Banks react to Bertelsmann consolidation comments

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Thomas Rabe, CEO/chairman of Bertelsmann, has shared his view that there’s a strong case and a need for consolidation amongst streaming platforms.

His comments prompted a note to clients from a couple of investment banks. Exane/BNPP asked: “Does this give RTL the impetus to be the European broadcasting champion?”

The bank adds: “As a reminder, two weeks ago Mediaset announced its Media for Europe project would be off the table. The announcement had come following the news of the Spanish court rejecting one of the last milestones in the creation of the MfE project and the consequent letter sent to Mediaset by Vivendi with proposed governance changes regarding the creation of a pan-European media holding company. Mediaset’s release suggested:

  • “Given that the Spanish court’s decision makes it impossible to complete the operation within the planned timeframe foreseen by Dutch law (2 October 2020), the Board of Directors has accepted that the planned project, (MfE) as deliberated on 7 June 2019, is no longer possible due to technical deadlines.”

Management is now looking into the creation of an alternative plan to achieve the same objectives as the MfE was planning to.

Rabe mentioned that broadcasters “should be allowed to create national TV champions”, adding that RTL was “open-minded to exploring such possibilities” in the markets where it operates. Luxembourg-based RTL operates TV channels and radio stations across Europe, including in Germany, France, the Netherlands and Spain.

Exane/BNPP’s Gareth Hollis adds: “We would prefer to play the broadcasters more likely to be acquired e.g ProSieben than those looking to compete with the likes of Netflix, Disney and Amazon by creating continual streaming champions (eg Mediaset, RTL). The long-term pair trade of ProSieben Media vs MS still works in my view.”

Deutsche Bank, in its view, suggested that Rabe was clear in that he – and RTL – were open to such consolidation. “We note OTT based streaming services such as Netflix, Amazon Prime and Disney+ have recorded a strong surge in their paying subscribers in recent months, benefitting from lockdown measures with people watching online content; however, European broadcasters with their nascent VoD offerings have struggled to evenly compete with well-placed US streaming platforms to garner any material subscriber/revenue market share.”

The bank continued: “RTL has taken the most aggressive stance amongst its European counterparts. RTL has reiterated its 2025 targets (in the 1H/20 results) to propel its SVOD platforms (TVNOW in Germany and Videoland in Netherlands), with annual content spend expecting to more than quadruple from €85 million in 2019 to €350 million by 2025. Despite the aggressive investments, RTL expects to achieve an EBITA break-even by 2025 with a revenue target of €500 million backed by 5-7million paying SVOD users. In 1H20, RTL reported total SVOD revenue €80 million (+23 percent) with 1.77 million paying subscribers (+45 percent Y-o-Y), implying 2Q/20 net additions of only 240,000 users. We maintain our Hold rating on RTL Group due to a balanced risk-reward. We think sizable SVoD investments on content, marketing, technology, other Opex might constrain RTL’s Group EBITA profile in the near-term, especially in a challenging TV advertising market.”


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