Annual Report 2015 Entertain. Inform. Engage. Key figures SHARE PRICE PERFORMANCE 30/04/2013 – 31/12/2015* + 42.7 % )RTL GROUP + 54.5 % MDAX + 48.1 % DJ STOXX 600 INDEX = 100 * RTL Group shares have been listed in the Prime Standard of the Frankfurt Stock Exchange since 30 April 2013. RTL GROUP REVENUE SPLIT In 2015, TV advertising accounted for 49.4 per cent of RTL Group’s total revenue, making the Group one of the most diversified groups when it comes to revenue. Content represented 22 per cent of the total, while greater exposure to fast-growing digital revenue streams and higher margin platform revenue will further improve the mix. 11.8 % OtHER 8.4 % DIGITAL 49.4 % 22.0 % TV ADVERTISING CONTENT 4.1 % PLATFORM REVENUE 4.3 % RADIO ADVERTISING SCAN THE Contents QR CODES... ...and watch the RTL Group Annual Report 2015 spring into action on your mobile device. Snap this code now to watch Corporate information the first video! 6 Chief Executives’ report 12 Our business model 14 Our strategy 20 Our role in society 25 Corporate Responsibility Report 2015 (booklet) 26 Entertain. Inform. Engage. The highlights of 2015 56 Chairman’s statement 58 The Board / Executive Committee Financial information 66 Directors’ report 115 Management responsibility statement 116 Consolidated financial statements 121 Notes 208 Auditors’ report 210 Credits 211 Five-year summary RTL Group Annual Report 2015 5 Chief Executives’ report Focusing on growth in a changing world “2015 was a record year for RTL Group: for the first time in our history, revenue exceeded € 6 billion.” GUILLAUME DE POSCH Co-Chief Executive Officer 6 RTL Group Annual Report 2015 Chief Executives’ report “We are confident our digital businesses will reach such scale over the next 24 months that they become one of the growth drivers of RTL Group’s total revenue,” said RTL Group’s Co-CEOs at the 2014 results presentation. This followed major investments in online video companies BroadbandTV, StyleHaul and SpotX. Picking up on this, we talked to Anke Schäferkordt and Guillaume de Posch about RTL Group’s growth in 2015, about fostering closer collaboration across its business units and, above all, how RTL Group is responding to the rapid changes across the whole ‘total video’ value chain. “With more than € 500 million in revenue, digital has become a dynamic third pillar for RTL Group.” ANKE SCHÄFERKORDT Co-Chief Executive Officer RTL Group Annual Report 2015 7 Chief Executives’ report “For us, TV isn’t just ‘television’ any more, it means ‘total video’.” ANKE SCHÄFERKORDT RTL Group @rtlgroup · 11 Nov 15 RTL Group Co-CEO Anke Schäferkordt talking #digitalisation at #OWM 2015 in Berlin. How did RTL Group perform in 2015? GUILLAUME DE POSCH: Despite a mixed picture in the global economy, 2015 was a record year for RTL Group: for the first time in our history, revenue exceeded €6 billion. Operating profit EBITA also reached a new high, despite lower positive one-off effects than 2014. Net profit for RTL Group shareholders increased strongly by 21.0 per cent to €789 million. ANKE SCHÄFERKORDT: All European net TV advertising markets in RTL Group’s territories were up or stable year-on-year, with the German market remaining the healthiest in our portfolio. At 8 14 Mediengruppe RTL Deutschland, we outperformed the German TV advertising market, which was estimated to have grown by 2.0 On 11 November 2015, to 3.0 per cent in 2015. We also generated higher diversification RTL Group Co-CEO revenue such as online couponing and platform revenue. As a result, our biggest profit Anke Schäferkordt was invited to speak at the OWM symposium centre grew significantly and generated another record profit. in Berlin where advertisers and marketing executives talked Did digital grow as forecast? about the topic “Winning in the Digital Reality”. Picture: ANKE SCHÄFERKORDT: With more than €500 million in revenue, digital has become a Anke Schäferkordt dynamic third pillar for RTL Group, complementing our market-leading broadcasting and with host Wolfram Kons. content production businesses. Digital revenue now represents 8.4 per cent of RTL Group’s total revenue. The massive growth rate of 72.2 per cent for our digital revenue reflects our early investments in online video. According to Comscore, RTL Group is now number one on YouTube worldwide, with strong positions in the US, Europe and Germany. We generate around 11 billion video views each month, including mobile. We are the strongest and most international online video operator of all the broadcast groups in the US or Europe. Organically, the revenue growth rates for our multi-channel network businesses BroadbandTV, StyleHaul and Divimove – and for our monetisation platform SpotX – are 50 per cent or more. And they will continue to grow, at significant double-digit rates. GUILLAUME DE POSCH: We need to invest in these businesses to further strengthen their strong market positions. Some of them will