Skip to main content

Losing ‘X Factor’ and a Weaker ‘American Idol’ Hurts RTL Group’s Profits

RTL Group, Europe's leading television company, had a mixed 2014 amid digital growth, but weakness in more traditional media businesses.

RTL Group, Europe’s leading television company, had a mixed 2014 amid digital growth, but weakness in more traditional media businesses.

Losing X Factor in the U.S, which Fox canceled last year after three underperforming seasons, and weaker returns from American Idol hit RTL’s production division FremantleMedia, which saw its operating profit slip to $125 million (€113 million) from €136 million in 2013.

Among RTL’s European markets, only Germany showed strong growth, with revenue from French, Dutch and Belgium operations flat and earnings from RTL Hungary down sharply. The Hungarian government’s new tax system, which RTL has said singles the company out for punitive tax rates, meant RTL Hungary booked an operating loss of $1.1 million (€1 million) last year, after a €15 million profit in 2013. RTL Group recorded a $85 million (€77 million) goodwill impairment on RTL Hungary last year as a result of the new law.

Aretha Franklin on Mentoring ‘American Idol’ Singers & Whether She Still Wants to Be a Judge

At the same time, RTL’s move into the digital arena is showing promise. The company acquired several digital natives last year in a bid to establish a footprint in the online video world. Its €104 million acquisition of a 65 percent stake in online advertising platform SpotXChange appeared to pay off, with the Denver-based company processing more than 3 billion video ad interactions per day. RTL also bought Fashion MCN StyleHaul for $107 million, Berlin-based Divimore, Europe’s leading MCN, and, in 2013, Canada’s YouTube channel aggregator BroadbandTV.

The company was able to point to double-digit digital growth, with digital revenue, defined as online sales excluding e-commerce, home-shopping and platform revenue, up 26.6 percent to $326 million (€295 million) in 2014. According to the company’s figures, RTL Group’s online video services, including catch-up TV, web sites and MCNs, attracted a total of 36.4 billion online video views last year, a 117 percent increase. Of those, FremantleMedia’s YouTube channels drew 9 billion views, up 35 percent.

Overall, revenue at RTL Group was down 0.3 percent in 2014 to $6.4 billion (€5.81 billion). Net profit attributable to RTL shareholders was down sharply, falling 24.9 percent to $721 million (€653 million).

Steven Tyler Lawyer Loses Battle Over ‘American Idol’ Negotiations

“Despite challenging environments in France and Hungary, RTL Group once again delivered a very strong set of financial results,” said RTL Group co-CEOs Anke Schaferkordt and Guillaume de Posch. “We made significant progress in implementing our strategy across broadcast, content and digital. We successfully launched three new TV channels and further established a second revenue stream from platform operators which delivers high growth rates and profit margins. We invested more than €240 million ($265 million) in rapidly growing digital businesses. This is the highest investment level for acquisitions since 2005.”

Schaferkordt and De Posch said under their digital strategy, RTL-owned MCNs would, over the next 24 months, reach a scale where they will become one of the company’s main drivers of revenue growth.

For the company’s old-media business, they were cautiously optimistic, saying they expected slight growth across Europe and that revenue and profit figures for this year would be broadly stable compared with 2014.

This article was first published by The Hollywood Reporter.