Bertelsmann chief puts goal of national TV mergers on ice

The head of Europe’s largest media company has admitted temporary defeat in his goal to create national TV giants capable of challenging global streaming services after the failure of two key proposed tie-ups.

Thomas Rabe, chief executive of Bertelsmann, said the decision by regulators in France and the Netherlands to effectively block big television deals in their countries had forced the group to put the idea on ice.

“It’s very clear [that in] the next two to three years, it doesn’t make sense to come up with large-scale merger plans in TV, because the position which the authorities took in France and the Netherlands is likely to be the same in other countries,” Rabe told the Financial Times.

The boss of Bertelsmann, whose brands include European broadcast network RTL, publisher Penguin Random House and music label BMG, insisted the strategy of creating “national media champions” that could take on the likes of Netflix remained unchanged.

But Rabe said the company would now pursue what he called “alternative paths to scale” such as advertising and distribution partnerships.

“These will be smaller steps to consolidate and create scale,” he said. “But, frankly, [they are] the only steps which are currently available, given the position of the competition authorities.”

Rabe has run Bertelsmann since 2012 and was credited with reshaping the company and driving strong revenues and profits at the German family-owned media empire.

But he has suffered a series of setbacks in recent months that have struck a blow to his core strategy.

In October, Bertelsmann abandoned a plan for its French channel M6 to merge with Bouygues-owned TF1 after regulators raised far-reaching objections about the impact on the advertising market and imposed conditions that the companies said would have made the deal unworkable.

In January, the Dutch competition authority blocked a proposed merger between RTL Nederland and Talpa Network, citing similar concerns about the power it would give the new combined entity over the Dutch advertising market.

Bertelsmann was dealt a further blow in the US last year when a New York judge blocked Penguin Random House from proceeding with a proposed $2.2bn acquisition of Simon & Schuster after the US justice department argued the merger would create a “publishing behemoth” that would harm both authors and readers.

Rabe was critical of European regulators and their refusal to change the definition of “relevant market”, used to assess competition risks, to include online advertising as well as television — a move that would have reduced the size of the market share of the combined broadcasters.

He said they had failed to sufficiently take into account the changing media and advertising markets, adding: “That’s a big missed opportunity.”

His comments came as Bertelsmann reported record revenues of more than €20bn in 2022, but the group’s net profits more than halved to €1bn — down from €2.3bn the previous year.

Results at Bertelsmann’s publicly listed RTL group, which is on the front line in the battle against streaming giants, painted a mixed picture. It recorded growth in the number of paying subscribers and revenues from its streaming business, but a 6.5 per cent fall in operating earnings before interest, taxes, depreciation and amortisation — a fall driven partly by declining advertising revenues.