RTL Group: Navigating Ad Slump to Streaming Dominance – A Turnaround Play by 2026

As traditional TV advertising revenue stumbles, RTL Group is positioning itself as Europe’s streaming disruptor. Despite a 6.4% decline in German TV ad revenue in Q4 2024, RTL’s 42% surge in streaming revenue and 21% jump in subscribers signal a strategic pivot that could redefine its valuation. With a clear roadmap to streaming profitability by 2026, RTL offers a compelling turnaround story for investors willing to ride out near-term ad headwinds.

Streaming Growth: The Catalyst for Recovery

RTL’s streaming division is now a €403 million juggernaut, fueled by its flagship platforms RTL+ (Germany) and M6+ (France). The 42% revenue spike in 2024 was driven by:
- 22.7% subscriber growth in Germany (6.06 million total), aided by bundling with Deutsche Telekom’s Magenta TV.
- Exclusive content, such as the hit game show Du gewinnst hier nicht die Million, which drew 73% of new male subscribers aged 30–49.
- Ad revenue gains on both RTL+ and M6+, where programmatic targeting is boosting CPMs.

Margin Improvements: Path to Profitability

RTL’s streaming start-up losses narrowed to €137 million in 2024, down 25% from 2023, with further reductions to €80 million expected in 2025. By 2026, RTL aims to turn streaming into an EBITA-positive business, supported by:
- Bedrock tech migration: A planned migration to the Bedrock platform by early 2026 will slash costs and improve scalability.
- Content leverage: Bundesliga highlights and FIFA World Cup rights (2026–2030) will deepen its sports catalog, a key driver of subscriptions.

The broader business also shines: Adjusted EBITDA rose to €992 million (15.9% margin) in 2024, with Fremantle’s international distribution boosting margins to a target of 9% by 2026.

Catalysts for Continued Growth

1. Deutsche Telekom Partnership: The renewal of RTL+’s bundling with Magenta TV until 2030 ensures a steady subscriber pipeline.
2. AI Innovation: A partnership with OpenAI will enhance content creation, enabling hyper-personalized recommendations and cost efficiencies.
3. Content Aggression: RTL’s €200 million annual content spend on regional hits (e.g., German crime dramas) and sports rights secures its niche against global giants.

Valuation: A Discounted Gem

RTL trades at 8.57x EV/EBITDA, below the media sector median of 8.75x, and a P/E of 13.42, far below peers like Netflix (19.2x) and Disney+ (22.7x). With an 8.3% dividend yield (€2.50 per share) and plans to pay out at least 80% of net income, RTL offers rare value in a volatile market.

Why Buy Now?

• Short-term pain, long-term gain: The ad slump is temporary, while streaming’s 66% annual viewing-hour growth (up to 649 million hours in 2024) is structural.
• Undervalued upside: At a fair price of €24.84 (vs. current €4.20), investors stand to gain 226% if RTL achieves its 2026 targets.
• Regional dominance: RTL’s focus on Europe’s fragmented streaming market avoids costly global battles, leveraging telco partnerships and local content mastery.

Risks to Consider

• Macroeconomic slowdowns could delay streaming adoption.
• Competitor pricing wars: Netflix’s ad-supported tiers may poach budget-conscious users.

Final Verdict: Buy

RTL Group is a low-risk, high-reward play for investors with a 2–3-year horizon. With streaming’s momentum, margin improvements, and a valuation far below peers, RTL is primed to emerge as Europe’s streaming titan by 2026. The ad slump is a speed bump, not a roadblock.

Act now—RTL’s upside is clear, and the discount won’t last forever.