Annual Report 2017

Shaping the Future of Entertainment

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Shaping the Future of Entertainment

 

2017 was a fantastic year for MTG – the best ever! 8% organic sales growth, 19% profit growth and 33% total shareholder returns tell their own story.

We have lived and breathed our values – BOLD, SMART, FUN and ENGAGING – over the past year and we have more relevant, popular and available products today than ever before. We have brought our customers closer to the entertainment experiences that they love, and we have continued to pioneer new areas at the very forefront of our industry – from Viasat to Viaplay, to Splay and Viafree, to ESL and Viareal, to InnoGames and Kongregate! We have celebrated 30 years of TV3 with new streaming services, award winning original productions, the biggest live sports line-up in our history, esports viewing records, new online games, and cutting edge digital entertainment experiences and social media campaigns.

And all of this has been made possible by our teams. Our annual survey showed that 94% of our people are willing to make an extra effort to make MTG more successful; 88% are proud of working at MTG; and 84% say that it is fun to go to work. This is so important in a world where new talent is seeking an experience and a purpose, not just a job and a salary. And rich and varied experiences are exactly what we offer our team members. Our shared purpose is to create responsible and sustainable entertainment, which is why we have clear strategic priorities based on media responsibility, social impact, business ethics, and environmental care. It is also why we launched a new code of conduct in 2017, which sets out who we are, what we stand for and how we do business.

30 years ago at the end of 1987, we launched the first commercial TV channel in Scandinavia and now our Viaplay, Viafree and I Like Radio streaming apps are available to everyone on all devices, and Splay is helping next generation creators and advertisers succeed in social media. This adds up to millions of hours of entertainment content. We have the broadest live sports line-up of any broadcaster anywhere; we have more movies and TV series than ever before; we have a pipeline of more than 50 of our own original series; and we have launched our own worldwide boxing tournament. And our esports companies not only arranged more events than ever before around the world, but just hosted a demonstration tournament ahead of the Winter Olympics in PyeongChang. That is quite a transformation and we are just getting started…

Transformation has always been part of our DNA and this is precisely because the world around us is constantly changing. We always aim to invest our time, energy and money in those areas where our customers spend most of theirs. Online video consumption rises every year and is soon set to be 50% mobile, as well as 50% on-demand. This is why we are investing so much in our streaming services and in original content, including our most recent move into the world of virtual reality with Viareal.

The formation of MTGx in 2013 marked the start of our strategic transformation path from a traditional national broadcaster into a global digital entertainer. This then accelerated in 2014 with the launch of the new MTG brand and values, and led to the acquisition of the esports and digital video content businesses in 2015, and the acquisition of our online gaming businesses in 2016 and 2017. In order to finance this expansion, we have sold a number of territorial businesses along the way, including the Czech and Baltic operations in 2017, and we have announced the sale of Trace and our Bulgarian operations in 2018. In each case, we have found new owners for these companies that will invest in their futures. Since 2015, we have spent SEK 3.7 billion on buying companies and sold businesses for SEK 6.0 billion. As a result of this transformation, our digital sales grew by 68% and accounted for 31% of total group revenues in 2017.

The Nordic Entertainment business performed very well in 2017, delivering 7% organic sales growth and 15% profit growth in a highly competitive industry. Our ability to develop, utilise, promote and monetise programming content through so many windows across the Nordic region is a key differentiator and competitive advantage.

The MTGx businesses generated 37% organic sales growth and were EBITDA profitable for the full year basis for the first time. If we had consolidated InnoGames and Kongregate since the beginning of the year, MTGx would have reported sales of SEK 3.7 billion and an EBITDA profit of SEK 180 million!

MTG’s performance in 2017 shows just how well positioned we are in the highly competitive and rapidly evolving content and communications landscape. We have the best and broadest content offerings and streaming services in the Nordics, and we have closer and deeper partnerships with content creators, owners and distributors than ever before. We also offer next generation entertainment services on a global basis through our MTGx businesses. So the model is working and our strategic transformation continues, which is why we are now taking the next step by initiating work in order to be in a position to propose a split of MTG into two listed companies. The plan is to create a Nordic entertainment champion by combining Nordic Entertainment, MTG Studios and Splay Networks, and distributing shares in this business to MTG shareholders later this year. The remaining MTG would then be a pure digital entertainment play focused on esports and online gaming. This will create even greater focus and flexibility and enable further growth, higher profits and increased shareholder value. This proposal is of course conditional on the termination of the earlier proposed combination of our Nordic Entertainment and Studios businesses with TDC Group, which reflected a number of similar strategic priorities.

Thank you for taking the time to read this and for your support, which has enabled all that we have achieved together, as well as our exciting plans for the year ahead. I have worked at MTG for over 24 years now, and I am more excited than ever today because we have simply never had so many opportunities in front of us!

#wearemtg

Jørgen Madsen Lindemann
President & Chief Executive Officer

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