Digital Streaming Expansion Will Redefine European Media Landscape

Key Takeaways

• Strong growth in streaming and digital advertising, aided by strategic acquisitions and broader partnerships, is reducing reliance on declining linear TV revenues.
  
• Expanded content offerings and a focus on proprietary IP and technology are driving platform engagement, operational efficiencies, and margin improvements across segments.
  
• Heavy reliance on legacy TV, major streaming competition, and acquisition risks threaten margin growth and digital transition, especially amid fixed costs and macroeconomic uncertainty.

Catalysts

An entertainment company, operates television (TV) channels and radio stations, and provides streaming services in Germany, France, the Netherlands, Belgium, the United Kingdom, the United States, and internationally.

• Rapid expansion in streaming, with paying subscribers up 15% and streaming revenue up nearly 30%, and clear progress toward near-term profitability (projected for 2026), improves the revenue mix, boosts visibility, and should reduce earnings volatility as digital/digital+advertising revenue replaces structurally declining linear TV ad revenues.
  
• The acquisition of Sky Deutschland is set to triple subscription-based revenues within RTL Deutschland, broaden audience reach, and unlock €250 million in synergy savings, driving top-line growth, margin improvement, and long-term earnings accretion through diversification and scale.
  
• Integration of new sports rights (Bundesliga, DFB Cup) and expansion of all-in-one app offerings (video, audio, podcasts) increases platform stickiness, time spent, and ARPU, thus supporting sustainable revenue growth and higher unit economics for the digital business.
  
• Fremantle's focus on scaling proprietary IP, AI deployment throughout its production value chain, and targeted acquisitions in local content positions the segment to capitalize on increasing European and international demand for local/original programming, driving licensing revenues and boosting margin targets toward 9% by 2026.
  
• Digital advertising and programmatic technology expansion, coupled with broader partnerships and alliances, will enable more targeted, higher-CPM ad sales, mitigating the linear-TV ad market decline and supporting a shift toward higher-margin, data-driven revenue streams in the long run.

RTL Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming RTL Group's revenue will grow by 4.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.9% today to 7.0% in 3 years time.
• Analysts expect earnings to reach €496.3 million (and earnings per share of €2.82) by about September 2028, up from €242.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €552.0 million in earnings, and the most bearish expecting €351 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.4x on those 2028 earnings, down from 22.0x today. This future PE is lower than the current PE for the GB Media industry at 27.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.17%, as per the Simply Wall St company report.

RTL Group Future Earnings Per Share Growth

Risks

• The ongoing decline in traditional TV advertising revenue-evident from a 3.2% group revenue decrease and mid-single-digit declines in Germany and France-reflects the secular shift from linear TV to digital/on-demand platforms, which could reduce overall top-line growth if digital revenue fails to offset legacy losses or the pace of transition stalls.
  
• Intensifying competition from global streaming giants (e.g., Netflix, Amazon, YouTube) may compress margins and limit subscriber growth for RTL's digital platforms, heightening risks around the ambitious streaming revenue target (€750 million for 2026) and potentially resulting in lower-than-expected digital ARPU or market share.
  
• The planned acquisition of Sky Deutschland, while potentially strategic, introduces execution risks including regulatory hurdles, integration challenges, and substantial increases in content spend (annual spend to more than double to €2.5 billion), which could erode margins if anticipated synergies (€250 million annual) and upselling revenues do not materialize as forecasted.
  
• RTL continues to experience high fixed costs related to traditional broadcasting (highlighted by one-off restructuring items and efficiency measures at RTL Deutschland and Fremantle), which could constrain net margin improvement if revenue shifts further to lower-margin digital segments or if cost cuts impact content quality or market positions.
  
• Revenue and profitability remain cyclical and exposed to broader macroeconomic and advertising market volatility-management's outlook relies on a modest TV advertising recovery in H2 2025 and economic improvement in Germany and France; any macroeconomic downturn or persistent weakness could sharply impact revenue, adjusted EBITDA, and payout capacity.

Valuation

• The analysts have a consensus price target of €37.149 for RTL Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €41.0, and the most bearish reporting a price target of just €31.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €7.1 billion, earnings will come to €496.3 million, and it would be trading on a PE ratio of 13.4x, assuming you use a discount rate of 5.2%.
• Given the current share price of €34.35, the analyst price target of €37.15 is 7.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.