“the kingdom of content” and “the creation of sustainable stakeholder value”, 5 november...
TRANSCRIPT
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MODERN TIMES GROUP
SHAPING THE FUTURE OF ENTERTAINMENT
MATHIAS HERMANSSON, CFO
NOVEMBER 2013
OFFICIAL BROADCASTER OF THE
2014 OLYMPIC GAMES IN SOCHI
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OUR CONTENT REACHES MORE THAN 100 MILLION PEOPLE
THROUGH OUR ON AND OFFLINE FREE-TV AND PAY–TV SERVICES IN 36 COUNTRIES
THROUGH A PORTFOLIO OF VERY STRONG, AND WELL ESTABLISHED BRANDS
MTG - A MEDIA HOUSE WITH SCALE
REACH
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GEO
EXPANSION
Growth in
emerging markets
Growth in online
M&A opportunities
DIGITAL
Consumption
moving online
Main medium in
the future
Digital opportunities
beyond video
CONTENT
Value shifting to
content
Key differentiator
Value & growth
driver across
platforms
COST FOCUS / OPERATIONAL EXCELLENCE
GROWTH + VALUE CREATION
WE HAVE A GROWTH STRATEGY
BASED ON 3 PILLARS, WITH A RENEWED FOCUS
ON COST
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GEO EXPANSION DIGITAL CONTENT
MTGx
Creations
MTG
Studios
Content
Acq & OP
MTG
Content
Strategy
Sports
OTT TV
Africa FTA expansion
Mini-pay new markets
Free-TV expansion CEE
MTG Studios expansion
No1 in Viaplay & further expansion
AVOD expansion in Nordic s
AVOD rollout in CEE
MTGx: new services and expansion
Further Online growth in EM
Multi-platform content acquisition
and monetization strategy
Premium sports rights to support
local strategies
Growth and M&A in Studios
MTGx studios/talent program
OUR STRATEGIES IN EACH AREA
SUPPORT THE JOURNEY TO ACCELERATE IN
EACH PILLAR
LEADING POSITIONS
IN SPORTS & ACQUIRED CONTENT
1st pay window
2nd pay window
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SPORTS AND OWN PRODUCTIONS
IS BECOMING INCREASINGLY IMPORTANT
Growth used to come from acquisition, but has now changed to more premium and locally produced content
HOURS OF CONTENT, SPLIT BY TYPE - LINEAR ONLINE
60%
10%
30%
90%
6% 4%
?
?
?
> 20 YEARS
AGO
MTG TODAY
(NORDIC ONLY) THE FUTURE
Sport OP
Acquisition
Sport
OP
Acquisition
Sport
OP
Acquisition
Pay-TV Free-TV Channel
distr. SVOD AVOD TVOD
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WE ARE UNIQUELY POSITIONED
TO CAPITALIZE ON OUR CONTENT INVESTMENTS
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STRONG TSR RECORD
FOCUS ON SUSTAINABLE STAKEHOLDER VALUE
DRIVEN PRIMARILY BY STRONG GROWTH AND HIGH
RETURNS
15% TSR
CAGR (10Y)
Sales: +10% CAGR
EBIT: +24% CAGR
Average ROCE: 25%
Total distribution to
shareholders: SEK 8.1 bn
Launch of Modern
Responsibility
2004
2005 Introduction of Code of
Conduct and Whistle
Blower Policy to all
employees
2008
Publication of
first MR Report
2010 • Corporate Responsibility
report in accordance with
GRI framework
• Reporting CDP 88/100
(2013)
2011
2012/2013 Included in DJSI
World
Europe
2013
Third party assurance of
modern responsibility
report
OUR WORK TOWARDS LONG-TERM
RESPONSIBILITY & PERFORMANCE
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SUSTAINABILITY INVESTMENTS
GROWING QUICKLY
6,914
26,468 25,361
48,090
2005 2007 2009 2011
0
10,000
20,000
30,000
40,000
50,000
60,000
SUSTAINABILITY THEMED INVESTMENTS IN EUROPE (€M)
Source: Eurosif
MODERN RESPONSIBILITY
SAVING THE WORLD & MAKING A PROFIT IS NOT AN
EITHER/OR PROPOSITION, IT IS A BOTH/AND PROPOSITION
Improved relationships with stakeholders
Enhanced Employee Relations
Enhanced Productivity and Innovation
Improved Reputation and Branding
Improved sustainable shareholder value
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WE LISTEN, LEARN & ADAPT
TRANSPARENCY & MEASURING HAVE BEEN IN FOCUS
CUSTOMERS
NGO’s SHARE-
HOLDERS
EMPLOYEES SUPPLIERS
REGULATORS
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Transparency being honest not only
about what we’re doing well but also where we
have room for improvement
Measuring and reporting on our
performance has helped us see where we can
improve, and enabled us to set targets and
action plans for those areas
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MTG STUDIOS “THE KINGDOM OF CONTENT”
