By Sahil Patel
A great number of media giants have made investments in online video in the past few years — but maybe no giant is more invested in online video than one of the biggest broadcasters in Europe.
Headquartered in Luxembourg, RTL Group has a market cap of €12.2 billion (as of December 31, 2014). The company has a controlling interest in 52 television channels and 29 radio stations across Europe, including Germany, France, Belgium, the Netherlands, Luxembourg, and Spain. It’s also one of the top producers of content in the world thanks to its ownership of
FremantleMedia, which creates more than 10,000 hours of TV programming every year including hit global franchises such as “Idols,” “Got Talent,” “The X-Factor,” and “Family Feud,” and distributes more than 20,000 hours of content spanning more than 200 territories.
In short, RTL Group already reaches a lot of people. But as expansive as RTL’s business is, the company sees a huge opportunity in short-form content, which as far back as 2012 it did not have a lot of expertise in, according to Guillaume de Posch, co-CEO of RTL Group.
“We consider ourselves the clear market leader in linear free-TV in Europe,” says de Posch, who oversees the company’s business interests outside of German-speaking countries. (His fellow co-CEO, Anke Schäferkordt, handles operations within Germany, Austria, and Switzerland.)
“Although still relatively small in Europe, online video is growing nicely year on year, in both long-form and short-form. With the catch-up TV services of our broadcasters, focusing mostly on long-form television, we operate our 100%-owned ‘Hulus’ in the countries in which we operate — to make a simple comparison with the US market,” he continues. “Scanning the market potential back in 2012, we realized we were lagging a bit in short-form video. Our strategic aim was therefore to have leading position in all segments of the rapidly growing online video market: long-form, short-form, producing web-original content, and data and technology-driven monetization capabilities.”
Starting in 2013, RTL set out on that course. In June of that year, the company invested $36 million in BroadbandTV, which claims to be the third-largest global multi-channel network on YouTube. Back then, the Vancouver-based BBTV — as it’s often referred to — was a relatively little-known operator (when compared to the Makers and Fullscreens). The investment sum and the fact that it came from RTL swiftly put the company on the industry’s radar.
“We had a number of major investors interested in the business, but RTL Group and Bertelsmann stood out as one of the strongest strategic partners for BBTV as it was clear that we shared the same vision,” says Shahrzad Rafati, founder and CEO of BBTV. “We really saw the opportunity as combining leading digital and traditional businesses to drive the industry forward, and shape the future.”
BBTV represents a network of YouTube creators and provides them with tools to grow audiences and generate revenue on the site. It also helps manage the YouTube presence of major brands and media companies — organizations with valuable assets that need to be protected and monetized. Organizations that include RTL Group.
Here, BBTV is already proving to be valuable. For instance, the company manages all fan-uploaded videos for FremantleMedia, including clips of shows like “American Idol” and “America’s Got Talent.” And considering that the producer says it has more than 210 channels and generated 9 billion video views in 2014 alone, that’s a decent source of revenue from an emerging medium.
Around the time of the BBTV investment, as the MCN landscape began to shift toward more verticalized networks focusing on specific interests, RTL Group also had its attention on StyleHaul, the largest fashion and beauty network on YouTube. Here, RTL opted for a more “VC” approach, according to de Posch, with multiple smaller investments — including one from Bertelsmann Digital Media Investments, the investment arm of media giant Bertelsmann, which owns a majority stake in RTL Group.
Last year, RTL Group closed the loop on its relationship with StyleHaul by acquiring a 93.6% majority stake in the company for $107 million. As part of the deal, RTL also promised an additional $20 million to fund StyleHaul’s growth plans.
“It became more and more clear how much our partnership meant, and how much we were involved in each other’s businesses beyond them just being investors,” says Stephanie Horbaczewski, founder and CEO of StyleHaul, of the acquisition.
Like other YouTube networks, StyleHaul sells ads against its channel partners’ videos. That said, by its very nature, a huge part of StyleHaul’s ad business revolves around brand and product integrations. (“Haul videos,” in which influencers show off their latest purchases and favorite products, are huge on YouTube.) This has naturally led to strong relationships between StyleHaul, which represents the stars, and agencies and brands that want to tap into the influence of those stars.
“What we really like about StyleHaul is that they have great relationships with the ad agencies and brand advertisers that we talk to — as you know, fashion and lifestyle consumers are key demos for us on TV,” confirms de Posch.
Between BBTV and StyleHaul, RTL Group commands a massive YouTube presence. What makes the deals additionally interesting is that it merges not only a traditional media giant with leading digital networks, but also Europe with North America. “If you look at where short-form is created, the US has the lead — just as it does when it comes to linear content in fiction,” says de Posch. “America has always had a kind of five-year head-start when it comes to audiovisual and internet industries.”
