RTL sees consolidation in UK TV market this year

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Tue Apr 7, 2009 3:48pm BST

* Sees consolidation in UK TV market this year

* Favours merger of Channel 4 with Channel 5

* Sees need to save costs across industry for some time

By Nicola Leske

VIENNA, April 7 (Reuters) - Europe's largest broadcaster RTL Group AUDK.LU expects the crowded British TV market to consolidate this year as it eyes a merger of its TV channel there with broadcaster Channel 4, RTL's chief executive said.

"2009 will be a decisive year for consolidation in the UK," Gerhard Zeiler told Reuters in an interview.

"Our proposal is on the table...I suspect that the process in which opinions on the matter are formed will soon be concluded," Zeiler said, adding he expected to see some movement later in the second half of the year.

Zeiler, who has been at the helm of RTL Group for six years, said he favoured a merger of state owned Channel 4 with RTL Group's Channel 5, which would leave it with a minority stake in the combined entity.

"There's an industrial logic to it," Zeiler said, though admitting Channel 4 saw the situation somewhat differently.

Channel 4 has argued a merger of the two would not resolve structural industry issues, such as the fact that advertisers are less willing to advertise around public service content.

Austrian-born Zeiler, who shuttles between RTL headquarters in Luxembourg as well as London and Vienna, headed RTL Television before taking on the CEO post for the whole group.

SIZE MATTERS

German media giant Bertelsmann [BERT.UL] owns 90 percent of RTL Group, which grew out of a merger of CLT-Ufa and Pearson Television in 2000, four years after Bertelsmann's Ufa television group and Luxembourg's CLT combined their businesses.

The group, which posted 5.8 billion euros ($7.85 billion) in revenue last year, has 45 TV channels and 32 radio stations in 11 countries. It is also active in rights trading and content production worldwide.

Its content business consists of FremantleMedia, a major rival of Dutch TV production house Endemol EDMLF.PK. FremantleMedia has produced shows such as Idols, the X Factor, Family Feud and Farmer Wants a Wife.

"We have the benefit of being pretty big, so if we lose a show here or there it won't hurt us that much," Zeiler said, commenting on the overall market situation.

Nevertheless, Zeiler said there would be a drive to cut costs across the industry in an effort to compensate for a shrinking TV advertising market throughout Europe, which he said was expected to decline by some 15 percent.

That did not necessarily mean major job cuts but moves to produce more efficiently and to produce less content in-house.

"Personnel cost in our industry are not that high in comparison with other industries -- on average around 15 percent of costs," Zeiler said.

He declined to say whether there would be job cuts at RTL Group businesses apart from ones already announced in the UK. In Germany, Europe's biggest TV market, RTL competes with ProSiebenSat.1 (PSMG_p.DE), which unveiled plans to cut jobs in November.

Zeiler said that RTL was keeping an eye out for acquisitions for its content business.

"Our acquisition policy is such that we are interested in talent and small and medium-sized production companies," Zeiler said.

In February, FremantleMedia acquired a 75 percent stake in U.S.-based Original Productions geared towards male audiences with shows such as Ice Road Truckers, Monster Garage or Ax Men.

RTL, Bertelsmann's cash cow, expects lower profits this year due to the advertising slump.

Zeiler, who has been repeatedly slated for a position in Austria's government or head of Austrian public broadcaster ORF, said he enjoyed his job and declined to comment on speculation he would soon move on. Zeiler's contract runs until May 2011.

(Editing by David Cowell)

((nicola.leske@thomsonreuters.com; +49 69 7565 1214; Reuters Messaging nicola.leske.reuters.com@reuters.net))

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