Consolidation in the media industry is about to take the next step. In the German television and streaming market, this would be the most significant for a long time: RTL wants to take over Sky Deutschland. The use of the subjunctive is appropriate, as a decision by the EU Competition Commission is still pending. Assuming approval from Brussels, the question arises as to whether the merger of the two companies could start a series of successes.

It is not a particularly bold hypothesis that RTL and Sky will be better able to keep up with the US heavyweights Netflix, Amazon Prime and Disney+ in the German-speaking countries and regions in the long term. With currently 11.5 million subscribers, the two would no longer be that far behind Netflix's estimated 17 to 18 million paying customers. The industry estimates Amazon Prime at 14 to 15 million subscribers, Disney+ at 8 million.

Economies of scale play a role - and not just for centralised functions. In negotiations with sellers of film and sports rights, size creates a stronger position. However, in order to become profitable, both merger partners need to make considerable progress on both the revenue and cost side. RTL Group has not yet reached the threshold for an operating profit with its streaming business. This should be achieved next year. For this year, the management is expecting start-up losses of around 80 million euros on an Ebita basis. Three years ago, the deficit was almost three times as high.

Sky Deutschland is aiming for a balanced result this year - before interest, taxes, depreciation and amortisation (EBITDA). It would be the first year without a loss at this level since the pay-TV company was founded 34 years ago, when it was still called Premiere. Alongside media entrepreneur Leo Kirch and Canal Plus in France, RTL majority shareholder Bertelsmann was also involved at that time. The circle would then be complete.

One year without an operating loss would, of course, be no proof of a lasting turnaround. Sky could at least benefit from the financial and investment strength of the Bertelsmann Group via RTL, but would have to bring in more than it spends. The previous US owner Comcast had been looking for a buyer for some time. In order to reach its goal, Comcast made the offer more attractive. The decisive factor was to bid for a large part of the rights to the Bundesliga over the next four seasons. Sky Deutschland also reduced the number of employees by around 15% to around 2,200 since 2022 - primarily in the service centre. This also improves the starting conditions.

The opportunities of a merger lie primarily in the complementary business. RTL brings in entertainment with shows, Sky brings in sport - especially football (but without the Champions League matches) and Formula 1. In order to generate as much revenue as possible for the content, a joint company can use and combine the various platforms: free-to-air, ad-financed programmes, pay-TV and streaming services. The target groups also complement each other. RTL's audience tends to be more female and younger than Sky's.

Hence, there are several good reasons why a new German television and streaming group RTL-Sky could hold its own against the competition in the long term. It would be good news for Germany as a media centre if this field were not left to the US companies alone. In any case, there is no way around the consolidation of the domestic market with more than two dozen streaming offerings - even if the willingness to pay has increased significantly since the coronavirus pandemic. Netflix and Amazon Prime are established in many households. The merger of RTL and Sky could create the conditions to establish themselves as a third force. However, the takeover would still be far from a guarantee of success.