PATRICK SVENSK, EVP OF CONTENT & CHAIRMAN OF MTG
STUDIOS
JENS ERIKSSON, PRESIDENT & COO OF MTG STUDIOS
JEREMY FOX, CEO OF DRG
5 NOVEMBER 2013
US NETWORKS / STUDIOS EUROPEAN VERTICALS SUPER INDIES
THE INDUSTRY PLAYERS
BY CATEGORY
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INCREASED NUMBER OF
CUSTOMERS/BROADCASTERS BUYING
CONTENT
LOCALLY PRODUCED CONTENT
BECOMING INCREASINGLY
IMPORTANT
MEDIA CONSUMPTION GROWING, NEW
PLATFORMS REQUIRE CONTENT
PRODUCED
00:00
02:00
04:00
06:00
08:00
10:00
2010 2011 2012 2013
TV Digital (computer+mobile)
Linear
OTT
Time
1 2 3
0
50
100
150
200
250
300
TV4 SE TV2 NO MTV FI TV2 DK2006 2011
A GREAT BUSINESS
WITH A BRIGHT FUTURE
Average time/day (US Adults, hh:mm) Programming spend (EURm)
A GREAT BUSINESS
MACRO TRENDS IN FAVOUR
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+
-
Distribution/
IP revenues
and R&D ROI
Content
production
EBIT
Number of
productions
Revenue per
production
Other costs
Tech costs Costs
Production
revenues
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A GREAT BUSINESS
HEALTHY MARGINS AND GREAT RETURNS
(2012,
SEKM) FREMANTLEMEDIA ITV STUDIOS RED ARROW
Owner RTL Group ITV ProSiebenSat.1
Revenue 14,892 7,643 830
EBITA 1,201 1,149 37
Margin 8% 15% 3% Base case Hit production Hit distribution Boosted margin
MARGIN BRIDGE EXAMPLE
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PRODUCTION HOUSE
Hungary
Bulgaria
Slovenia
Romania
Serbia
Czech Rep.
Costa Rica
Latvia
Estonia
Lithuania
Sweden
Norway
Denmark
Holland
CURRENT LOOK OF THE STUDIOS
Produced formats Recurring series
Revenue split by
business type
Revenue split by
geographic area
FULL YEAR 2012
proforma figures
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WE ARE NOW A SCALE PLAYER
FOLLOWING RECENT ACQUISITIONS
REVENUES OF SEK 1.7 BN (PROFORMA 2012)…
…GENERATED FROM 30 COMPANIES…
…BASED IN 15 COUNTRIES
PRODUCING >3,500 HOURS OF CONTENT ANNUALLY…
…WITH 60 FORMATS SOLD TO >80 COUNTRIES WORLDWIDE
35%
65%
No. recurring salesNo. new sales
51%
49%
No. in-house formatsNo. 3rd party formats
68%
14%
18%
TV-production
Distribution
Non-broadcast
81%
5% 14%
Scandi
CEE
UK (distribution only)
…THAT IS WELL POSITIONED
TOP 10 CONTENT DISTRIBUTORS AS RATED BY UK INDEPENDENT TV PRODUCERS
HIGHEST RATED DISTRIBUTOR MOST USED DISTRIBUTOR
Source: Televisual Distributor Poll, September 2013
1 BBC WW
2 ITV Global
3 Zodiak Rights
3 DRG
3 Shine
6 Fremantle Enterprises
6 DCD Media
6 Endemol WW
10 Passion Distribution
6 All3Media
1 BBC WW
2 DRG
4 ITV Global
3 Zodiak Rights
5 Fremantle Enterprises
6 Endemol WW
8 Passion Distribution
7 Electric Sky
9 Sky Vision
9 All3Media
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+
TOP 5 TV CONTENT PRODUCERS (RANKED BY SALES) IN
THE NORDICS (2012)
WHERE ARE WE, AND HOW DO WE
OPERATE?
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CONTENT
ORIGINATION &
CREATION
GLOBAL CONTENT
DISTRIBUTION
THE FARM
THE BAR
FAME
FACTORY
RELATIONSHIPS
WITH ALL MAJOR
BROADCASTERS
75%
25%
External sales Internal sales
Market attractiveness
Reality/Lifestyle
Hig
h
Med
ium
L
ow
Humour,
entertainment
Quiz game show
Current affairs,
infotainment
Sport
Documentary
Scripted News
Children
High Medium Low
MT
G S
tud
ios s
tre
ng
th
Reality/Lifestyle
Scripted
Current affairs
& infotainment
Humour
News
Studio ent. &
quiz shows
Documentary
KEY FOCUS AREAS
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Children
Sport
MARKET ATTRACTIVENESS
M
TG
ST
UD
IOS
ST
RE
NG
TH
DRG and Nice has transformed our business
Nice – adding scale
DRG – adding reach
However we are still in expansion mode
With a lot of focus on risk management
Content portfolio management
People’s business – or is it?
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MTG Studios current footprint.
BOLT-ON ACQUISITIONS
TO TURBO-FUEL GROWTH
MAJOR SCALE ADVANTAGES
Local scale advantages
Organization designed for expansion
Multiple brands for independency
Local cost synergies
Global scale advantages
Combined catalogues
Combined customers
Scale synergies in portfolio
High volume global hits
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• MTG Studios producing a
target’s IP outside Scandi.
