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RTL’s high on Five

Euro giant buys out web it co-founded

LONDON — Blighty’s youngest terrestrial web, Five, is about to grow up — and competing U.K. networks are certain to feel the heat.

Five’s majority shareholder RTL, Bertelsmann’s pan-European media giant, finally put its money where its mouth is and bought out United Business Media’s 35% of Five for $421 million July 20.

This frees Five’s management, frustrated by more than eight years of dealing with two owners who didn’t always see eye to eye, to take the battle to their digital rivals.

For a start, this should mean substantial new investment.

“It should certainly loosen up program budgets,” opines Theresa Wise, partner at consultants Accenture. “UBM was a sleeping partner that was reluctant to invest in the business.”

RTL CEO Gerhard Zeiler, an avowed Anglophile, is likely to want to move fast to shore up the web’s precarious position and help it to compete more effectively against terrestrial rivals Channel 4 and ITV.

Both C4, who last year rejected Five as a merger partner, and ITV have a credible digital strategy; C4 recently began broadcasting spinoff web, E4, as a free service, while ITV is preparing to launch its fourth digital channel, male-skewed ITV4, this fall.

Five, meanwhile, is still stuck with its single core channel, where ratings have stalled. RTL claims commercial impacts among the key ABC1 16-34 demo are up 5% year on year, but overall ratings for the first six months of 2005 showed a decrease of 3%.

“Five needs to launch some new digital channels quickly or risk being left out in the cold,” says Wise.

The point is not lost on Five’s CEO Jane Lighting — or Zeiler. “Five has done fantastically,” he told the Royal Television Society in London in May. “What we have to do now is either to build, buy or merge to get a family of channels.”

One possibility is a children’s web based on Five’s successful pre-school offering, but this is a ferociously competitive market.

The signals from RTL’s corporate HQ in Luxembourg are encouraging for Lighting and her team, which have moved the web upmarket thanks to a strong factual lineup and a shrewd diet of U.S. imports like “CSI,” “Joey” and, more recently, “House.”

It’s a far cry from Five’s launch offering back in March 1997, which its first program topper Dawn Airey subsequently described as “football, films and fucking.”

“We are not going to give Five a blank check,” says RTL spokesman Andrew Buckhurst, “but if management can convince us that what they are proposing makes smart investment sense and will drive long-term growth, we will back them.”

The good news for U.S. studios is that any extra coin is certain to benefit them.

“Five has always been a smart buyer of the very best American shows, especially crime series like ‘CSI’ and ‘Law and Order,’ ” Buckhurst adds. “This is a very important part of our program grid and will continue to be at the heart of our strategy.”

As for growing as a channel operator, one possibility is that Five will bid for Telewest’s content arm, Flextech, owner of a suite of channels that includes Living TV and UK Gold (Variety, July 18-24).

For RTL, which has interests in 31 TV companies and 33 radio stations in 10 European countries, the only downside to controlling Five is that a wholly owned channel is more attractive to would-be predators, especially since UBM had a reputation for being a difficult negotiator.

So who are the potential bidders? Under CEO James Murdoch, satcaster BSkyB’s strategy is focused on boosting subscriber numbers rather than acquisitions, so a bid from the Murdoch camp looks unlikely, if not impossible.

ITV is a more likely candidate. “Five and ITV would make a perfect fit,” opines Wise, a view shared by two ex-Five toppers, Greg Dyke and David Elstein. “There are massive synergies to be gained on both sides,” she adds.

Right now, though, RTL is determined to grow its new, wholly owned asset, and selling Five is the last thing on its mind.

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