Good day and welcome to the Q1 2018 results conference call of RTL Group. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Andrew Buckhurst. Please go ahead.
Good morning, everyone, thank you for joining this conference call for our results for the first quarter of 2018. Our speaker today is Elmar Heggen, the Group's Deputy CEO and CFO, and he will now begin the presentation.
Thank you, Andrew, good morning from me as well. Starting on slide number three, the highlights of the first quarter 2018. Thanks to growing advertising markets, our main TV businesses in Germany, France, and the Netherlands, had a good start into the year. FremantleMedia had also a good quarter on an underlying revenue basis, but was hit by negative ForEx movements. The Group's digital activities continued to grow despite ongoing concerns over brand safety and negative ForEx that impacted top-line development. All in all, the Group's top-line grew just under 1% with EBITDA coming in at EUR 259 million. Both the EBITDA and EBITA were impacted by one-off costs at the level of Groupe M6 around the football club, as already explained by M6, and some negative phasing in terms of programming costs.
Overall, the Group's cash conversion remained very strong at 112% of EBITA, while the net profit for RTL Group shareholders came in at EUR 111 million. Let's now turn to the financial review starting on slide number five. Group revenue rose 4.8% or EUR 11 million to EUR 1,416 million. Underlying revenue was up 2.6% after adjusting for consolidation and exchange rate effect. The ForEx effect in the first quarter results was a negative EUR 29 million, hence, the almost two percentage points difference between the reported and the underlying number. Group operating expenses rose by just EUR 12 million or 1% over the period. Our EBITDA decreased by EUR 5 million to EUR 259 million, resulting in an EBITDA margin of 18.3% for the quarter, down 0.5 percentage points on the same period last year. The Group's EBITA came in at EUR 210 million, resulting in a margin of 14.8%.
The Group's net debt position was EUR 365 million at the end of the period, down from EUR 545 million at the end of 2017. The net debt has increased since following the dividend payment amounting to EUR 461 million that was made on the 26th of April. Let's now move to the next slide. With a slightly lower EBITDA and no positive one-offs this year, the net profit for the period was EUR 111 million compared to EUR 137 million last year. The tax charge is slightly higher in 2018 due to a lower commission income and to some small one-offs relating to prior year adjustments and deferred taxes. Overall, this translates into earnings per share of EUR 0.72 per share. Moving on to the cash flow on slide number seven. Our cash conversion ratio remains at a very high level, reaching 112% during the quarter, broadly in line with last year.
Tax paid decreased compared to last year as we have received reimbursements from the French state for the so-called dividend tax. Let me now give you a brief overview of our main business units. Before starting, I'd like to point out that a number of internal reorganizations have taken place, resulting in comparative figures for Mediengruppe RTL Deutschland, FremantleMedia, RTL Nederland, and the other division being represented. These reorganizations cover the Smartclip AdTech business and TV [Foreign language]. Starting with Germany on slide number nine. The audience share performance for Mediengruppe RTL Deutschland was good during the first quarter, in particular in access prime time and prime time. In these time slots, the 14 to 59 target group, the lead over its largest commercial rival amounted to 6.3 and 5 percentage points respectively, an increase of 1.2 and 4.3 percentage points over the same period last year.
Across the whole day, the gap remains strong and amounts to 4.5 percentage points of audience share. In an advertising market that we believe rose by between 1.5% and 2.5%, Mediengruppe slightly outperformed, resulting in a total revenue growth of 2.9% to EUR 534 million. EBITDA rose slightly to EUR 69 million, resulting in an EBITDA margin of 31.6%. Looking now at Groupe M6 from slide number 10. In the French TV advertising market that was estimated to have grown by around 2%, Groupe M6 outperformed significantly in terms of advertising revenue development. Lower revenue from the film rights business and the football club, Girondins de Bordeaux, meant that revenue overall was stable at EUR 360 million. EBITDA came in at EUR 76 million, largely due to higher costs at football club, some of which is linked to one-off payments to non-playing staff. Moving on to slide number 11.
