August 29, 2018 / 9:42 AM / 3 months ago

UPDATE 1-Broadcaster RTL walks away from Endemol; to focus on content, streaming

* Prefers to focus on organic growth at Fremantle, small buys

* RTL’s streaming projects show rapid growth

* No rush to team up with ProSieben-Discovery’s German platform

* Second-quarter results top expectations, shares up 7 pct (Releads with CEO interview, share price reaction)

By Douglas Busvine

FRANKFURT, Aug 29 (Reuters) - European broadcaster RTL Group has withdrawn its interest in buying Dutch production company Endemol Shine to focus on developing its own scripted shows and expanding its new video-on-demand platforms.

The news came as RTL reported strong second-quarter revenue and core earnings, buoyed by its Fremantle studio arm and promising growth at its digital products that seek to fend off the challenge from global giants like Netflix.

RTL shares rose by 7 percent - all but erasing their losses this year - as revenues rose by 3.6 percent to 1.63 billion euros ($1.86 billion), topping even the highest forecast in a Reuters poll of analysts.

“On Endemol Shine, we stepped out of the process,” CEO Bert Habets said in an interview.

“At Fremantle, we focus on expanding our scripted output – and we are very successful in doing so. We aim to grow the business going forward in the scripted and unscripted domain by small- and medium-sized acquisitions.”

Co-owners Apollo Global and Twenty-First Century Fox put Endemol, creator of reality show ‘Big Brother’, up for sale in early July with a price tag of 2.5-3 billion euros. The sale process continues, a source close to one of the owners said this week.

HYBRID PLATFORMS

RTL, which also reported core earnings growth of 4.7 percent, outperformed its main rival, German-focused ProSiebenSat.1 Media, which earlier reported soft second-quarter results.

Revenues were buoyed by the return of music talent show ‘American Idol’ to U.S. network ABC, while on the scripted front Fremantle said ‘Picnic at Hanging Rock’; ‘My Brilliant Friend’ and ‘The Rain’ had also performed well.

In addition to selling shows to the streaming giants, RTL is developing its own ‘hybrid’ platforms - offering ad-funded free options and subscription deals priced at 4-8 euros a month. That’s cheaper than Netflix.

It’s doing so on a country-by-country basis, with Dutch platform Videoland reporting paid subscriber growth of 122 percent and TV NOW in Germany up 44 percent. RTL declined to give absolute figures.

There are moves afoot in Europe to build streaming joint ventures modelled on America’s Hulu and, here, RTL has joined a French partnership called Salto.

ProSieben and Discovery have also invited partners to join their German streaming venture. Habets said he was “open-minded” towards the idea but his priority was to develop TV NOW.

He played down prospects for the kind of merger activity in Europe that is transforming English-speaking markets, telling analysts on a conference call that potential for synergies from cross-border deals was far less.

RTL, controlled by German publishing group Bertelsmann , confirmed its guidance for revenues to grow this year by between 2.5 and 5 percent, excluding exchange rate effects.

It expects EBITDA (core profit) to be broadly stable after adjusting for the one-off impact of a real estate sale in 2017. (Reporting by Douglas Busvine; Editing by Caroline Copley and Mark Potter)

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