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TMG at 45: Group’s Strength is Adapting to German Market

It’s one of Tele Muenchen Group’s strengths that the company has been able to adapt to changes in the German market — one of the biggest in the world — and cater to its specific needs.

After 45 years as a rights trader, producer and broadcast network owner in Germany, TMG’s chairman and owner, Herbert G. Kloiber, has a vast network of contacts among international producers and distributors, whom he can call on to supply the movies and TV shows the German market needs.

“You know loads of people who’ve done it before, and some that have done it well, and so you try and stick to those that you believe have served up the right dish at the right temperature,” he says.

The arrival in Germany of video-on-demand and subscription streaming service operators such as Netflix, Amazon and Vivendi’s Watchever, alongside home-grown streaming sites like Maxdome, is a positive development for TMG. As a rights trader and producer TMG counts them all as its customers. But German viewers are conservative and have been reluctant to pay for television content in the past since they have been so well served by domestic commercial and public broadcasters.

“Traditionally, the market has been dominated by free-to-air TV viewing, and the pattern of the viewing has not shifted,” Kloiber says, because Germans stay with their personal patterns a long time. Change is hard. “They are not like the French, (who are) very early adopters of digital gadgetry, and that is why we have a home-video business that has not even declined in 2014 or 2015.”

He adds: “We still believe over 100 German-generated channels will massively occupy the viewers’ time budget for the next three to five years — and beyond.”
It’s fortunate that TMG also owns one free-to-air broadcaster — Tele 5 — and holds a big stake in another, RTL II.

Kloiber has total faith in free-to-air television’s economic model.

“Look at RTL II, which has been a very constant player, in the second generation, with between 5% and 7.5% market share, and now it is about 6.2%, and every year they have been able to kick up the net revenue. That’s because it has become a much scarcer commodity to aggregate 500,000 to 1 million viewers every night. Print can’t do it, online can’t do it, mobile can’t do it; free TV continues to do it.”

Kloiber believes that the VOD and streaming players will simply enlarge the pie rather than take a bite out of it.

“People don’t watch less television because they’ve just spent 20 minutes watching Netflix on their iPhone at the train station. They’ll still come home at 7:30, and watch two to three hours of free TV. So I think it’s not one taking from the other, it’s really just adding.”

Kloiber notes, too, that the advertising world has started to question the effectiveness of advertising on digital platforms.

“Sooner or later the advertising agencies are going to have a problem selling (advertising on digital platforms) to their clients. There are big doubts about the effectiveness and pricing of new-media advertising.”

The other issue with the streaming platforms, he says, is they are not distinct enough in terms of what they offer, and this will lead to specialization when it comes to selecting the product they offer.

For those two reasons, he expects significant changes in the pay TV and VOD market to come, which will reduce the number of acquisitions they make.

“I think the shake out is going to happen in the next two years,” Kloiber says. “They’ll all want to be driven by their own productions, and they are making so many of them that it is hard to understand why they still need so much acquisition.”

Kloiber’s son, TMG managing director Herbert L. Kloiber, adds: “It seems to me this whole development is similar to the premium pay channel model of the 1980s, where it gets aggregated, and there will be one home for all of them, and in a market like Germany, where for over 20 years it wasn’t possible for one pay platform to be successful, suddenly you have five. That is unlikely to be a viable proposition.”

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