Kate Bulkley, Media Analyst.

Didier Bellens: Putting Belgium on the airwaves

By Kate Bulkley

The Independent

Oct 11, 2000

Corporate Profile: Bigger than the Smurfs. Cannier than Poirot. More dogged than Tintin. Meet the Belgian with designs on British TV

After Hercule Poirot, Tintin and the Smurfs, Didier Bellens could soon be the biggest thing to come out of Belgium in the entertainment world. This is the man who will oversee the next stage in the life of what the British media has dubbed Channel Filth. And he will have ultimate say in any new series of The Bill as well as decide if They Think It's All Over continues to be funny enough to justify the cost of making more shows.

He heads RTL Group, Europe's newest and largest TV and radio broadcasting and production company, producing 160 TV programmes in 35 countries and providing 10,000 hours of programming a year to broadcasters.

Mr Bellens is earnest and charming, talking big picture and big numbers. How, for example, he wants Channel Five's 6 per cent audience share to reach 10 per cent in two to three years and how he wants to buy the 25 per cent of Channel 5 he doesn't already own. But he has no intention of letting United News & Media's CEO Clive Hollick - owner of that 25 per cent stake - make him overpay for total control. Lord Hollick is rumoured to want £500m for his stake, or about £200m more than senior RTL people say it is worth.

Mr Bellens is not forthcoming on how the next stage of Channel 5 will look. Will you get details about whether the Channel 5 head David Elstein will stay on? Or how much the programming budget might be increased? The answer would probably be "No".

The 6ft, 45-year-old Belgian was chosen to head RTL by Thomas Middelhoff, the CEO of Bertelsmann, and business magnate Albert Frere. The 19 years working alongside Mr Frere at his company, Group Bruxelles Lambert, had paid off. A London-based equities analyst calls Didier Bellens a potent mix. "He's like a tall, lean version of {Vivendi-Universal CEO Jean-Marie} Messier, with a direct link to Albert Frere."

But as with Mr Messier, who has spearheaded the audacious transformation of his French water and waste company into a global media giant, the proof for Mr Bellens will be in how the newly fortified RTL Group fares in the media big leagues.

Ironically perhaps, one of the earliest of Channel 5's in-house productions when it launched in 1997 was called Family Affairs. The in-house politics that have shaped the history of RTL Group could probably be the basis of a few episodes.

The story began in the early Thirties when the Luxembourg government awarded a broadcast licence to Compagnie Luxembourgeoise de Radiodiffusion. CLT began transmitting RTL Radio for France and Radio Luxembourg for English-language audiences in 1933. In 1984, CLT and UFA, the film unit of Bertelsmann, launched RTL TV in Germany and in 1996 the two companies merged, creating a joint CEO position that did little to smooth out the conflicts between the German and the Luxembourg sides of the company.

By this time Albert Frere and Didier Bellens were also involved through a shareholding in CLT. Mr Bellens was on the CLT-UFA management board. But if the structure of a pan-European broadcaster was in place in 1996, conflicting European regulations and plain old internal power struggles slowed CLT-UFA.

It took the fresh management perspectives of Mr Middelhoff and Marjorie Scardino, CEO of Pearson, combined with the realisation that a public listing could allow for faster growth, to complete the overhaul of CLT-UFA announced in April of this year. In fact, weeks from the time Mr Middelhoff and Ms Scardino first met in Bertelsmann's headquarters in Gütersloh, Germany, to discuss the idea of merging Pearson TV into CLT-UFA, part of the deal was done.

Ms Scardino felt the linkup was allowing Pearson TV to expand on a relationship that already had Pearson as CLT-UFA's partner in Channel 5 and Hungarian broadcaster RTL Klub. It was also a way to limit Pearson Plc's exposure to the hit-driven TV production market while still encouraging the company to take the programming risks needed to come up with hit shows. And for Mr Middelhoff to add the content assets of Pearson fits perfectly with his plan to grow the media-rich Bertelsmann portfolio.

Mr Bellens has the right assets to start his assault on the Big Media leagues. RTL Group has been wrought out of the TV programme, production and distribution interests of Pearson Television, with the broadcasting and advertising sales companies of Luxembourg's CLT-UFA, and the stake held by Frere's Group Bruxelles Lambert (GBL) in CLT-UFA.

This multi-national pudding was given a stock listing by backing all of its assets into a GBL-controlled public company called Audiofina, then renamed RTL Group. The result is RTL Group, a new company listed in Brussels, Luxembourg and London which is 37 per cent Bertelsmann, 22 per cent Pearson, 30 per cent GBL and nearly 11 per cent free-float.

And it's a power to be contended with. When the merger was announced, RTL had proforma revenues of nearly 4bn euros (£2.66bn) and cash of 400m euros. For the first half of this year RTL reported a net profit of 113 m euros versus 221m euros a year earlier, but the bulk of the difference is from the one-time gain in 1999 of 227m euros from the sale of CLT-UFA's 42 per cent stake in the loss-making German pay-TV operator Premiere World.

The figure media types point to is the operating profit before interest, tax and goodwill amortisation (EBITA). And for the six months ended in June, RTL had pro forma EBITA up 46 per cent to 316m euros, of which TV accounted for 208m euros. To put RTL in perspective, its TV revenues alone are equal to the combined revenues of Granada Media, Carlton Communications and the TV interests of United News & Media.

As an investment play in European free television, RTL Group is hard to ignore. Its 18 radio and 22 TV channels include Germany's largest commercial TV broadcaster RTL, as well as France's most-successful terrestrial network M6.

