Market Insight

Viaplay drives 2015 growth as MTG continues digital transformation strategy

February 03, 2016

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms

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Swedish media business Modern Times Group (MTG) experienced its best quarterly growth in Nordic premium TV subscribers in six years in Q4 2015, despite the continued decline of its Viasat satellite subscriber base. Premium subscribers totalled 996,000 at the end of 2015, up 24,000 on Q3 2015. This was driven by an increase in the number of subscribers taking premium services via third-party networks, up 37,000 during the quarter, more than compensating for the 14,000 decrease in DTH customers. MTG has not disclosed subscriber figures for its OTT service Viaplay, but it singled it out as the key driver towards 3% growth in total Nordic pay TV net sales, which reached Skr 5,926 million (€633 million) for the full year.

Annualised pay TV ARPU in MTG’s Nordic markets for Q4 2015 was Skr 5,161 (€552), down 1.8% compared with the same quarter the previous year. However, MTG said that, at constant exchange rates, ARPU remained stable year-on-year.

Satellite subscribers in MTG’s emerging pay TV markets continued to exhibit a downward trend, with customers decreasing 12% year-on-year to 269,000 at the end of 2015. MTG attributed this decline largely to a poor performance in the Ukrainian market, with its business there currently under review. MTG’s pay TV performance in these markets comes against the backdrop of the sale of its Russian and international channels business in October 2015. Further analysis of this development is available here.

Our analysis

MTG’s premium subscriber base served via cable and IPTV third parties has historically grown consistently and 2015 was another good year, with net additions totalling 50,000. The company’s focus on premium services is illustrated by the upward migration of its basic satellite subscribers in Nordic markets, with this base down to 18,000 by the end of 2015, from 33,000 a year earlier. This, together with the recent upturn in premium subscribers via third party networks, suggests there is still appetite for premium content in the Nordic region, despite the declines in Viasat’s direct subscriber base for its satellite service. It should be noted, however, that Viasat subscribers also benefit from access to Viaplay. Whilst Viaplay is not included within MTG’s published premium subscriber figures, MTG asserted that it has played an important part in driving its net customer growth, suggesting that MTG’s commitment to OTT is paying off.

In terms of MTG’s wider strategy, 2015 saw the media group continue to shift its focus away from traditional broadcasting towards digital media and premium content. In addition to the sale of its Central and Eastern European channel businesses, the operator divested Swedish cable operation Sappa in Q1 2015. MTG’s repositioning as a digital media group was further demonstrated by its investments in multichannel networks Splay and Zoomin.TV in July 2015, and its acquisition of esports group DreamHack in November 2015. MTG also added to its premium content portfolio in the year when, in October, it expanded its range of sports rights to include Spain’s La Liga and Italy’s Series A until 2018.

These investments in content, coupled with increased spend on expanding Viaplay, saw MTG’s Nordic pay TV operating costs rise in Q4 2015. The company hopes to recover some of these through planned price increases for both its core Viasat service and Viaplay. These should also help to address the recent stagnation in MTG’s ARPU.

Organization
Modern Times Group Viasat
Research by Market
Media & Advertising
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