In doing so, RTL Group also becomes a global leader in a field that is still developing. Roughly half of the revenues from short-form content generated on new video platforms such as YouTube happens in the US. The rest is global. “That’s why we decided to invest in the US. In a nutshell, it just made sense to go West and into North America,” says de Posch.
Of course, RTL Group already had an establishment in North America, and FremantleMedia has not been shy about embracing online video. In addition to the channels it has on YouTube, this year the producer took a majority stake in European MCN Divimove. With the US market cornered, it makes sense for RTL to turn its attention to YouTubers in other territories.
FremantleMedia also owns the digital studio Tiny Riot, which it launched last year to focus on original digital productions. Notably, Tiny Riot has a partnership with Vice Media to develop and produce programming for the Munchies food channel, which has more than 480,000 subscribers on YouTube.
FremantleMedia and Tiny Riot also have development and production deals with BBTV and StyleHaul — an example of the “synergistic” thinking that both Rafati and Horbaczewski credit as one of the reasons why RTL Group is such an attractive investor. “RTL Group offers a ton of resources,” says Horbaczewski. “They do a lot to bring us together with existing businesses.”
“The Crew,” one of the shows produced as a result of StyleHaul’s deal with FremantleMedia.
There’s one area for synergy that is not even available yet, but is possible as a result of another investment RTL Group has made in the past year. Last July, the company spent $144 million to acquire a 65% majority stake in SpotXchange, a provider of programmatic video advertising technology for publishers and networks.
As much as BBTV and StyleHaul were investments in short-form, YouTube, and the future of content, SpotXchange is a bet
on the larger online video world. As more publishers and networks distribute video content, including TV shows, movies, and clips online, platforms such as SpotXchange are key to making that content more monetizable.
One such client for SpotXchange is RTL Group itself. The platform now is responsible for managing inventory on the Dutch on-demand platform RTL XL. It also forms the basis of SpotXchange Benelux, a joint venture of SpotXchange and RTL Nederland that serves as an ad exchange for Benelux advertisers.
“Our platform will help RTL keep control of inventory, revenue streams, and advertiser relationships, reducing dependency on third-party providers,” says SpotXchange co-founder and CEO Mike Shehan. “The acquisition brings technology and margins in-house.”
This could prove to be beneficial for BBTV and StyleHaul, too — if and/or when the YouTube networks choose to expand beyond YouTube. “When it comes to off-YouTube extensions, of course SpotXchange could be the trading platform for selling advertisements on those platforms,” says de Posch.
What’s clear with all of these investments is that RTL Group is not passive about online video — the media giant didn’t make an investment because it was the thing to do at the time. With BBTV, StyleHaul, SpotXchange, and Divimove now under its umbrella, and with the moves FremantleMedia has already made in the space, RTL Group is planning to build a business that covers all facets of video.
“If you look at their acquisitions, it’s quite clear that they are building a new digital ecosystem,” says Rafati. “You can see them very cleverly bringing together content, distribution, and monetization, which are clearly three key pillars for success online.”
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There is a lot of optimism for what the future holds for RTL and its family of companies — and some of that is due to the type of relationship RTL encourages with its subsidiaries. It’s very pro-entrepreneur.
“Because they are such a global powerhouse, they are aware that companies that grow and thrive have to be given the space to operate, because you can die inside a large operation,” says Horbaczewski. “They have a very partnership-oriented philosophy about this — it’s part of the corporate culture, and not just something they say. Their total respect for how that works is something I connected with.”
That said, as any good investor or parent company would, RTL also knows when and how to step in and help. “They aren’t just making investments, they are getting involved and thinking deeply about how these assets will work together,” says Rafati. “They are strategically working on driving scale and synergies between the digital assets in the group.”
“The team at RTL is intelligent and they see where the market is going. They understand that in a number of years, to maintain their dominance, they will need to compete as effectively in digital as they do today in free-to-air TV broadcasting.”
And just to be clear, the giant is not done. When I ask de Posch what the company has planned for 2015 and on, he says, “We will continue to invest in the space. In the next few months, we will get new assets into the group — there’s more to come.”
Correction: An earlier version of this article stated that FremantleMedia’s YouTube channels generated 36.4 billion views in 2014. In actuality, its channels had 9 billion views last year. RTL Group’s total online video viewership, which includes FremantleMedia as well as its catch-up TV services and MCNs, was at 36.4 billion in 2014.