RTL Group SA

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RTL Group SA

R.C. Luxembourg B 10.B07
45 boulevard Pierre Frieden
L-1543 Kirchberg
Luxembourg
Telephone: (352) 421-421
Fax: (352) 421-42-2760
Web site: http://www.rtlgroup.com

Public Company
Incorporated: 1931 as Compagnie Luxembourgeoise de Radiodiffusion (CLR)
Employees: 6,930
Sales: EUR 2.85 billion ($2.68 billion) (2000)
Stock Exchanges: London
Ticker Symbol: RTL
NAIC: 51312 Television Broadcasting; 51211 Motion Picture and Video Production; 513112 Radio Stations

RTL Group SA reaches some 120 million European TV viewers and radio listeners a day through its 24 commercial “free TV” channels and 17 radio stations in 35 countries. The company has achieved leading positions in three of the six largest European media markets, including Germany, France, and the Netherlands. The German RTL Television channel and French TV channel M6, along with its French radio stations, are the group’s most important revenue sources. RTL group is one of the world’s biggest producers of TV movies and a leading trader of sports broadcasting rights in Europe. It is majority-owned and controlled by the German media conglomerate Bertelsmann.

Becoming the Star of European Commercial Radio in the 1930s

In the 1930s, when Europe’s emerging radio landscape was dominated by public broadcasting stations, a group of businessmen engaged in a venture that was designed to change that landscape forever. In 1931, the Compagnie Luxembourgeoise de Radiodiffusion (CLR) was incorporated in Luxembourg and received a radio broadcasting concession from the Luxembourg government, granting a monopoly for 25 years. The idea of establishing a strong commercial radio station aimed at Western Europe was conceived by radio enthusiast and technician François Anen, ex-radio magazine editor Henri Etienne, and entrepreneur Raoul Fernandez—all Luxembourgians who were joined by several businessmen from Paris. Backed up financially by French capital, the new entity set up the most powerful radio transmitter in Europe: a 100-kilowatt-transmitter with generators powered by two huge 800-horsepower marine diesels. In 1932, the newly established radio station found a home in the Villa Louvigny, a former fort built in the seventeenth century and located in a park in the center of Luxembourg. At first the company rented part of the Villa, and in 1936 bought the whole building which became CLR’s headquarters for 45 years. At the Villa Louvigny CLR established a number of studio facilities during the 1930s, including a large studio for a full orchestra, a smaller studio for small orchestras and recitals, four voice studios, a record studio, and a tape recording and dubbing studio.

In early 1933 the station started test transmissions on a long wave frequency, although Luxembourg had no permission to do so from the Union International de Radiophonie (UIR) of which the Grand Duchy was a member. At UIR’s Lucerne conference in 1933, the organization reconfirmed its decision to allocate only a medium wave frequency to Luxembourg, which in turn did not sign the resulting treaty. In January 1934, just a day after the new UIR treaty became effective, CLR even seized a long wave frequency that Poland had just abandoned and started using it for its broadcasts.

Radio Luxembourg’s long wave programs were broadcast on weekday afternoons and evenings and from 8 a.m. until midnight on the weekend, mainly presenting popular dance music and some symphony music. In the beginning the station broadcast to a different European country every night, including Italy, Belgium, Luxembourg, Germany, the Netherlands, France, and the United Kingdom, with announcements in the appropriate language. In 1933, CLR launched two long wave radio programs: the French program Radio Ondes Longues and Radio Luxembourg for English-speaking listeners. The new programs did not follow any defined framework. The only guideline for the station was to attract as many listeners as possible at any time of the day. Radio Luxembourg, mainly aimed at the United Kingdom, was able to draw large audiences in the millions very quickly. It presented the most popular music at the time which people wanted to hear but were not able to hear anywhere else. It presented them in a relaxed and fun way—quite different from the more serious fashion of the state-owned radio monopoly British Broadcasting Corporation (BBC). Radio Luxembourg was covering all of the United Kingdom with its powerful transmitter from the less-than 1,000 square miles nestled in between Belgium, Germany, and France that constituted the Grand Duchy of Luxembourg. From the very beginning, BBC tried to fight the “foreign intruder” on its territory by all means imaginable. The BBC tried to put diplomatic pressure on Luxembourg’s government through the British government; it offered to pay the station for not going on air; it tried to get on the Board of Directors; it denied the station a cable connection to it’s London-based studio; it convinced the British press not to publicize the station’s program schedule; it banned announcers and stars that would work for or appear on one of the station’s programs—nothing worked. In 1938, the BBC gave up the illusion that it could stop Radio Luxembourg from broadcasting.