The TV advertising market in the Netherlands was estimated to be up by just over 7% in the first quarter of 2018, a very welcome return to growth. Revenue was up 4.8% year-on-year, with EBITDA rising to EUR 6 million. Let's now move to FremantleMedia on slide number 12. On a ForEx adjusted basis, FremantleMedia would have had revenue growth of 7%, at the high end of the full year guidance given in March. However, on a reported basis, revenue was stable year-on-year at EUR 271 million. Please also note that the Australian drama, "Picnic at Hanging Rock," slipped from the first to the second quarter, and that the number of delivered episodes of "American Idol" were just 6 in the first quarter, out of a total of 19. The revenue bridge on the chart shows the details of the various impacts in Q1.
EBITDA was slightly lower at EUR 13 million. The main business highlight in Q1 was the return of "American Idol." The show has so far attracted an average audience of 10.1 million viewers and a total audience share of 9.6%, over 50% higher than ABC's primetime average. Last week, ABC announced, obviously to our satisfaction, that they have recommissioned "Idol" for next year. In terms of the full year outlook for 2018, we reconfirm our expectations of growth in revenue and an improved absolute full-year EBITDA for FremantleMedia, excluding foreign exchange impacts. Moving to the next slide. Digital. First quarter revenue growth was 7% year-on-year, resulting in revenue of EUR 190 million. Negative ForEx impacted revenue by EUR 10 million, organic revenue grew by 12.4%.
Our AdTech businesses, notably SpotX, had a difficult start into 2018, reflecting many of the same issues at the end of last year. Major digital advertisers are demanding transparency, brand safety, and time spend optimization strategies. In addition to the top line pressures, these demands require higher infrastructure requirements to support quality of service and more resources, generally due to additional complexities and customized work. While the first quarter was difficult for SpotX, we remain convinced that the right strategy is in place, i.e., a focus on the more premium OTT model. In terms of our MCN businesses, BroadbandTV continues to show both growth in video views, with 100 billion delivered across the first quarter, and revenue, which was up 8%.
Reported a 25% increase in revenue year-on-year, while StyleHaul was disappointing, reporting a 17% decrease, mostly driven by a lower number of direct sales. The number of video views delivered in the first quarter of the year rose to 124 billion, more than doubling since two years ago. This concludes the business review, and I will now turn to the outlook on slide number 15. With European advertising markets currently showing mixed performances, we do not expect Q2 to show any significant growth, given the impact of the World Cup. FremantleMedia is expected to have a similar performance in Q2 as in Q1, with revenue growth set to accelerate in the second half of the year on the back of the new drama deliveries.
The group's digital revenue should return to higher growth rates towards the end of the year as well, although the second quarter performance is likely to be weak given some particularly tough comparatives, as this includes the sale of "American Gods" to Amazon in 2017. Despite the short-term headwinds, we reconfirm the full year 2018 outlook given in March of this year. This is clearly dependent on the growth in the second half of 2018, as the results are expected to be more back-end loaded than the prior years. Group full year revenue is expected to grow moderately, largely driven by the group's content and digital activities, subject to ForEx, while EBITDA on a normalized basis will be broadly stable. Thank you. We are now available to answer any questions that you might have.
Thank you. Ladies and gentlemen, to ask a question, please press star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal. Our first question today comes from Lisa Yang of Goldman Sachs. Please-
Hi, good morning. My first question is on your outlook. I think you said you expect Q2 not to show any significant growth. Were you referring about of Germany or any other markets? Is it possible to have any color on maybe April, May, for your main three markets, Germany, France, and Netherlands? Second question is about the advertising share that you expect for the year in the same three markets. Any color would be appreciated. The third question is around your digital revenue. Appreciate you gave some color around SpotX and StyleHaul. What was the performance of your AVOD business, given your online video views grew significantly? Just wondering how that revenue line developed. The last one is, I think the statement you mentioned, you're going to increase investment in video services.
I'm just wondering how much you're planning to invest this year and going forward. Thank you.