continue to generate short-term start-up losses. The fact that we achieved faster revenue growth while keeping our high profit margin at Group level underlines the tremendous strength of our core broadcasting business. In other words: RTL Group is on the growth track. Driven by our digital businesses, we expect our total revenue to continue growing moderately in 2016. What is the proposed dividend for 2015? GUILLAUME DE POSCH: In September 2015, we paid an extraordinary interim dividend of €1.00 per share as an advance for the fiscal year2015 . In addition, RTL Group’s Board of Directors has proposed a final dividend of 3€ .00 a share for the fiscal year 2015. As in previous years, this reflects the Group’s strong cash flows, investment plans and target 8 RTL Group Annual Report 2015 Chief Executives’ report leverage factor. Based on our average share price on the Frankfurt Stock Exchange in 2015, all dividends for the fiscal year – totalling €4.00 a share – represent a dividend yield of 4.9 per cent. This is, again, among the most attractive in Europe. In August 2015, at the half-year results, you mentioned rapidly evolving total video market. What do you mean by ‘total video’? ANKE SCHÄFERKORDT: Linear TV still dominates the video market – it’s the only medium consistently reaching mass audiences daily. But people watch more video content than ever – in long and short-form, linear and non-linear, on the TV screen and on mobile devices. The demand for high-quality video content is growing rapidly, as is online video advertising. So for us, TV isn’t just ‘television’ any more, it means ‘total video’. This is important as many people still think of the TV set in the living room – rather than the wider TV industry. Where do you see the significant changes in the value chain? ANKE SCHÄFERKORDT: From the production of content to its aggregation on TV channels, On 20 January 2015, multi-channel networks or thematic verticals, and from its technical distribution to Bertelsmann organised the ‘Let’s Go Connected’ advertising sales: the digital transformation is blurring the borders between the individual forum in Brussels to stages of value creation. Media agencies invest in production companies, US studios run exchange views on European TV channels, producers and channels expand into challenges ahead in the digital realm. digital, especially non-linear services, and platforms such as cable operators or telcos invest in their own content and advertising capability. There’s also extensive consolidation and integration at RTL Group @rtlgroup · 20 Jan 15 all stages of value creation, making competition ever fiercer. Guillaume de Posch, Co-CEO of RTL Group, at the ‘Let’s Go Connected’ forum by @Bertelsmann_com GUILLAUME DE POSCH: As a leading video content provider this presents us with many new opportunities, but it also means we must set clear priorities. Therefore we have set two main investment goals for further acquisitions and partnerships. The first is to further develop in the digital domain. The second is to produce our content and owning rights, because we’re certain this will be key to growth. Looking at the first stage of the value chain, what are the challenges for RTL Group’s content arm, FremantleMedia? GUILLAUME DE POSCH: Increasing creative diversity – both 4 32 organically and through acquisition – is FremantleMedia’s top priority. As they are already one of the biggest independent production companies, they focus on creative talent, developing projects that will feed into their unrivalled international network. Compared to bigger acquisitions, this is a long- term play, as development takes time. In the last three years, FremantleMedia made several acquisitions that illustrate this strategy, including scripted companies Miso in Scandinavia, Corona in the UK, Wildside in Italy, as well as Fontaram and Kwaï in France. Wildside, for example, specialises in scripted television drama and commercial feature films. Their output includes The Young Pope – their first international production – with partners including HBO, Sky and Canal Plus. The series stars Jude Law and Diane Keaton, with Oscar winner Paolo Sorrentino working as co-writer and director. “The RTL Digital Hub team manages our portfolio of digital acquisitions and supports their further international expansion.” GUILLAUME DE POSCH RTL Group Annual Report 2015 9 Chief Executives’ report “Increasing competition in the digital world calls for closer co-operation across RTL Group, to give our global advertising clients the best service.” GUILLAUME DE POSCH FremantleMedia has also re-invigorated its own heritage in scripted drama. The German series Deutschland 83 has had great success internationally. It was the first German language drama aired, to critical acclaim, in its original language in the US. It has now been sold to 20 channels and platforms, including Channel 4 in the UK, Canal Plus in France and Hulu.