Right from the beginning, the business model for CLT was based on advertising revenue from the United Kingdom. For this reason the company’s charter included broadcasts in foreign languages, and that is why such a powerful transmitter had to be built. In May 1933, CLT launched an advertising campaign in Advertiser’s Weekly for “the most powerful broadcasting station in Europe.” Since Radio Luxembourg had quickly gained a considerable audience, advertisers jumped at the opportunity to market their products through the new medium. However, because there was no “land line” between Luxembourg and Great Britain, the sponsored programs were produced in London, shipped to Belgium, and put on a train to Luxembourg. By November 1934, the list of advertisers had grown several pages long, including “big names” such as Palmolive, Shredded Wheat, Beecham’s Pills, and Rothmans. In the beginning the CLR worked with International Broadcasting Company (IBC), a small radio station based in France that sold commercial advertising, to solicit advertising revenues and produce “sponsored programs.” Later a new subsidiary, Wireless Publicity, was founded to sell air time to advertisers, while the J. Walter Thompson advertising agency took on the production part. About 44 different 15 minute long “sponsored programs” were produced at J. Walter Thompson’s state-of-the-art London studio every week.

CLR’s first radio announcers were “borrowed” from other existing stations such as Toulouse-based Radio Normandy, IBC, and even the BBC in London. Unlike the stiff manners employed by other stations, especially the BBC, Radio Luxembourg’s announcers used a very personal style, addressing listeners by name if they wrote a letter to the station, and employed the modern voice-over technique to enliven the program. To further attract listeners Radio Luxembourg started to get as many big name stars into their shows as possible. And with the considerable advertising revenues the station attracted it was able to pay enough for the stars to come, including some big names from the United States, such as Carson Robinson and Morton Downey. By 1937, Radio Luxembourg presented more stars on a single Sunday than the BBC did in a whole week. Later into the 1930s the station started cooperating with Hollywood film makers by broadcasting parts of not-yet-released movies, catering to the curiosity of the huge and growing number of film fans. By the end of 1938, the number of the station’s Sunday listeners was 4 million, double the number of the BBC, and Radio Luxembourg charged the highest rates of any commercial radio station anywhere in the world.

In June 1938, CLR started broadcasting its worldwide short wave program. By 1939, the company had established itself as the number one commercial radio station in Europe. However, in that year World War II broke out, causing a major interruption that could have ended CLR’s history. German troops occupied the Grand Duchy of Luxembourg in 1940 and immediately took over control of Radio Luxembourg. The German Reich’s propaganda minister Goebbels, whose offer to deliver “news” to the station had been turned down in the 1930s, used Radio Luxembourg’s powerful transmitter to broadcast Nazi propaganda which was taped in Hamburg throughout Europe. When the Allied forces were approaching Luxembourg toward the end of the war, the Germans tried unsuccessfully to destroy the Villa Louvigny, and the Grand Duchy was liberated by American troops.

Radio Luxembourg Conquering Europe: 1945-70

After World War II had ended, a few determined people decided to build up the radio station again. This was only possible with a great deal of energy and money, but the radio station had become a vital part of Luxembourg’s economy, which was otherwise dominated by agriculture and the iron and steel industry. One year after the war had ended, Radio Luxembourg was broadcasting again. However, in the beginning it was tough to produce radio programs since parts of the station’s library of recordings had been destroyed and there was not much music being recorded at the time. On the other hand, paying advertisers were as rare in those days as music recordings. However, step by step the radio station was able to gain momentum again and finally regain the success it had in the prewar period.

Company Perspectives:

The combination of CLT-UFA and Pearson Television created an integrated pan-European company with successful business operations spanning television and radio broadcasting, content and online activities. The directors believe that a shared position at two key points on the value chain, distribution and content, will better place RTL Group to achieve stronger revenue and earnings growth to benefit from consolidation in the world’s television market.

The postwar decade at Radio Luxembourg was shaped by a man who had joined the station as a DJ in 1946—Geoffrey Everitt. He presented Swinger Requests, a show on Sunday afternoons. Later, in 1953, Everitt went back to England where he started working as a radio program producer in the company’s London studios. In 1960, Everitt joined CLR’s management as Chief Producer and eventually became General Manager. He first conceived the idea to switch from pre-produced programs to a live format. At the same time Everitt became somewhat disillusioned about the unscrupulousness of some people in the music industry and finally resigned in 1970. He was succeeded by Alan Keen, the former Program Director of the closed down British pirate radio station Radio London. Under Keen Radio Luxembourg made the transition to an all-live format.

