Market Insight

MTG expands its esports portfolio with DreamHack acquisition

November 27, 2015  | Subscribers Only

Ted Hall Ted Hall Director – Research and Analysis, Service Providers & Platforms

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Pan-Nordic broadcaster and pay TV provider MTG has acquired DreamHack, Scandinavia’s largest esports player. The deal for 100% of the company, which runs local and global esports leagues, tournaments and championships, values DreamHack at SKr244 million ($28 million).

The move comes after MTG made a spate of investments in online content companies in July. The most notable was its acquisition of a 74% stake in Turtle Entertainment, the world’s largest esports company and operator of the ESL brand, for €78 million ($83 million). MTG also invested in European multichannel network (MCN) Zoomin, acquiring a 51% stake in the company in a deal that valued it at €88 million, and increased its stake in Scandinavian MCN Splay from 49% to 81%.

Our analysis

MTG has gone further than most traditional media companies in embracing esports as a means of diversifying its content offering. The first significant step came with June 2014’s launch of Viagame - currently closed as MTG prepares to revamp its offering - and nearly 18 months on, the broadcaster has the assets to be a leading player in this space. And not just as a distributor - by buying directly into the sports leagues run by DreamHack and ESL, not just the rights to air them, MTG has taken full ownership of the product, vertically integrating esports into its business in the way a network or pay TV operator could if acquired a major professional sports league.

The rationale for pursuing these ambitions is solid - IHS expects esports video to be worth $300 million in online advertising revenue per year globally by 2018. Growth in viewing has been fostered by several factors, among them: key game titles reaching maturity; game publishers taking a major role in promoting esports competitions; and the emergence of online-video platforms that are capable of handling large-scale live audiences.

The markets MTG serves, in particular, are hotbeds for esports and online content in general. Evidence of cord-cutting outside of the US is strongest in the Nordic markets, where traditional pay TV has been in decline and streaming-video alternatives, including Netflix and HBO Nordic, as well as local offerings C More Play and MTG’s own Viaplay, have flourished. This trend is a clear sign that millennials must be catered to with content such as esports - MTG itself cites data indicating that 15-24 year-old Western TV viewers spend 65% of their viewing time using online-video services, and that these viewers watched 20% less linear TV in 2014 that in 2012.

That MTG can offer its esports services pan-regionally is also a significant advantage, reaching a large audience with digital content that does not need to be localised and has cross-border appeal. This same advantage is being leveraged by other pan-regional broadcasters that have invested in online-exclusive content. In Germany, entertainment-themed MCNs have been the targets of RTL and ProSiebenSat.1, with the former acquiring StyleHaul and the latter buying Collective Digital Studio. Another European pay TV operator comparable to MTG, Sky, made a $7 million investment in sport-focused MCN Whistle Sport in October 2014, and revealed last week that the service will be accessible via an app on Sky’s new Sky Q ‘next-generation’ set-top box when it launches in the UK and Ireland next year.

When it comes to esports, broadcasters are in a strong position to nurture their growth, with MTG planning to draw on its traditional media experience with core sports rights to productise its new assets and maximise the value of this content. One way of doing so will be to air events on linear channels via traditional platforms, alongside its coverage of established sports. Major players have already started treating esports competitions like ‘real’ sports, marking a clear sea change. ESPN has, somewhat reluctantly, increasingly made esports a part of its offering as audiences have grown. Turner Broadcasting, meanwhile, has made a more enthusiastic commitment to the genre, promising cross-platform coverage, including Friday-night shows on TBS and a second-screen companion experience, of its own esports league in 2016.

All these developments are evidence of a collective shift in pay TV platforms and channel providers’ approach to content aggregation and distribution, as they diversify into harnessing emerging genres such as esports to reach younger audiences that are watching less and less linear broadcast TV.

Organization
MTG Viasat
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