Market Insight

MTG exits Czech Republic TV in favour of games

January 26, 2017


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MTG, the Swedish broadcaster, has divested from traditional TV media in the Czech Republic and is looking to strengthen its gaming vertical by further investing in InnoGames, a games developer and publisher. MTG has announced that it will sell its 50% stake in FTV Prima to local business leaders Vladimír Komár and Ivan Zach, making the latter the majority owner with a 62.5% share. The deal values FTV Prima at €237.4 million ($ million). This is a significant earn out in the CEE context; ProSiebenSat1 sold its operations in Romania in 2015 for €10.2 million.

Our analysis

MTG has been present in the Czech Republic since 2005, so the change in ownership to local owners will have both benefits and risks. It will help the broadcaster to focus on local enterprises for advertising opportunities, given the local business ties of its owners. For content it risks losing the scale and clout of international MTG, but as the CEE operates with highly localised content, the scale effects can be minimised by investing in local production.

Prima TV is the second largest broadcaster by advertising share in Czech Republic, with 29.5% of the total TV ad market. For 2017, IHS forecasts that Prima will grow its net advertising revenues by 5.7%, while its main competitor TV Nova, owned by the key regional broadcaster CME, will grow at 6.7%.

MTG’s digital arm MTGx has invested in the games sector in a series of acquisitions: in 2015 it spent $87 million to acquire 74% of Turtle Entertainment, the holding company of ESL a German esport entertainment company with 70 million unique users in 2015. In 2016, MTG spent an estimated $100 million to acquire 35% of InnoGames, the also German games developer (originally backed by venture capital investors) and now considers the option to increase its stake to 51% from the proceeds of the Prima TV sale.

These investments for MTG have four main benefits:

  • MTG  taps into the fast growing games sector to hedge against the slower growing TV markets,
  • it builds on the synergies between TV broadcasters of linear and video online content, and the publishers of games content on online and mobile platforms, including live esports events,
  • it indirectly acquires a user base of highly monetised demographics associated with online and mobile games - a younger and highly engaged audience
  • geographic expansion in its games territories and gain access to the German games market.

In the period 2013-2016 InnoGames on average grew by 20% (CAGR) per year, which is significantly larger average growth than the mature TV sector. The growth in that sector can be further augmented by the synergies between games and video. Games have managed to attract and develop loyal and engaged followers who are active further beyond games platforms (on IP TV and online video). Esports and games related videos have grown very fast with the rise of MCNs as the vast amount of games content is streamed on YouTube and Twitch (the games dedicated platform). Indicatively, ELS created 16,000 hours of live content, whereas Splay, MTG’s multichannel network, registered 7.5 billion views of games content in 2016.

The investment in games therefore gives MTG the opportunity to monetise video content on its own players and also on YouTube, repatriating some of the ad revenues that advertisers would allocate to online rather than traditional TV advertising.

On the broadcaster level the capacity of broadcasting live sports is an advantage in the esports sector, as it has the technical knowledge of broadcasting and monetising such events on TV and online. IHS predicts that the global esports ad market in 2017 will be worth €347 million and will exceed the €1 billion revenues mark by 2021.

Finally, user data has become a key asset for publishers particularly in reference to programmatic advertising - an area of development for MTGx. InnoGames games are developed in ways to attract and cater for specific audiences - for example, female gamers - by developing games with female audience-friendly features (similarly for certain age brackets). Those audience segments along with specific profiles about the gamers are very valuable data for advertisers which MTG can capitalise to sell on across its various owned platforms (IP TV, games online/mobile).

Organization
MTG
Research by Market
Media & Advertising
Category
Advertising Games
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