Okay, thanks a lot, Lisa. Let me try to get back to you with all the answers. First, on the second quarter. The fact that the World Cup will be played in June, July, and the fact that we do not have the rights for that event means that we will see a more difficult and challenging second quarter for all of our broadcasting entities. It's not just linked to Germany. Even in the Netherlands, where the broadcaster is fully into advertising money, despite the fact that the Dutch team is not qualified, yet we still believe that this is going to be a strong impact on the commercial broadcasters. Hence, we expect June to be down for all our broadcasting assets. With regards to the performance in April, May for the three main markets-
Germany, France, Netherlands, yeah?
Yeah.
April, obviously, you've got the negative impact of Easter. For Germany, April, for us anyway, is down. May is trading positively as we would expect. Obviously, as Arnaud mentioned, given the World Cup starting at the back end of Q2, we would expect a difficult June. Pretty much the same story in all of our markets in many ways, a very volatile Q2 to be expected. France, similar. Obviously, we can't speak for the market. Again, we're just looking at M6. Mixed performances at the moment, some ups and downs. Netherlands, less positive in Q2 than Q1, but currently trading slightly upwards. Your last question, Lisa, on AVOD. If I look at our in-stream advertising Q1 2018 versus Q1 2017, then we have double-digit growth across the group.
What about your advertising share for the year? Sorry.
Germany, I think, we were still hoping to gain a small market share across the full year, given the strength of our audience performances in 2017 and obviously going into 2018. Notably, around the second channel or the second-tier channel, Vox. In France, M6, you've seen in Q1 are already gaining market share, and fingers crossed that continues through the rest of the year. Holland is more difficult to give you guidance because of the sports events and the fact that the public broadcaster has full access to the advertising market and will therefore take quite a substantial share in June, July. That's a little bit more difficult. The positive news is that the market's up. Whether we gain share or not, I think it's difficult to give you full year guidance at the moment, honestly, Lisa, but at least it's a positive environment.
It will be difficult to gain share in an even year given the sports events on the public broadcaster. I think that it will be a challenge to gain share in 2018. It's easier in an uneven year.
Great. Thank you. The investment in the AVOD services? The AD-VOD services.
The hybrid AVOD model?
Yeah.
That's really going to start kicking in towards the end of this year, with probably a higher impact through 2019 and then 2020 as the services effectively come online as we start investing more in the programming, et cetera. At the moment, there's a lot of, we think, internal development work going on, and planning and discussions. The services, as I said, will ramp up towards the end of this year with more of a financial impact in 2019.
Okay, thank you.
Our next question today comes from Charles Bedouelle of Exane. Please go ahead.
Good morning. Actually, I had quite a few questions that Lisa already asked, but maybe just a quick follow-up. ProSieben talked about strong commitments, which made them confident for the rest of the year. I just wanted to know if you could share any similar confidence or not, on the commitments for clients on the full year basis. That's my first question. My second question is, if we try to think about your digital business, which is not quite large, and we try to think about the businesses which are not directly tied to TV. Either on the AdTech side or on the video side, can you give us an idea of how the revenue is developing, the margin is developing, and where you have the most, or I would say, less confidence for the future? Also follow up also on the digital revenues.
We've seen ProSieben with disappointing digital revenues. We've seen Criteo guiding more cautiously in Q2. Would you link what's happening in your business with the GDPR and maybe some changes in the way advertisers behave, or do you think it's just RTL specific issues? Thank you.
In terms of the commitments, if we look at the position today compared to the same position last year, then our commitments in Germany are up. We have a higher level of commitments at the moment, compared to the same period 2017, which it seems to be in line with what ProSieben told the market as well. In terms of the digital question on AdTech, MCNs, et cetera. We've seen the BroadbandTV, as we mentioned, revenue was up in the first quarter. Divimove was up 25%. Although it's a much smaller business. StyleHaul was down, largely due to the issues that Elmar mentioned on the call. Our AdTech businesses had a soft start. Well, in particular, SpotX. Smartclip was actually up year-over-year.
