Still Made To Grow
Last Thursday we announced our results for 2011. I’m proud to say that we had another year of record sales, and generated significantly increased cash flows, which has allowed us to propose a dividend which is 20% higher than that paid to shareholders in 2010. MTG has come a long way – from a single channel in 1987, to distributing channels in 35 countries today. We have well positioned media houses in 11 countries, and satellite platforms in 9. Yes, there are some operational issues that we are addressing and there are challenges to be met across our various territories, but also opportunities for continued growth and expansion.
Those opportunities come in any number of shapes, and it is up to us to act fast and work hard in order to grow in the future. Broadly, the opportunities we face can be divided into three main areas. The first is technology, where we already are a cutting edge, device independent premium content broadcaster. We are staying ahead of the game, and working intensely on developing our portfolio of new and traditional services.
The second area is content. It goes without saying that we must maintain our focus on offering our viewers the most exciting content, whether it’s reality TV, drama or comedy series, feature films or premium sports. We are seeing the popularity of live content and strong local connections increase, and more media windows are opening up all the time.
The third area is one where we traditionally have been very strong – geographical expansion. When we entered the Baltic states and Russia, over ten years ago, many people questioned our choices. Now, when we have proven that our commitment and desire to go against the stream actually builds great businesses, people are asking what the next step is. For us, the next step is our African operations. The TV industry in Africa is still in the early stages of development, but our first free-TV channel, Viasat1 in Ghana is doing great, and already has a viewing share of over 20%. The advertising market is growing fast, and we have made important steps on the continent by launching our pay-TV channels in four African countries.
We have been able to achieve all of this by working as a close knit team and by supporting each other, but also by challenging each other on a daily basis. Our culture is, and will always be, one of our key assets. We as will always strive to move a bit faster, work a bit harder and, last but not least, have a bit more fun whilst doing so than our competitors.
Hans-Holger Albrecht
There’s no escaping the future
Earlier this week, Sky came out with some big news, announcing the launch of a new OTT TV service. Jeremy Darroch pointed out that Sky will now offer some of its most popular content through a wide range of broadband connected devices, and that it is a totally new way for them to reach out to viewers who have not subscribed to the full offering before.
Sky has offered online services like Sky Go to their existing clients before, but up until now their focus has been on the existing subscriber base, which is understandable given the competitive landscape in the UK. But the landscape is changing. With Netflix now on the market along with services like iTunes, YouView and LOVEFiLM and games consoles like the Xbox and PS3 offering everything from popular player and catch-up services to movie streaming rentals, it’s safe to say that the future is here. Actually it’s everywhere, on a “when you want it and how you want it” basis, and it is forcing traditional operators change the way they view their own business, offering and environment. It’s also forcing companies to hurry on with the move from being satellite, cable or even IPTV companies, to being “anytime anywhere” content providers, before players like Apple TV and Google’s YouTube decide to shake things up even further.
Historically, MTG has often used Sky as a benchmark and an industry leader to copy with pride and precision. But when it comes to OTT services, I’m proud to say that we were considerably ahead when we launched Viaplay’s streaming pay-TV offering. For this we can thank the fiercely competitive Scandinavian TV broadcasting landscape and the high broadband penetration in our home countries, which created an environment in which we had to adapt to compete and grow. This landscape allowed us to launch Viaplay, after a number of years testing different technologies and business models, and I believe that our multi-tiered subscription offering is the right one going forward. Viaplay’s content library feeds from our integrated free-TV and pay-TV business structure, and the strength of the service lies in offering exclusive and library TV series and movies, as well as premium sports in one place, together with both our own and competing catch-up services.
Personally, I look forward to following the development of Sky’s new OTT service and trying it out when I get the chance. But for now, Viaplay on my iPad is more than enough and I look forward to logging in to watch Chelsea against Manchester United on Sunday.
Hans-Holger Albrecht
Winds of change
The world continues to change faster than ever before. It is of course amazing that you can watch content on your iPad, Android smartphone or any other device, but what is even more amazing is how people’s behaviors and ways of consuming content are changing as well. There was a lot of coverage last week about the PIPA and SOPA antipiracy bills in the US, after both were effectively stopped after a large amount of protests not only from businesses, but from consumers and viewers who felt that the language of the bills could pose a threat to an open internet.