Even if free-to-air advertising revenues come under pressure in one country, RTL group runs broadcast operations in 11 European countries, thereby spreading its exposure. The Pearson TV tie-up has brought in such worldwide franchises as The Price is Right, Family Feud, Baywatch and Neighbours.

And after the success this summer in Germany on its TV channels and on its website for the reality show hit Big Brother, RTL Group has committed to a five-fold increase in web-related spending to 50m euros for the second half of the year. In August, RTL Group's websites clocked 100 million page impressions, with the site GZSZ.de for the hit TV show Gute Zeiten, sclechte Zeiten, among the most visited.

Mr Bellens believes the company's strong RTL brand means it doesn't need equity tie-ups with online partners, such as Time Warner is doing (regulators permitting) with AOL, but even so there are rumours that RTL could take over the broadband interests of Bertelsmann. Mr Bellens wouldn't comment specifically on this, but he says: "We don't need partners. We have content and we have 150 million listeners and viewers everyday and all these people we can send on-line."

With a market capitalisation of some 17bn euros and no debt, RTL is considered one of the few European media companies with the clout to expand into the US as well as further across Europe. "We are very pragmatic," says Mr Bellens, who has just returned from a week-long roadshow to analysts in the US. He says no one balked when he outlined the group's plan to take on as much as 7bn euros in debt to fund acquisitions. They all understood when Mr Bellens and his head of strategy, the ex-CEO of Pearson Television Richard Eyre, explained the synergies between broadcasting and content. After Time Warner and Disney ABC and Viacom CBS, they had heard and believed this message before. But RTL Group is a minnow when compared to these US giants, a fact Mr Bellens is eager to change.

Mr Bellens is targeting Europe first. "Radio, well, we may be interested if there are opportunities at the right price. And content. We just bought Talkback Productions {the makers of They Think It's All Over, Never Mind the Buzzcocks and Da Ali G Show, among others} and we have other plans to develop our interests in content in Europe.

"We are also looking at the States. We are present there in content (through Pearson Television's USA co-production office) but the scale of our interest is probably not the one we would like to have in the States."

Mr Bellens can raise debt for acquisitions but he could also issue more stock, which would also have the benefit of raising the public float of RTL Group above the 15 per cent threshold necessary to be listed in the FTSE 100. This would put RTL Group into certain index funds and generally make their stock more available. Rumblings that Albert Frere is hesitant about issuing more shares - and thus diluting his stake - could not be confirmed, but if anyone has the track record to deal with the Belgian tycoon it's Mr Bellens.

And Mr Bellens will need all the firepower he can muster. His vision is to replicate throughout Europe the success that RTL Group has in its biggest market, Germany. The strategy is simple: create a family of channels then circulate program- ming made in one market to all the others. The best example is in Germany where RTL owns four broadcast channels, including the market leader RTL, the more male demographic channel RTL2, kid's channel Super RTL (a 50/50 joint venture with Walt Disney & Co) and a woman-targeted channel VOX, as well as operating a number of Germany radio stations.

An action series called The Clown was originally produced for RTL. It then got a run on sister channel RT 2, before it was adapted for the French market where is broadcasts on M6 and RTL in Belgium. The family concept is already in place in Belgium (RTL TVi) , the Netherlands (RTL 4 & RTL 5) and Luxembourg. In France RTL is number one in radio and shares ownership of leading TV commercial station M6 with Suez Lyonnaise des Eaux. RTL Klub in Hungary is the market leader and RTL also owns Channel 5 in the UK and RTL 7 in Poland.

Obviously, the gap in the European game plan is southern Europe. One of Mr Bellens' first moves after the merger was to increase RTL's stake in Spain's largest commercial channel Antena 3 to 16 per cent, and lay the groundwork for further co-operation with the channel's main shareholder Telefonica Media, a unit of the Spanish telecommunications company, for future, un-defined projects.

"It's a real partnership with Antena 3 in Spain for further development," says Mr Bellens. "Antena 3 says we are their European media partner for development. We haven't discussed a shareholding (equity swap) but we have developed ideas that will increase our business stream between Antena 3 and our group."

Telefonica Media is a likely partner for RTL. The Spanish company turned the heads of some old media hands when it stomped up about 4bn euros to buy Endemol, a leading European independent producer. Linking with Telefonica Media could prove a good way to stand up against Europe's other southern media giant Mediaset. And although buying stakes in existing broadcasters can be expensive, there are opportunities in the up-coming launch of digital terrestrial TV and digital radio services across Europe.

Mr Bellens will triple his production budget to fund tested shows (such as the 11th series of Baywatch) and hopefully create new blockbuster formats, particularly ones re-useable and exportable to his European channels and within the global TV market. His aim is to increase margins to 20 per cent, up from 16 per cent at the end of July. Banker Merrill Lynch estimates that margins could hit 20 per cent by 2005.

Margins are of particular interest to Mr Bellens. A recent in-company, get-to-know-you session by RTL Group's senior managers was billed as a bonding exercise, but ended up being dominated by Mr Bellens talking about margins. One executive who attended the session told me: "(Bellens) is not the most entertaining of guys. He's very numbers-orientated, but he seems like a nice guy. He doesn't have a big ego. There are a lot of big egos in this business, but Didier isn't part of that." So RTL Group is run by a non-egomaniac, with a savvy British head of strategy and content (Eyre) and a straight-talking German COO (Ewald Walgenbach).

They are known by some observers as The Three Musketeers, but it remains to be seen if Mr Bellens can make this European soufflé of senior executives adopt an "all for one and one for all" mentality.

If he can, and if the troops and the three big shareholders follow suit, then RTL could be elevated into the front line of global media businesses in the next few years.

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