During the 1960s, 1970s, and 1980s, commercial radio stations were popping up throughout Europe, most of them with a narrower, local focus. However, Radio Luxembourg was able to defend its position in the increasingly competitive commercial radio market by being sensitive to new music trends and by creating ever new program formats. The British wave was followed by Californian “Flower Power Music” of the late 1960s. In that time period popular music got a huge boost and spurred the growth of the music industry which in turn put out a growing number of recordings. In the late 1960s, the British Daily Mirror started supplying news content to Radio Luxembourg and publicized the station’s schedules and other information. When independent local radio stations and BBC’s local programs started threatening Radio Luxembourg’s advertising revenue, the station reacted by inventing new forms of promotion. One of them was the “DJ-Roadshow” which put faces on the immensely popular Radio Luxembourg DJ’s voices and brought the radio station into the neighborhood. In the early 1970s, the station spotted the emerging “Teenybopper” wave, promoted their emerging stars such as the Osmonds, and launched the magazine FAB 208 —208 was Radio Luxembourg’s new frequency—that featured the stars of the new scene. When the station found out that advertisers did not think much of it’s new teenager audience, it switched to an all-album concept for six months, but moved back to chart music afterwards. In the late 1970s, at the height of the disco era, Radio Luxembourg moved to the disco sound, but finally returned to the successful original format of “the pop hits of the day” mixed with some country and oldies. By the end of the 1970s, the radio programs produced in Luxembourg attracted a total daily audience of about 40 million in Luxembourg, France, Germany, the United Kingdom, and other European countries and received more press coverage than any other radio station. The company had become Luxembourg’s biggest tax payer, unsurpassed by the steel, coal, and banking industries.

Breaking into Television after 1954

A new era arrived for CLT in 1954, when it entered the promising field of television broadcasting. In that year the company launched the French-language TV channel Télé Luxembourg, which started broadcasting to eastern France and southern Belgium during lunch time and from 5 to 11 p.m. To reflect the change the company was renamed Compagnie Luxembourgeoise de Télédiffusion (CLT) in the same year. From then, it took 15 years until CLT’s Luxembourg-language TV channel RTL Télé Lëtzebuerg went on the air and another 15 years until television started becoming a real force for CLT in addition to radio broadcasting.

It was in 1984 when CLT together with the German Bertelsmann group’s film and TV production subsidiary UFA launched the German commercial TV channel RTL + , in which CLT held 46.1 percent and Bertelsmann 38.9 percent of the share capital. Under the leadership of Austrian executive Helmut Thoma, the Cologne-based station, which was later renamed RTL Television, became CLT’s TV flagship and cash cow. Another major launch was the French channel Metropol 6 (M6) in 1987. At the end of the 1980s television replaced radio as CLT’s major revenue source.

In 1991, CLT moved company headquarters and its radio unit to Kirchberg on the outskirts of Luxembourg where it soon built new facilities for its growing TV division. By 1991, TV contributed 70 percent to CLT’s total sales, and most of that came from RTL. 79 percent of all German households were able to receive RTL through antennas, satellite dishes, or cable, and the channel’s share of German TV viewers had reached about 14 percent. One of the most successful RTL projects was the daily soap Gute Zeiten Schlechte Zeiten —”good times bad times”—which was produced by UFA and broadcast since May 1992.

As it had happened with commercial radio, a growing number of players entered the European market for commercial television. And as it also happened with radio, the only strategy to keep sales up was diversification. In 1993, CLT became involved in a second German TV channel, RTL2, in which it held about one third of the shares. A third German TV channel, Super-RTL, was created together with the Walt Disney Corporation in 1995. Besides its German TV stations, CLT got involved in TV projects in other countries, including two RTL channels in the Netherlands, the CLT news pool European News Exchange (Enex), and Paris-based Pay-TV program Multivision.

Key Dates:

1931:: Compagnie Luxembourgeoise de Radiodiffusion (CLR) is granted a broadcasting license.
1933:: CLR launches French program Radio Ondes Longues and Radio Luxembourg for English-speaking listeners.
1954:: CLR becomes CLT—Compagnie Luxembourgeoise de Télédiffusion; French-language TV channel Télé Luxembourg starts broadcasting.
1969:: Luxembourg-language TV channel RTL Télé Lëtzebuerg goes on air.
1984:: Together with Bertelsmann’s UFA subsidiary the company launches German TV channel RTL +.
1997:: CLT and UFA merge to become CLT-UFA.
2000:: CLT-UFA merges with British Pearson TV to form RTL Group.
2001:: Bertelsmann becomes the company’s majority shareholder.

Although CLT was involved in 13 European radio stations, seven TV channels, seven content production firms, and five publishers by the mid-1990s, more than half of the company’s revenues of about DM 2.4 billion were generated in Germany. For all these “antennas” as the company’s radio and TV channels were called, CLT needed to create a growing stream of content. However, the European content market was dominated by the German Kirch group. In addition to that, advertising-revenue financed “free TV” seemed to have reached its limit of growth. Consequently, license and content acquisition, investments in TV production and the new business model digital pay-TV became CLT’s main focus in the second half of the 1990s. Concentrating on television, the company’s position in the radio market declined significantly during the 1990s, especially in Germany. By 1996, 22 radio stations contributed ten percent to CLT’s total sales while 83 percent were generated from its involvement in 19 TV stations.