The piracy legislation debate is a complicated one, and we as a media company are of course interested in legitimate solutions which benefit the industry as a whole. But our view has always been that the way forward is by offering our customers interesting and attractive legitimate high quality services, like our own Viaplay. One of our core rules at MTG is “see your customer”, and I continue to believe that if you offer what your customers want, they will be happy to pay for it because it provides them with value, saves them time and effort and makes their lives more interesting. There are plenty of examples out there that prove this, and I am convinced that the media industry players who continue to develop their offerings, adapt and embrace change and the many opportunities it brings will continue to thrive in the future as well.
Hans-Holger Albrecht
No need to run for the lifeboats, the pay-TV ship is still sailing
About a week ago, Credit Suisse issued a research report discussing the future of pay-TV, and the views presented by the bank were discussed in a wide range of media in Sweden. I found the Credit Suisse report interesting, and it is always valuable to get a feel for what goes on in the US pay-TV market. However, it is important to remember that the Scandinavian pay-TV markets, in which we have been operating for 20 years now, are arguably the most competitive markets in the world. Broadband penetration in our countries is among the highest anywhere, and the internet speeds delivered in the Nordic countries among the best. All of our TV has been fully digitalized for several years, and DTT, IPTV, satellite and cable distribution is more or less ubiquitously available. On top of that, OTT services have now been present and growing in our markets for several years.
This year we celebrated the twentieth anniversary of our pay-TV operations – the core of our pay-TV activities in the Nordics today. What Credit Suisse discusses in the report is not that these ‘more traditional’ pay-TV services are dead, or “about to fall off a cliff”, but rather that there is a potential shift in consumer behaviour on the horizon, as a new generation of viewers emerges. These viewers are technologically savvy, and time is their most valuable commodity. They expect to be able to access their content no matter where they are, independently of time or device.
The idea that the market share of traditional pay-TV distribution like satellite or cable TV services will be stable, or decline slightly over time is not new and were one to look at satellite and cable TV subscribers in Scandinavia over the last year or so, this trend is clearly observable.
My view, however, continues to be that this presents a huge opportunity for us as a company. Our view has always been that the technology of distribution is always secondary to the content offering and viewer experience. MTG has an old saying, that “content is king, and distribution is the throne it sits on”. TV is about delivering content and experiences to viewers, in the most exciting way possible, and this is what MTG is all about.
And we have come a long way. Twenty years ago, we were just starting out, and analogue TV offered three channels. Today, we have, and continue to be, instrumental in pioneering new viewer experiences. Not only can our viewers access our pay-TV packages on our own satellite platform, or through third party cable and IPTV networks, but they can also go online to access a broad range of films, TV series and premium sports on Viaplay, our OTT platform, which like is Hulu, Netflix and ESPN all in one place.
Our ambition has always been to be where our customer is, and to deliver what our customer wants, when she or he wants it. Keep in mind that the development of these services takes time, and that we still are in the early stages of our work with Viaplay, but are already seeing promising trends, ones which we hope to harness both to grow as a company, and to continue delivering a faster, broader and better TV experience to our customers. And we are getting recognized for it. Just recently, three people from MTG were recognized in the recent Digital TV Europe 50 list, and all three have been deeply involved in our Viaplay offering and our technological development.
In the meantime, we will also continue to improve and refine our satellite pay-TV services. Satellite is still the best way to deliver a broad range of content in data intensive formats like HD and 3D, and there are opportunities here as well, both in terms of programs and service offering, as we increasingly integrate our linear and on-demand services to create seamless user experiences.
Hans-Holger Albrecht
Turbulent times… But we are well positioned
I don’t think that anyone could have avoided the broad range of news regarding the uncertainty of the Euro, the economic problems in Greece, and what is going on in large European countries like Italy and Portugal. The financial markets have also been pressured recently, with our home Stockholm market down 17% this year. At the same time, our home Scandinavian economies have continued to perform well, and we haven’t seen any signs of deterioration in the Scandinavian advertising markets so far. We are of course not immune to what’s going on globally, and we have to remember that things can change quickly, but demand levels for our core Scandinavian free-TV businesses remained strong during the first nine months of the year.