We have a very mixed picture, and this probably in many ways comes back to your last question, Charles. What's really going on? I think if we look at it from our TV sales out, what they can see is clearly that, so we say advertisers who have traditionally been or have been spending on digital businesses have been holding back at the beginning of this year. Obviously impacted by some of the concerns around brand safety, at the end of last year. Obviously, the Facebook story at the beginning of this year didn't help either. There's been a slight degree of reticence to invest in digital. On top of that, also, I think our sales teams are seeing a degree of reluctance from advertisers to spend ahead of trying to properly assess what the impacts of GDPR are going to be.
There's also a little bit of a wait and see attitude from advertisers on the digital platforms. Lastly, and this is specifically for us in Germany, is that we also stopped working with Google DoubleClick at the beginning of 2018, in terms of demand side platform. Basically that was a decision taken locally. There's been a number of impacts going on within the business, which is playing a little bit with the slightly slower revenue growth.
Okay. Just a follow-up, if I may, on that. Since GDPR is going to start very soon, we could imagine that this softness actually carries on in Q3, right? Unless the clients decide five or six weeks after the start of GDPR to completely change their view, is there a chance that we continue to see mixed trends, not just in Q2, but actually in Q3 as well?
We would agree with you for Q2. I think it's too early to tell for Q3, but certainly we're more optimistic that the growth will come back towards the end of the year. Whether that's in Q3 or when in Q3, we can't tell you at the moment. I think in the very short term, i.e. Q2, hence some of the discussion and the guidance in Elmar's speech, was really about don't expect much growth in quarter two from our digital activities. We see similar trends, i.e. involved with a tough marketplace in the short term, but growth, we believe, will come back towards the back end of the year. When that starts, Charles, we can't tell you.
That's very clear. Thank you very much.
Later.
We'll now take a question from Adrien de Saint Hilaire of Bank of America Merrill Lynch.
Good morning, everyone. Thanks for taking the questions. First of all, Netherlands, the market was up 7% in Q1, and you're talking about the market being, or yourself being up, in quarter two. Do you think the market has reached now a state of equilibrium after a few years of decline? Secondly, where do we stand on the process of exiting or crystallizing value around BroadbandTV and some of the other digital assets? Thirdly, I just wanted to double-check if you were reconfirming your outlook for Fremantle for 2018.
Let me quickly start with the outlook of Fremantle. Yes, we reconfirm the outlook for Fremantle, believe that they will be in a position to hit both the revenue as well as their EBITDA target. Revenue is expected to be up in the tune of what we mentioned in March. We obviously need to see how ForEx will continue to develop. As we mentioned earlier, ForEx was an issue for Fremantle in the first quarter. Without ForEx, the underlying growth would have been 7%. On a reported basis, we've been showing flat revenue for the first quarter. We remain confident that they should be well positioned to hit their full-year targets. With regard to the Dutch market, admittedly, we were positively surprised to see the Dutch market growing by 7% in the first quarter.
I think it's an open secret that we haven't expected that in the second half of 2017. It's a bit too early to really tell you whether this is a structural phenomenon that we're now seeing, that the market is eventually flattening out at a lower level, or whether this is going to be only a temporary effect. We mentioned earlier that we expect the second half to be much more difficult given the fact that the World Cup is played on the public broadcaster, and they will fully monetize this event in the Netherlands.
BBTV.
Nothing's really changed, Adrien, since March, basically. We continue to discuss and explore opportunities with the local management team. It's work in progress.
Thank you.
Thank you.
It's been the longest wait.
We will now move to a question from Julian Roach of Barclays. Please go on.
Yes. Good morning, Elmar, and good morning, Andrew. My first question is on German TV advertising in Q1. Elmar, you said you thought the market was up one and a half to two and a half, and you gain share. ProSieben reported, or told us that TV advertising was up two and a half. How much was your TV advertising up in Q1 in Germany towards this market share? That's my first question. Second question is coming back on online growth. How much was online advertising up or down in Q1 in Germany, excluding AdTech? Pure online advertising in Germany in Q1. The last one is, Andrew, you said your commitment, comparing year to date 2018 to 2017, were up in Germany. Can you give us a bit more color on what up means? Is it up two, three, four? Thank you.
