News | RTL Group | Colgone, 09/29/2013

Claude Schmit: ‘We’re Investing Massively In The Future Of Our Program Line-Up ’

In April 1995, the German children's channel Super RTL was launched as a joint venture by Bertelsmann's Television division, today, RTL Group, and the Walt Disney Company. What followed is an impressive success story: For the past 15 years, the highly profitable channel has been the German market leader in children's television, something not even the emergence of new competitors such as the public service broadcaster’s Kinderkanal and the commercial children's channel Nickelodeon could change. Despite this strong position, Disney has decided to launch its own free-to-air Disney Channel in Germany in January 2014 – and to move the Disney series broadcast on Super RTL until now to the new channel. In an interview, Super RTL CEO Claude Schmit discusses this unusual situation of competition from within, and his channel’s strategic response to it.

Mr Schmit, Super RTL is the market leader and is very profitable, so why has Disney decided to launch its own Disney Channel?

Claude Schmit: Super RTL was always a special case for Disney. We are the only TV channel in the world for which Disney entered into a joint venture. Ever since the channel was founded, we’ve repeatedly heard the arguments that have now led to the launch of a separate Disney Channel in Germany. It's not that Disney is unhappy with the commercial performance of Super RTL – quite the opposite. Nor is it about having sole control, although that may of course play a part. The point is rather that Disney feels that in relation to the country’s economic strength, too little money is being made in Germany from merchandising Disney products. For Disney, merchandising sales are generally very much more important than television ratings. The new Disney Channel is hoped to boost German merchandising sales. But based on my years of experience I know that the merchandising and sale of children's toys in Germany works differently than in the U.S. So I don’t believe that this strategy will live up to the very optimistic assessments of its success – and I’ve always told Disney this.

How much of a threat is the Disney Channel to Super RTL?

Claude Schmit: Since the pie is not getting any bigger, all German children's channels will be affected by the launch of the Disney Channel, although its success is by no means a given. But with the strong Disney formats, over time the Disney Channel will probably succeed in achieving a significant market share. And Super RTL will be hit doubly hard by the market entry. First because of the increased competition for ratings and hence advertising revenues, and secondly by the loss of popular Disney series like "Phineas and Ferb" and "Jessie."

And how serious is the loss of these Disney series for the channel?

Claude Schmit: A few years ago I would have said, "Terrible!" At that time, this loss would have really hit us hard. However, we now have other popular content such as our own homegrown formats. Disney most recently made up about 30 percent of our daytime program lineup. However, and that’s another part of this story, this also includes formats that we certainly would not have chosen to buy and broadcast on our own. From January, we’ll actually be missing about 20 percent from our daytime lineup, which is no small thing...

How do you intend to replace that 20 percent?

Claude Schmit: Once it became clear that Disney had decided to launch its own channel we decided not to just sit around and wait, but immediately start looking for high-quality replacement – after all, we still want to be the German market leader in a few years’ time. Our biggest success in our search for new partners came in May: a long-term partnership agreement with DreamWorks Animation, the world’s largest independent animation studio. Series spin-offs from bestsellers such as "How to Train Your Dragon " and the animation movie scheduled for this fall, "Turbo," will be shown exclusively on Super RTL. We expect to cover about ten percent of our daytime program lineup with these high-profile formats, especially in the important access primetime slot. And unlike with the Disney formats, we also got the online rights for these formats, which will make our website even more attractive for children.

And how will you fill the remaining gap in the program lineup?

Claude Schmit: Primarily with the in-house productions I mentioned earlier. Homegrown popular-science and information programs are a longstanding tradition of Super RTL and of German children's television in general. A recent extensive study we commissioned indicates that parents’ expectations of children's TV are very high. They want us to show educationally valuable programs. We will therefore invest in this area and will show our popular-science shows in the important access primetime slots as well in the future. We also investing a lot more than we used to in “production deals,” which means we get involved in exciting formats during the production phase to secure the option for broadcasting them later. Here we are mainly looking at production in the U.K., but also in France and Canada. Production deals used to be rare with us, but we have now signed 15 of them. We see this as a massive investment in the future of our program lineup, as these deals won’t have an impact until one to two years from now at the earliest.

Without the support of Disney on the one hand, will Super RTL be able to rely more on help from Mediengruppe RTL Deutschland on the other?

Claude Schmit: Absolutely! As a family member of Germany's largest broadcasting group, we benefit from the output deals that Mediengruppe signs with the major Hollywood studios, because we end up with some of the formats. For example, next season we are broadcasting the German premiere of the U.S. fantasy series "Secret Circle" and the Canadian mystery series "Lost Girl." We will also continue to show the very popular series "Once Upon A Time." And thanks to an output deal, we will be showing another Disney series from Oct 14, "Scandal," one of the surprise hits of last year's TV season in the U.S. Our Mediengruppe colleagues will support us even more in future, especially with the evening program lineup and with intensified cross-promotion across channels. Together with our ad sales house IP Deutschland, we have looked at which target groups we can best reach in primetime, and will now increasingly cater to young female viewers in this time slot. So in the evenings, Super RTL will be aimed more at women; and Mediengruppe will supply the programming.

As a joint venture partner, Disney is completely in the know about all these plans, and yet it operates as a competing broadcaster. How is that supposed to work?

Claude Schmit: Disney is handling this problem very professionally and in accordance with the strict U.S. compliance regulations. Disney began by building a preventive "Chinese wall" – so in the last few months Super RTL has stopped being a direct Disney subsidiary. Now managers from its U.S. sports channel ESPN sit on our Advisory Board, rather than Disney managers. They report not to the Disney headquarters in Burbank, California, but to the ESPN headquarters in Baltimore. The only thing that interests our ESPN colleagues is the channel’s financial prospects.

Can such acompartmentalization really be waterproof?

Claude Schmit: Yes, that is the question, of course. But we’ve already had two very important decisions that served as test cases. One concerned the extension of our marketing agreement with IP Deutschland, which we are very satisfied with. Decisions of such magnitude have to be approved by the Advisory Board. The ESPN committee members would certainly have been able to find a reason to deny the extension, but didn't. And the second case was our contract with DreamWorks, which is a direct response to the Disney Channel. But here too, the Advisory Board agreed without further ado. If this continues to be the case, if Disney in fact limits its role to that of a purely financial investor, then it can work.

The measures you’re taking in response to the launch of The Disney Channel don’t just include changes to the program lineup – you’ve also announced job cuts?

Claude Schmit: Yes, I told the staff in June that we will cut up to 20 jobs. We must – at a time in which Super RTL is doing really well – prepare for tougher competition. It’s better to put together fair severance packages now while we have the time, than having to perhaps respond more frantically at a later date. After three months, I can say that the program has been very well received, and we’ve been able to implement it more quickly than planned.