video on demand services retained and to commission that to the markets. But as I indicated before, the cumulative loss of or negative EBITDA contribution of these investments will be cumulative up to €10,000,000 up to 2021.
Needless to say, with slightly higher in the starting point of this year, but as we also significantly expect to increment the subscriber base at the rates just indicated by Andrew. I think there is a significant ramp up of incremental revenues. And 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 community demand services through our distribution partners.
And then the second question is on Yoastpace, 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 world that we want to contribute. We could give you the precise numbers. I'll leave that to Andrew to discuss to 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 VideoLAN since over the last sort of 2 to 3 years and how you think about the customer acquisition costs? And then 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?
And then finally on the MPN, let's talk again about brand safety issues, etcetera, etcetera. Do you see any risk for the NPN channels from advertisers sort of dialing down their spend on YouTube?
I think on the impact of linear viewing time of our nonlinear offers, I think 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 nonlinear offers combined. So I think the total video market consumption of the consumer is still a growing market in all of our countries. And we are preparing for new digital offers and new advertising offers, both on a pan European basis through RTL Ad Connect 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. And we will try to continue to do.
This is also an answer to the question with regard to the Netherlands, where we've been able to significantly increase prices in the last in 2018. Churn at video lands has decreased significantly. Viewing time has significantly improved on the platform. Churn will be a major continued point of attention, but we as focus more and more on the real customer value, long term value that we will bring by the acquisition. The number of the level of acquisition cost per customer has gone down significantly.
And last question on the brand safe environment of the MPN space. I think we with our investments in the MPN space, we primarily focus on the higher quality segment of the video for use that we want to bring to the advertisers. So it's been always been one of our main focus area to act and sell in a brand safe environment with our partners.
Thanks. You mentioned you had further in the guidance you've given? Or is that additional outside of the adjusted number?
No. The restructuring that we currently see, that is included in the guidance.
And the second question, just to be quite dull about the TV advertising outlook, the predictable one. Can you give us any numbers for the 1st 4 months, excluding Easter or any early indications still of that?
It's 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. So we should be able to catch up with for some of the ground loss in March. As Bert mentioned, it's always worth to look at the 2 months in combination. Hence, if due to Easter, March is expected to be down.
Then against last year, April should be up. That's the expectation currently. But it's I can't really give you a good enough guidance on the other markets for April. It's too early. We don't really own that visibility.
So the Q1, as Bert mentioned, is expected to be difficult, but that we knew because the comps last year were very high. So we expect in the Q1 to see revenues being slightly down. But over and beyond 10% it's difficult to say. I'd like to refer to the full year guidance where we expect overall revenue to be moderately up, I. E.
2.5% to 5%, but 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. So if there are any questions from there, then we are now free to take them as well.
And we'll go first to Patrick Schmidt with Bora Bora Research. Yes.
Hi. Thanks for taking the question. I would like to come back just what you've talked about the TV outlook. So in terms of your margin, I mean, it's a higher margin business, obviously. So 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 make up the difference?
And so maybe again to the phasing, so 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 Medigrope. So 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. So it's mainly linked to additional program investments.
It is also linked, but this is part 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.
No. Any other questions from the people in the room? None of them. I would like to thank you all for turning up today for listening. Obviously, we I am open for follow-up questions, modeling questions that you might have later today or tomorrow or into next week.
And obviously, we will be in touch around early May with the Q1. So thank you very much. Enjoy the rest of the day. And for those of you in London, we are here still for a bit of time and next door there is some light refreshments, so please come and join us. Thank you very much.