On the online advertising, I'll take your second question, Julian. If I look at the advertising revenue for Mediengruppe RTL Deutschland, which includes basically in-page, in-stream, et cetera. We were up a high, in the 15%-20% range for the first quarter. In terms of advertising revenue, obviously ProSieben talks about 2.5%. I don't know whether that was 2.5% for advertising revenue including their Austrian and Swiss windows. And obviously they would have an impact in terms of the consolidation of ATV. I'm not sure if we're comparing like with like. If we look at our advertising revenues as based on our 1.5%-2.5% estimation of the market, we were above the higher end of that range for the 2.5%-3% advertising revenue growth for the first quarter.
The last question in terms of commitments. Sadly, I can't give you any more information because I don't have it, other than to say that it is above, but I can't tell you whether it is 2%, 3%, 4%, or whatever percent. Otherwise, it has been confirmed that it is above last year.
Okay. Very clear. Thank you.
Thanks, Julian.
Okay.
We will now take a question from Conor O'Shea of Kepler Cheuvreux. Please go ahead.
Yes, thanks. Morning, everybody. A couple of questions from my side as well. Just on other revenues, which are down 2.6% in the first quarter. Can you give us a little bit more color on that? Is that some of your digital businesses that are not consolidated within your country lines and/or your Eastern European businesses, is the weakness there? Related to that, in terms of phasing of costs, I think you referenced the launch of three video-on-demand platforms in the first quarter in Hungary, Croatia, and Belgium. Just wondering about cost phasing relating to similar projects for the rest of the year or overall OpEx, the shape of the increase that you might expect for quarter-on-quarter. The third question, just in terms of particularly Fremantle.
If exchange rates remain more or less where they are, do you have a rough estimate of the ForEx headwind full-year, please? Thank you.
Okay, Conor, I will start with the other revenue, which as you mentioned, is down 2.6% in the first quarter. The so-called other segment is a mix of various activities. The main components are, for example, our broadcasting businesses in Hungary, and there we've been down in the first quarter. We already mentioned that we had had a rather slow start in our AdTech business in the first quarter. Basically Hungary and the slow start of the AdTech business is blamed for us being down 2.6% in the first quarter compared to prior year. We've had some activities that were slightly up, and Andrew mentioned BroadbandTV earlier. All in all, Hungary and the AdTech business are the main reasons to blame, so to say, for us being down 2.6% in other revenues in the first quarter.
Okay.
In terms of the cost phasing question, there wasn't that much additional cost in terms of the launch of the three VOD platforms, because effectively, we've used the M6 or the 6play backend and front-end technology to go into Belgium, Croatia, and Hungary.
That's basically just exploiting, so to say, intergroup knowledge expertise synergies. The cost phasing that we referred to around the presentation, or Andrew referred to in the presentation, is effectively some higher programming spend in Hungary. The overall year is going to be the same. It's just that we've front-end loaded a little bit of programming spend at the beginning of the year, to hopefully drive audience shares. Certainly we're seeing a positive effect coming through in Q2 now in terms of advertising revenues. Between, should we say, that's been one specific effect in Q1. In terms of the VOD activities, we come back to an earlier question. That largely is going to be in Germany, where we effectively improve the positioning or change the positioning, and develop the positioning of RTL Now in Germany, and turn it into more of a hybrid business model.
That's really going to start kicking in probably September, October, more of a Q4 impact.
Okay.
Fremantle, in terms of the full year FX impact, that's very difficult because obviously most of it's going to be coming from our U.S. business, and that's going to be pretty much the first six months of the year, because obviously we've got "Idol," which is coming to an end or has ended. We will have "America's Got Talent" as well through the summer. Beyond that, there is, so to say, less in terms of very big shows in our U.S. business. It's difficult to give you a picture on that, especially as a lot of the, as we said, the licensing business is also intensely in U.S. dollars as well. I would hate to give you a number, Conor, honestly.
Okay. Fair enough.
If you assume a third of Fremantle's business is U.S., then that will give you, if you wanted to work it out, a reasonable base to start with.
Okay, fair enough. Thanks, guys.
As a reminder, to ask a question, please press star one on your telephone keypad. We will now take a question from Laurie Davison of Deutsche Bank. Please go ahead.