In our Eastern European markets the picture remains somewhat different and the advertising market recovery is lagging, while pricing levels remain low. Despite that, and thanks to our consistent work with the channel schedules and brands in these territories over the last couple of years, we increased our advertising market shares in all but two territories during the first nine months of the year. Separately, our pay-TV operations continue to grow. And, as we have seen during the recent recession, these kinds of businesses tend to be more stable during an economic downturn, even if no service or business can be immune to what is going on in the broader market.
I think it is fair to say that we live in times where change can happen faster than ever before. Whether this change is brought about by news, new technology and services or regulatory changes, we have to be able to adapt quickly or risk falling behind. We have to continuously re-evaluate our business models, our service offerings and how we run our company, and we have to be prepared to take tough decisions if that should prove necessary.
At the same time, I am convinced that we are correctly positioned as a Group. Our mix of mature countries and businesses with new platforms and emerging markets gives us a diversity which almost no other company can demonstrate. And it also allows us to be at the forefront of our industry, providing our customers with innovative solutions like Viaplay, which we will be able to export across our territories as and when the time is right. And, equally important, we have a fighters mentality as a Group, which makes us work smarter, run faster and be even tougher when the times demand it. As the saying goes – when the going gets tough, the tough get going.
Hans-Holger Albrecht
Busy days
As a CEO of a multinational company, I spend quite a lot of my time travelling between our countries. Even if it can be tiring to be on the road, it is both inspiring and rewarding to meet and learn from people who have a deep understanding of local market dynamics. These important face to face meetings also help me to get the helicopter perspective needed to observe the whole playing field and get a feel for the broader trends.
Today, this is more important than ever before. As some of you will have seen, we recently implemented a revised management structure for MTG. We will now coordinate our free-TV and pay-TV businesses on a geographical basis, but will continue to keep the structures which benefit from centralization in our London offices.
As a company operating in over 30 markets, it’s easy to get pulled into the details. All countries are different after all. They all have their individual flavour and quirks. So it’s only by taking a step back that you can begin to see the broader picture and the trends which emerge across the landscape. But all landscapes aren’t geographical. You also need somebody to concentrate on the rapid changes in areas like technology, programming or legislation. All of which the new operating structure will help facilitate even better.
At the same time, the new structure is built on people who have many years of experience with the MTG, as one of our goals has always been to develop and grow talent internally whenever possible. And people who have been with us for many years understand the markets, as well as our business and people, but also our strengths and weaknesses. All in all, it’s been a busy couple of weeks, but this is positive. We continue to push forward, to adapt and change quickly and when necessary. This will allow us to continue to grow, and to keep MTG exciting, fresh and dynamic.
Today I am travelling to Russia. It may still only be a small part of MTG’s overall sales and profits, but it is an area of great potential, and I look forward to meeting the team.
Hans-Holger Albrecht
The MTG United for Peace Cup Finals
Last Saturday I arrived at the LSK sports centre in Lillestrøm, just outside of Oslo in Norway, to watch 120 children from twelve countries and two continents take part in the MTG United for Peace Cup finals. If you want to find out more about the actual event or the charity, I recommend visiting the United for Peace web site. It has information about the event and the charity, pictures, stories from our ambassadors and more. For my part, I got the opportunity to play football together with Norwegian and international football players as well as to meet each of our young participants during the prize ceremony.
But the real highlight of the day for me was the tournament where we create the teams by mixing together children from the different countries. It took place after the individual country finals, and I can honestly say that it was a great pleasure to watch the young players come together, despite the barriers that their different backgrounds and languages would seem to present. It’s a tangible thing – when they arrive they stick to their own teams and people from their own country. But by the end, after having played and fought together and against each other, they mix with one another, they laugh despite not sharing a langue, they hug and applaud each other.
I believe in competition. I believe that it is healthy, and I believe that by competing we learn both about ourselves and the world. And while professional competition can be fierce and brutal, often pitting people against each other, there is also playful competition, full of laughter, energy and fun. And on Saturday, that is what we saw. Make no mistake, when the children play, they play to win. I really believe that our young participants truly want to win every match. They give their best to the team, but at the same time, they also reach out to each other, and the joint task of making that goal and defending your own posts creates a bridge that spans across age, culture, background and gender.
