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RTL posts loss as Five’s costs stack up

European broadcast giant RTL Group swung to a net loss for the first six months of the year, thanks partly to difficulties at its UK network, Five.

The Luxembourg-based company weathered the last six months fairly well, posting just a 9.6% drop in revenue during one of the most difficult periods in industry history, but reported a net loss of €105m (US$150m) compared with a profit of €388m in the first half of 2008.

RTL’s revenue slipped from €2.86bn to €2.59bn for the six months ending June 30, 2009. The group attributed much of that loss to “double-digit” declines in TV ad revenue across Europe, but said that good performances from its content production and diversification businesses, which include international giant FremantleMedia, had helped to cushion that blow.

RTL reported a drop in EBITDA of 36.7% to €318m due to lower contributions from most traditional profit streams, start-up losses associated with its consolidation of its new acquisition, Greece’s Alpha Media Group, and restructuring costs in the UK, Germany and Greece totalling €20m. But most of all it was hit by programme writedown costs at Five of €22m.

Aside from the writedown, Five, which saw its market value reduced by €337m in March and has been one of the hardest-hit of the UK’s broadcasters during the downturn, registered an operating loss of €19m and restructuring charges of €8m.

Despite drops in advertising income, several of RTL’s broadcast assets did build their ratings during the first half of 2009. Audience shares at the group’s flagship branded channels, RTL TV in Germany, Dutch RTL 4 and RTL-TVI in Belgium, were all up year-on-year, while Mediengruppe RTL Deutschland increased its lead over its main competitor, ProSiebenSat.1, to 4.5%.

Audience share at new family member Alpha increased each month between January and June, softening the blow of the cost of that investment, and France’s M6 Group managed to slightly increase its EBITDA by 3.7%, due mainly to profitability from its digital channels.

Five, which trimmed its broadcasting budget by 25% in July despite restating its commitment to international acquisitions and which has laid off or lost all of its factual commissioners over the last six months, was conspicuously absent from the list of high-raters.

The terrestrial’s future has been the subject of much debate of late, with both CEO Dawn Airey and RTL’s owner, Bertelsmann Group, championing a merger of Five and Channel 4 in order to keep both networks buoyant.

RTL’s CEO Gerhard Zeiler had no comment about RTL’s assets, but did say that costs would need to come down.

“RTL Group expects no quick change to the TV advertising market conditions and is therefore aiming for a significantly reduced cost base in our core business,” he said.

“In order to adapt to the new market realities, we need to gradually lower our production and acquisition costs, and structure our processes even more efficiently. Our goal is to achieve these savings while maintaining our leading audience market positions.

“While we work hard to optimise the efficiency of our core business, we’ll also further invest in promising new opportunities in digital channels, online video, diversification activities and content production.”

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