Hi, guys. It's Laurie from Deutsche Bank. First question, Bertelsmann are looking to sell Arvato. Do you think that if they do go through with that, they might be more relaxed about leverage at RTL Group and a higher dividend payout from you? Second question, given the digital woes, we don't seem to be seeing that TV is benefiting significantly in terms of growth. Numbers for first quarter are okay, but they've been benefited by Easter, and obviously you flagged the weaker second quarter. Where is this digital spend going, and why is it not moving back into TV? Lastly, just the FremantleMedia margin developments for this year and for next. Thanks.
Okay, Laurie. Thanks for your questions. Honestly, you need to talk to Bertelsmann on their intentions. I don't believe that a portfolio decision at the level of Bertelsmann means a change in our stated dividend policy. We'll continue to pay as ordinary dividend 50%-75% of the adjusted net profit, and we'll continue to try to maintain a gearing of 0.5 to one times net debt to EBITDA. This is not going to change, I believe, following a potential disposal of Bertelsmann when it comes to their CRM business. On the FremantleMedia margin, we always said that it will take us a bit longer to ramp it up to the target level. I believe that the absolute margin of FremantleMedia in 2018 will be slightly up compared to 2017. In terms of margin, we have to see how the final revenue will come in.
It also has to do with ForEx, as we mentioned earlier. All in all, we expect the revenue to grow. It will take additional time until we will see the return on sales back to the target level as we also indicated in prior calls.
Your second question on digital, why is the digital spend not coming back to TV? It's a good question, and I wish we knew. Certainly what we're seeing when I speak to the sales teams is, as I mentioned, reluctance to spend on digital at the moment. It's not yet coming back into the marketplace. Saying that, not in floods anyway. There's a lot more positive conversations going on, especially if you talk about the much maligned FMCG sectors, et cetera. We've seen a positive development in that sector in Q1. There is, I would say, some spend coming back into television, it's not coming back in floods, we would agree. Maybe advertisers are just sitting on their hands a little bit, as I said, waiting to see what the impact of GDPR will be, how the businesses will develop, et cetera.
Then they will make a choice. Overall, I'd say there is a more positive attitude in the marketplaces and the discussions with advertisers and agencies. We'd agree at the moment, we don't see those conversations necessarily turning into a huge amount of money coming back into television. The mood is definitely more positive across the board.
Okay, that's great. Thanks.
We will now take a question from Richard Eary of UBS. Please go ahead.
Morning, everyone. Just actually two questions, more on clarity. The first question just on the guidance numbers. Obviously, we're expecting a recovery in the H2. Am I right in assuming the sort of major risk to guidance being hit is whether we get a turnaround in the digital businesses rather than the TV assets? That was the first question. The second thing is just on going back to the commitment numbers. I can't remember whether you've given numbers before, but if we look at the commitments going back in, let's say, 2017, what were the commitments at the start of the year relative to the total revenues that were actually booked in the year, just so we can get an understanding of obviously how that moves into 2018 as well? Thanks.
Okay, let me take the first one, Richard Eary, on guidance. I think here it is fair to say that when we look at the revenue guidance, we said that we believe that revenue is up for the full year moderately, i.e., between 2.5% and 5.5%. There, you are right, digital assets will play a certain role, a quite important role. Especially with the unknown effects coming from ForEx, there is a certain kind of challenge or risk that will materialize throughout the course of the second half. If we get additional headwinds from ForEx, then if we fail to grow our digital businesses in line with expectations, there is a risk on our revenue guidance. Yes, this is probably more significant than the revenue risk on our free-to-air businesses.
Even FremantleMedia.
Yeah.
Commitments, Richard Eary, we have never disclosed absolute amounts or where we are on what is going on. I think it is very difficult looking at commitments at the start of the year because discussions start November, December, and really finalize through to January, February. January is always a very strange month in terms of advertising revenues anyway, when you look at the absolute numbers. I think it is very difficult to say where are we at the beginning of 2018 compared to the beginning of 2017, because each year is slightly different. As I said in response to an earlier question, we have seen much more positive discussions coming through from FMCGs. For example, at the beginning of this year in Germany, we have had increased spend from the likes of L'Oréal, Ferrero, and P&G, while Unilever remains down, but that is mainly due to the fact that they have sold some brands.