But as much as this is about people and not about football, it is also about football. I know of no other sport that is so much about cooperation, about understanding each other and working together, and which is so simple to do. You don’t need any tools besides a ball, and if you don’t have that, you can use a can, a bag, anything that you can kick between two posts. And that’s why I love playing it – it’s about unity and competition at the same time, anytime, anywhere.
Hans-Holger Albrecht
The leaves grow, but the roots remain
Facebook recently announced the next step in its development. There are plenty of articles and reports on the changes Facebook is making, so I am not going to go into it too much, but the point is that the upcoming transformation will increase Facebook’s integration into the lives of its users. Many of the coming changes have to do with how users relate to and consume media – articles, books, music or video content, and Facebook has also announced that it will partner with both Netflix and Hulu, to stream TV content via the social network itself. The purpose of these changes is both to improve the experience for users, and to create a platform where content is shared and recommended between users, continuously and organically. It is too early to say if this will lead to significantly increased sales of TV and music content or not, but judging by the news flow, plenty of service providers seem keen to use the new features.
But Facebook’s partnership with both Hulu and Netflix also highlights an important point – that content is king, and that it will remain king. For a long time now, my view has been that the leading positions in the online TV environment will be taken by companies who become successful content aggregators. This is a top of mind kind of game: when you have the content, and when you can deliver it in an easily accessible way, users will appreciate and support your service. The move by both Hulu and Netflix therefore seems perfectly reasonable – it’s about coming closer to users and making your content available anytime, anywhere.
As usual, changes like these lead to discussions of whether traditional TV is on the decline or not. Surely all content will now move online, and traditional TV will become obsolete? The future is, as always, unknown. But we should remember that TV unites. While the new media spaces which emerge online are important and exciting, they are not the only spaces, and there are plenty of people who still like to receive their TV through a television set in the living room, recording it on their DVRs, watching programmes together, discussing news, laughing at comedies. And, furthermore, it’s not an exclusivity game. Just because a person uses online services to watch TV doesn’t mean that they will let their TV set gather dust. The ecosystem is not dying, it is expanding. And as long as we keep our eyes on what our customers want, whether it’s traditional TV roots and new media, we will continue to grow and develop.
Hans-Holger Albrecht
We are launching TV8 in Lithuania
On the third of October we will launch a new free-TV channel in Lithuania. It will be called TV8, and will target a predominantly female audience, aged 35 and upwards. The new launch will provide us with a channel which will complement our existing free-TV offering in the country, both in terms of audience and programming. MTG is the leading commercial broadcaster in the Baltic states, and the launch is also the next step in the development of our Baltic free-TV portfolio. It is the first free-TV channel we have introduced in the Baltics during the last three years. This does not mean that we have not been actively developing our Baltic presence, but rather that a majority of our news flow has been devoted to important developments on the pay-TV side.
As you know, the Baltic economies were heavily impacted during the global financial crisis which began in 2008. Both the public and private sectors had to make adjustments, and the broadcasting sector and advertising markets were no exception. If you were to look back at the results from the Baltic businesses during the last two years, the numbers tell the story, and we are still living in the recovery period after this recession.
We did not, however, just keep our heads down and wait for things to get better. We restructured the operations in all three Baltic countries, adjusted our cost bases and streamlined the businesses in every possible way. At the same time, we continued to invest selectively, primarily in programming, in order to maintain our market positions and to keep up the strength and popularity of our brands. All of this flows from our broader philosophy as a Group: to think long term and to always aim to take steps which will position in the best way possible for the future.
It is of course something of a luxury to be able to invest strategically in businesses like these even during periods when markets are tough. Not everybody has been able to do to so during the last couple of years, and we saw the effects of this all over Europe, both in the mature and emerging territories. For our part, these investments were made possible by our unique scope and structure – our blend of free-TV and pay-TV assets in Scandinavia, Eastern Europe and Russia as well as the CIS and African countries. The mix of revenue streams and geographies that MTG’s structure generates, allows us to direct investments throughout the Group in order to build for the future. At the same time, we managed to retain profitability and deliver healthy cash flows throughout the whole recession. And every step we take, whether it’s the launch of a new channel in the Baltics, or prolongation of key sports rights like the Champion’s League, helps to secure continued growth and stability for the future.
Hans-Holger Albrecht
