Market Insight

MTG splashes out on acquisitions

June 12, 2013


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Modern Times Group (MTG), the multi-country broadcaster, channel manager and producer based in Sweden, has significantly expanded its footprint, both geographically and strategically, with three acquisitions. MTG has bought a majority share in Norwegian production company Novemberfilm and 92.4 per cent of English-language TV programme distributor, Digital Rights Group (DRG). Additionally it has scheduled the launch of its second African free TV channel in Tanzania.

The acquisition of DRG from shareholders Ingenious Media Active Capital Ltd is valued at £15m. The 51 per cent share of Novemberfilm was acquired from its management for an undisclosed cost.

The announcements signal increasing investment by MTG in originated programming. Norwegian operations were due to expand in the second half of this year with the new, third, free-to-air channel in the territory: now Novemberfilm can be expected to feed that channel, and indeed existing channels TV3 Norway and Viasat 4. Viasat1 Tanzania will also broadcast local content, potentially made by MTG's Ghanaian production company Modern Africa Productions.

Originations are more and more a priority for major broadcasters in the era of digital television. A larger range of channels on offer means heightened competition for viewers, more bids for 'big draw' hot properties in programming such as new US shows, and higher prices for acquisitions. Original programming is more financially attractive than ever. With a slightly negative financial year behind them - net sales were down five per cent across the Free TV Scandinavia segment in 2012, and IHS estimates a flat overall programming spend (one per cent growth year on year) in the same period - originated is also a key weapon in the ratings war.

An investment like this also speaks to the group's new focus on Norway, which we estimate only represents 13 per cent of MTG's free-to-air Nordic business, well behind Sweden and Denmark. Norway represents a similar share of MTG's overall originated programming spend - a figure that excludes sports programming. We forecast originated programming by MTG in Norway to rise five per cent this year.

This move is not just about internal investment and revenue generation, but also about looking outward. There are major possibilities for territorial gains opened up by the sizeable portfolio of DRG's English-language content. MTG Studios' production brands, such as Strix, already sell their own-produced shows and formats internationally; however, this is the first time they will make major strides in the markets for British, Canadian and Australian content. Programmes sold by the UK firm include scripted series Shameless and Doc Martin and formats Celebrity Ding Dong and Antiques Road Trip. DRG is also a diversification of MTG's activity into 'pure' distribution, representing a major catalogue of properties whose rights the firm does not own. The change of both market and activity could be seen as a counterbalance to the risks of taking the reins in production. 

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