The like-for-like comparison is slightly difficult. Last year it was a different picture. We had P&G was up as one of the big FMCGs, but all the others were pretty weak. Every year is slightly different. What we can say and can confirm is based on the position as of today, commitments are up in 2018 versus the same period in 2017.
Thanks. Can I just ask one sort of follow-up, just go back to the FX issues on the digital assets?
Yeah.
What's the percentage of the digital assets that are, let's say, non-Euro or U.S. dollar based?
Well, you've effectively got BroadbandTV, you've got ForEx, you've got StyleHaul. Let's have a quick look. Yes, in fact, we only got Divimove, United Screens, which is still very small. Do I have the numbers in front of me? Let me have a quick look. Richard, let me get back to you.
Yeah, that's fine. Thank you.
As Elmar mentioned on the call, there was a EUR 10 million impact in terms of FX on our digital activities in the first quarter. That obviously is basically the non-EUR businesses.
Okay.
We would have had EUR 200 million instead of the EUR 190 as reported.
Okay, that's helpful. Thank you.
We will now take a question from Ian Whittaker of Liberum. Please go ahead.
Thanks very much. Two questions, please. First of all, just going back to online VOD, you mentioned double-digit growth across the board in those revenues, but it does sound as though that is below the increase you got in views. If that's the case, have you taken the deliberate policy to keep your pricing down in digital VOD to drive traffic, to get advertisers to actually take the product and then have the view that you can ramp up prices later? Is there something else that's happening there? If you look at some other markets, for example, you now start to see VOD revenue growth start to outstrip audience growth. The second question, just in terms of the Netherlands and going back in terms of the market there.
I think before the commentary has been that, or the view has been that in terms of weakness of the Netherlands, some of it was driven by the impact of Netflix maybe on audience numbers, but a lot was driven by also as well the rival group being very aggressive in terms of their pricing. What do you think has changed with either of those dynamics within the market?
Ian, sorry, can you repeat your second question?
Yeah. Sorry, Andrew. Just in terms of the Netherlands, I think the view on the weakness in the market there has been, it was part driven maybe by the impact of the SVOD players, but also as well that there was a competitor who has been very aggressive in terms of their pricing-
Yeah
within that market. Just wondered sort of what exactly has changed in terms of dynamics that's maybe helping the market. Is it that that competitor has got less aggressive on their pricing? Is it that the impact of the SVOD services is maybe starting to weaken?
No to both of those. I think what has changed at the beginning of this year is the sales strategy of the public broadcaster, who have removed sort of volume discounts and agency rebates. That has helped, shall we say, the other players in the marketplace because we would have fully expected Q1, if you'd asked us even at the end of 2017 where we saw Q1 in Holland. For the commercial broadcasters we'd have said down because of the Winter Olympics, and the public broadcasters, as we said and as everyone knows, have full access to the advertising market. Now with them broadcasting the Winter Olympics, you would have expected them to suck up all the money. The fact that they changed their sales systems meant effectively, advertisers went elsewhere.
Back into the commercial broadcasters. That has helped. The fact that the public channels have changed their sales system seems to have helped the commercial broadcasters.
Okay. Thank you.
The smaller sales points and the SVOD growth, they still remain, shall we say, headwinds in that market. Your first question-
Thanks very much.
On the online VOD pricing. Quite frankly, I don't have an answer for you, but I will get back to you.
Okay. That's great. Thank you.
We will now take a question from Chris Donan of HSBC. Please go ahead.
Yes, morning. Thanks for taking my questions. First one on the distribution business. Maybe you could talk about the performance here and maybe what you expect for the full year, mainly in Germany and France. A second on your VOD businesses. I've seen you've printed decent relative growth on TV Now. For example, maybe you could help us with a small indication. I guess you don't want to give a specific number, but where do we stand subscriber-wise? Maybe a bit of a range so that we have somewhat of an idea.
