MTG’s decision to split into two, with businesses focusing on broadcasting and streaming and growth areas such as eSports respectively, was a long-term strategy, according to MTG corporate affairs chief and UK CEO Matthew Hooper. Stuart Thomson reports.
Modern Times Group’s (MTG) decision to invest heavily in eSports, multichannel networks and online gaming, and subsequently to split in two, was the result of a careful assessment of the future entertainment services and a realisation, following the launch of its Viaplay SVOD service, that people were moving to different forms of entertainment, according to Matthew Hooper, recently appointed as EVP, group head of corporate affairs and CEO, MTG UK, and soon to hold the same position at broadcast arm Nordic Entertainment Group UK.
“We decided to self-disrupt,” Hooper told attendees at an event organised by Ampere Analysis in London recently. “We did it to ourselves before it was done to us.” The decision to split the group in two, with the MTG brand reserved for the high-growth areas of eSports, MCNs and online gaming and a new company, Nordic Entertainment Group, taking over the free and pay TV activities, streaming outfits and production activity, which was announced in March, was a logical extension of this strategy and had been in train in some shape or form “for a long time”.
He said that MTG set an ambition in 2013 to become a digital entertainment company rather than a channels group. While the development of online video services Viaplay and Viafree was already in train, the bulk of the group’s business was in linear TV, something that remains the case: “That represents a strong installed base that is gradually moving towards the streaming space, but it is still very important today.”
MTG’s initial decision to focus its future investment efforts on eSports and multichannel networks as the key growth areas, was the first step. The group bought into eSports through its acquisition of a majority stake in Turtle Entertainment, owner of eSports leader ESL; acquired Scandinavian eSports firm Dreamhack; and expanded into multichannel networks with the acquisition of ZoominTV. Investments in gaming outfits Kongregate and InnoGames followed.
The decision to split in two followed the failure of a proposed sale of the Nordic Entertainment arm to Danish telco TDC, leaving MTG to focus as planned on new growth areas. However, Hooper said that the sale plan was essentially part of the same strategy.
TDC pulled out of the plan after it received an acquisition offer from Australian infrastructure investment outfit Macquarie, which made ending the MTG plan a condition of its offer. Hooper said that MTG still had a strong relationship with TDC and there were lots of links between the two companies. However, he said the cancellation of the TDC sale was “a missed opportunity” for both sides to create a fully converged telecom and media company.
The architecture of the split follows lines that already exist within MTG. The Nordic Entertainment business will combine with MTG Studios including production arm Nice Entertainment and YouTube network Splay Networks, “which is more about influencer campaigns now”, according to Hooper, and is being taken out of the former MTGx digital portfolio. The addition of Splay Networks to Nordic Entertainment makes sense because it also has “a very Nordic focus”.
Hooper said that since content can be distributed across linear and streaming services, it made sense to have Viaplay and Viasat put together with content production. The third part of the strategic shift, was the sale of MTG’s international businesses, which was completed by the sale of its majority stakes in Bulgaria’s Nova Broadcasting to investment outfit PPR, and urban culture media group Trace to TPG Growth. MTG sold out of its international businesses to finance its investment in new areas.
The decision to finance the MTG-Nordic Entertainment split through a distribution to shareholders would result in a well-financed MTG business set for growth, said Hooper, leaving debt with the more established Nordic Entertainment Group.
On the MTG side, Hooper said that both eSports and gaming are huge growth opportunities, and that advertising and sponsorship around eSports could be extended beyond the core young-male audience. “eSports enthusiasts are typically younger but it does extend,” he said. “Brands like Mercedes and others are coming in. And everyone knows the size of the mobile gaming market. With Kongregate you have 100,000 free to play games. You have gaming IP being created every day.”
On the Nordic Entertainment side, Hooper said that a large amount of revenue and profit still comes from traditional TV businesses and that is important in securing the financial future of the company. He said that the new company would benefit from the fact that Nordic content “travels very well”.
MTG has seen that the group had a good opportunity to create original content for Viaplay, and Nordic Entertainment has an opportunity to go further, he said. Viaplay continues to be well-placed to compete in the Nordic streaming market, offering premium sports, as well as a strong first-play window and the resources to create original content. “[Netflix is] quite different, but they have been fantastic for broadening the appeal of SVOD and streamed content,” he said.
Hooper added that, in general, TV could still be a growth business, whatever the superior growth trajectory of eSports.
“Convergence is a reality but the strategy we have had is… making our content available very widely.”