• Target gaining new
productions from MTG IP
(DRG)
• DRG distributing target’s IP
• Allocation of production staff
to other companies
• Cost savings on
administration and format
acquisitions
SYNERGIES EXAMPLE FROM AN ACQUISITION
COST SYNERGIES REVENUE SYNERGIES
MTG
GROUP
SYNERGIES
• Internalization of target’s production margins on
orders from MTG TV.
STRATEGIC INVESTMENTS
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FOUR STRATEGIC CORNERSTONES
Filling the creative
pipeline
Investing in creation of IP content
Investing in access to
3rd party content
Exploitation of portfolio
through production in other territories
Exploitation of portfolio
through distribution to other territories
Tapping the creative
pipeline
Building
the product
portfolio
Monetizing
the product
portfolio
STRATEGIC INVESTMENTS
THE CORNERSTONES AND PIPELINE FLOW
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TH
E P
IPE
LIN
E
Exploitation
through
production
Creation of IP
Access to 3rd
party IP
Exploitation
through
distribution
FO
UR
ST
RA
TE
GIC
CO
RN
ER
ST
ON
ES
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STRATEGIC INVESTMENTS
STEP 1: INVESTING TO FILL THE PIPELINE
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STRATEGIC INVESTMENTS
STEP 2: EXPLOITING BY TAPPING THE PIPELINE
TH
E P
IPE
LIN
E
STRATEGIC INVESTMENTS
THE IP FLOW MODEL
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Exploitation
through
production
Creation of IP
Increasing the pipeline
flow volume is key,
as it is the way to finding
new global hits
Access to 3rd
party IP
Exploitation
through
distribution
FO
UR
ST
RA
TE
GIC
CO
RN
ER
ST
ON
ES
CASE 1: DEVELOPMENT & PRODUCTION
THE FARM – A GREAT SUCCESS
3600 episodes produced since launch
100 licenses sold in total
50 territories worldwide have aired the format
12 consecutive years on air (and counting)
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PROMO
A show built on a
”recipe” is IP
IP (Intellectual Property) can be sold and
exploited. Ingredients can be e.g.
characters, activities, rules and a goal in
the show
Coming up with a
global hit - Robinson,
Idol, X-factor - can be
extremely lucrative
WHAT IS A FORMAT?
CASE 2: DRG ADDS KEY CAPABILITIES
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Content acquisition by territory (2013)
Diverse catalogue
Fiction (43%)
Factual (43%)
Formats (14%)
Note: As a % of revenues in 2013
Broad brand concentration (2013)
Top 10 brands
47%
UK 62%
US 29%
Australia 4%
RoW 5%
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ACQUIRE PROGRAMMES FROM
PRODUCERS AND OTHER CONTENT
OWNERS – BUILD PORTFOLIO
CASE 2: DRG ADDS KEY CAPABILITIES
SELL TO BROADCASTERS AND
OTHER DISTRIBUTION OUTLETS 1 2
Etcetera…
CASE 2: DRG ADDS KEY CAPABILITIES
BEING A PART OF THE MTG STUDIOS GROUP
DRG used to do business in the acquisitions/marketing/sales part of the creative process.
Now backed by MTG – able to fund and enable early stage project development
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New business area
+
Previous business area
CASE 3: SCRIPTED PRODUCTION
INCREASING EFFORTS IN A GROWING SEGMENT
Different model than the “general” ecosystem
MTG Studios becoming a major player
Boosted by the acquisition of Nice
Upsides for MTG Studios
DRG
Scale synergies
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TRAILER:
The Hundred-Year-Old
CU
ST
OM
ER
COST
PROFIT
Entertainment TV
Finance Cost/
Profit
Scripted
C1 COST
PROFIT
C2 BACKEND
Finance Cost/
Profit
Production
lifespan
An additional growth pocket
Broader and more diverse customer base
In-house competence for full-service
communication
CASE 4: ”CUSTOMER 2.0”
BRANDS ARE BECOMING BROADCASTERS
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And many more…
PROMO:
The Last Big Adventure
Storytellers
Editors Commercials
Event
CASE 5: LCC/HUB PRODUCTIONS
Paprika Latino is an important corner stone
Provides us with a footprint in CEE
Provides us with a LCC alternative
Potential LC Hub productions
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TRANSFERABLE COSTS
”THE CEE EFFECT”
SHAREABLE COSTS
”THE HUB EFFECT”
Up to 35% lower production
costs than Scandinavia Up to 30% cost reduction with
back-to-back or co-production
THE IDEAL PRODUCTION IS 50%
CHEAPER BOTTOM LINE
SUMMARY:
HOW TO RULE THE KINGDOM OF CONTENT
– Content is without a doubt the key to the future
– Coming from the right angle
– Hunting for hits to boost margins
– Paving ground for global presence
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Satisfying macro level
market conditions
Leading position in a
globally strong IP center
”Gold panning” for hits
through large-scale IP flow
Extensive network to exploit
all great IP worldwide
We have laid a strong foundation for higher growth and increasing returns,
as we will grow to become a true and successful global player
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THANK YOU