Okay, Chris, I'll start with the distribution business. You will have seen, because the M6 has made a number of communications on that they've been successful in signing agreements with regard to distribution. In France, we also see a continuous rollout of our HD offer in Germany, that makes us confident to be able to continue to see platform revenue growing also in 2018. If you look back over the last three to five years, we've seen growth of between 10% and 12% per year. I think this is a good proxy of what we should expect also for 2018. It is looking promising all in all. Your second question? Sorry.
On TVNow, maybe Videoland, so that we have a bit of an idea where we stand subscriber-wise on an absolute basis, maybe a range.
A range in terms of what, Chris? Sorry.
Absolute subscribers, that we know whether we're talking about 100, 200, 500,000.
What we can say for Videoland is that they had a very positive Q1. What was interesting there was that it was actually the subscriber growth was not necessarily driven as we would have expected by local dramas, as you might expect on a VOD platform, but was actually driven by an entertainment format. It goes to show that if you do find the right type of programming for an SVOD platform which appeals to a younger demographic, it can still drive even SVOD subscriptions, and we've had a very positive start. I think, certainly, 40,000-50,000 positive new subscribers coming in on Videoland. We won't give you the base, but it's certainly growing. You remember last year we had, I think, almost 80% growth in subscribers for Videoland. It's moving in the right direction. It's continuing with the trends.
The churn is still a single-digit figure, which is much lower than it was at the same period of last year. That platform, it certainly seems to be, at the moment, gaining a little bit of traction, which is encouraging for the development of our TVNow, shall we say, SVOD hybrid model towards the end of this year. TVNow is also positively growing. Again, I won't give you numbers, what we can say is all the metrics are in the green, and it is performing in line, if not slightly above expectations, following effectively a little bit of a relaunch, obviously the major relaunch to come towards the end of this year.
Okay, that's great. One more follow-up on the distribution side. What are you guys making of the proposed merger of the cable landscape in Germany with Unitymedia and Kabel Deutschland?
I think, to be honest, we would leave any comments for our German colleagues who are obviously more impacted and are closer to the market. I think it would be perhaps unwise for us to comment at the level of the group on something which is clearly very national in terms of impact.
Okay. Thank you.
We now have a follow-up question from Charles Bedouelle of Exane. Please go ahead.
Hi, it's a very quick one, actually. I was just wondering, when you were referring to what your colleagues from the sales house are seeing, in reference, I think, to Laurie's question on advertising. Are they able to see what money is going actually to Facebook, Google, or to Amazon? Because it seems to me that this is where the money is going, not away from digital into TV, but actually to those guys which have all posted spectacularly good numbers in Q1, not necessarily in Germany, because we don't have the disclosure, but globally or even outside the U.S. Are you guys able to see if there is any shift of money here or not? Just to put the comment on where the money is going into context. Thanks.
In all honesty, no.
We don't have this visibility.
Okay, thanks.
We assume, and based on, as you said, the reported numbers, that's where it's going, but we can't see it through our sales houses other than the fact we can see digital, shall we say, as a pot, or the areas that we can see in terms of digital not growing as fast as is expected. We can't see where that money's going. You're right, it seems to be going to the large Americans.
Okay. Thank you very much.
Once again, to ask a question, please press star one. We will now take a question from Laurie Davison of Deutsche Bank. Please go ahead.
Sorry, it's just another follow-up. It's just on your comments on distribution revenue staying in the same growth range. Shouldn't we be seeing a large uptick in France this year from the carriage fees that have been negotiated there?
Yes, it's a question also of mix. Yes, you're right, that the contribution that we should see from France is rather increasing than decreasing. Yet we'd like to be sufficiently prudent on the guidance for the group. We cannot really predict the uptake in HD subs in Germany. That's why we believe that if you take 10% to 12%, this is the growth rate that we've been able to generate in prior years. This is probably a good proxy. We hope it's going to be better, it's not in our hands at the far end.
Okay. Thanks.
If there are no further questions, I would like to turn the call back to your host today for any additional or closing remarks.
Thank you very much for joining us today. We both look forward to speaking to you again on the 29th of August around the half year results.
Thank you, my side. Have a good day.