A Series of Mergers Begins in 1997

In the late 1990s, consolidation activities of the global media industry accelerated. Further geographical expansion and digital TV technology required significant financial investments and CLT started looking for suitable strategic partners. The cooperation with Bertelsmann had not been without friction. There were disputes over Bertelsmann’s policies in connection with Cologne-based TV project Westschiene, where CLT accused the company of being involved in conflicting activities, and the German commercial TV channel VOX, where CLT was left out in favor of Rupert Murdoch’s News Corporation. However, after Bertelsmann’s successful negotiations with CLT’s majority shareholder Audiofina, CLT and Bertelsmann announced their intention to merge CLT with UFA in spring 1996, and the merger became effective in 1997. Half of the new company CLT-UFA was owned by Luxembourg-based holding Audiofina. The other half was held by the German BWTV-Holding in which Bertelsmann had an 80 percent share. The other 20 percent was owned by German newspaper group Westdeutsche Allgemeine Zeitung (WAZ).

The new group got off to a bad start. In its first year CLT-UFA generated a DM 140 million loss. This was mainly due to continued huge investments in the German pay-TV channel Premiere which was launched in 1990 by the Kirch group, Bertelsmann, and French Canal +, and did not take off as soon as expected. The approval of the European Commission was pending and it was clear that further large investments were needed in the future. In a leap of faith Bertelsmann and CLT-UFA—which both had stressed the strategic importance of pay-TV throughout the 1990s—sold all but 5 percent of its shares in Premiere to the KirchGroup for DM 1.2 billion in 1999, and declared commercial “free TV” its main future focus. In April 2000, CLT-UFA announced its merger with British Pearson TV, the TV and movie production arm of the British media group Pearson plc. The companies were merged with CLT’s former parent company Audiofina, renamed RTL Group, and listed at the London stock exchange where roughly ten percent of the new group’s capital was floated. BWTV held 37 percent in RTL Group’s shares; Groupe Bruxelles Lambert S.A. (GBL), the former Audiofina majority shareholder and publicly traded investment Belgian firm controlled by Belgian investors Albert Frere and Paul Desmaris, held 30 percent; Pearson plc held 22 percent; and the rest was publicly traded. In 2001, Bertelsmann gained control over RTL group with an unexpected move. The only way to persuade GBL to sell its share in RTL Group was to offer Bertelsmann shares in exchange. Under the deal GBL received a 25.1 percent share in Bertelsmann which could be offered to the public within three to four years. Bertelsmann received GBL’s 30 percent share in RTL Group, making Bertelsmann the new majority owner with 67 percent. Pearson continued to hold its 22 percent package, but was signaling its interest in selling it off.

After the deal was realized, Bertelsmann streamlined RTL’s management and Belgian Audiofina manager Didier Bellens was appointed CEO of the new company. The first major task was to cut cost by exploiting synergies within the group’s “family” of German TV stations once the company had acquired majority shares in RTL TV and VOX. Rupert Murdoch sold his stake in VOX to CLT-UFA for DM 600 million in 2000. Walt Disney, however, decided to hold on to its stakes in TV channels Super RTL and RTL2 after they started to show profits. In 2001, RTL Group saw its future in raising the percentage of self-produced TV content to 40 percent; launching its own TV news channel and expanding the value chain by acquiring soccer clubs; by implementing new, innovative TV formats in commercial television; by developing new revenue streams from Internet portals through its subsidiary RTL New Media; and by geographical expansion in Europe.

Principal Subsidiaries

RTL Television GmbH (Germany; 99.7%); Metropole TV S.A. (France; 43.8%); RTL2 Fernsehehn GmbH & Co. KG (Germany; 35.8%); VOX Film & Fernseh GmbH & Co. KG (Germany; 99.4%); Channel 5 TV Group Ltd (U.K.; 64.5%); IP Deutschland GmbH (Germany; 99.7%); IP France S.A. (France; 99.6%); Pearson Television Productions Ltd. (U.K.); UFA Film & Fernsehen GmbH (Germany; 99.6%); Trebitsch Produktion Holding GmbH & Co. KG (Germany; 63.8%); RTL Plus S.A. (Luxembourg; 99.7%); RTL4 Beheer BV (Netherlands; 99.6%); RTL Disney Fernsehen GmbH & Co. KG (Germany; 49.8%); M-RTL Rt (Hungary; 48.8%); RTL7 SP. ZOO (Poland; 99.6%); Ediradio S.A. (France; 99.6%); CLT-UFA UK Radio Ltd (U.K.; 99.6%); RTL Radio Deutschland GmbH & Co. KG (Germany; 99.7%); ID (Information et Diffusion) Sarl (France; 99.6%); RTL New Media GmbH (Germany; 99.7%).