Viaplay Q1 in line; HVoD service this summer
April 23, 2024
Viaplay has reported Q1 net sales of SEK 4,757m (€410.1m) and operating income before associated company income (ACI) and items affecting comparability (IAC) of SEK -317 million.
Core operations (Nordics, Netherlands and Viaplay Select) saw 6 per cent organic net sales growth to SEK 4,459 million, with operating income before ACI and IAC of SEK -270 million. Total reported operating income for the quarter was SEK -473 million including ACI of SEK 32 million.
Net income of SEK 605 million and EPS of SEK 0.23 included SEK 1,190 million one-off impact related to debt write-down part of recapitalisation
Viaplay notes that its recapitalisation programme was completed on February 9th with net cash proceeds of SEK 3.6 billion and financial net debt reduced by SEK 5.6 billion.
The company also revealed it plans to launch a hybrid ad-supported package later this year – which is detailed in the CEO statement below.
In a lengthy press statement, Jørgen Madsen Lindemann, Viaplay Group President and CEO, said: “The completion of the recapitalisation programme was an important step in setting the foundation for our retransformation into a profitably growing and cash generative business. We are now fully focused on the many operational improvements that need to be made across the Group. Our Q1 results are in line with expectations, and we have reiterated our outlook for the year”
“We have adjusted our product prices in recent months, in order to ensure that we can continue to invest in our content offering. This led to temporarily increased churn levels, and research shows that our linear and streaming products continue to be highly relevant, resonate well and provide very good value for money for our partners and customers, when benchmarked with competitor offerings.”
“Our core commercial content has continued to perform well, with viewing of the new Formula One season combining with exciting Premier League action and our very popular winter sports coverage, complemented by a wide range of sports-related programming. Local core commercial content like reality format ‘Paradise Hotel’ returned and followed up its success in Denmark by being the most watched non-sports title in Norway in Q1. New seasons of established favourites ‘MasterChef’, ‘Luxury Trap’ and ‘Efterlyst’ delivered again on both our TV channels and Viaplay, while the latest series of our hit crime drama ‘Wisting’ and new crime documentary ‘Under the Radar’ made a big impact in Norway and Sweden, respectively.”
“Following the recapitalisation, we can now begin to commission for spring 2025. Our slate for Q2 looks good with new seasons of successful local and international series, great new movie releases and new shows including comedy drama ‘All and Eva’ and documentary ‘Ace of Base – All That She Wants’. These will line up alongside the Ice Hockey World Championships, the Stanley Cup, top motor-racing, two golf majors and the culmination of the Premier League, Champions League, Europa League, Danish League and numerous other football leagues and cup competitions.”
“The reality is that our content costs have risen faster than our revenues over the past few years, due to competition, underlying inflation and ongoing adverse FX movements. We cannot expect our direct customers and distribution partners to carry these cost increases 100 per cent alone, which is why we have sublicensed selected sports and non-sports content to other broadcasters and streamers.”
“We are also innovating with new products such as our interesting linear TV channel partnership with Talpa TV in the Netherlands, and we are also planning to launch a new sports news channel in most of our markets, in order to capitalise even further on our wide-ranging sports offering. And we will be introducing a new HVoD streaming package this summer that will include advertising, in order to provide flexible solutions for our customers, and additional monetisation windows for our content.”
“We are in talks with our distribution partners regarding all of the above and will learn from what has been done well and not so well in the past few years, both in terms of products that have worked and where we can enhance the consumer offering and better monetise our content. These discussions will also address how we tackle account sharing together. This is a major issue for the industry.”
“We estimate that approximately a third of premium subscribers have been sharing the account details for their Viaplay subscriptions. This is not fair. We have implemented changes in some markets to limit the number of concurrent streams for live events, which have proved successful and have encouraged new customers to join and pay for the entertainment they watch. We will implement more far-reaching initiatives this summer, in order to get more to pay for what they watch. We are also working with our industry peers to combat piracy, but we do need much more help from politicians and regulators to prevent and police all forms of illegal content distribution.”
“As flagged previously, we have adjusted our financial reporting structure this quarter, in order to reflect our strategic focus on our core Nordic, Netherlands and Viaplay Select operations, and to provide a breakdown of our linear channel and sublicensing sales. The core operations are therefore now reported separately from the non-core international markets that we are exiting. We have completed the sale of our UK operations and the Paprika content business and exited the Baltics by transferring the subscriber base and sublicensing the sports portfolio. Poland will be our only non-core business until we exit that market in mid-2025. We will continue to have cash costs for these businesses and have therefore provided free cash flow numbers for both the core and non-core operations.”
“The 6 per cent organic growth for our core operations primarily reflected the sublicensing deals that I have mentioned and were announced during Q4. We do expect Viaplay subscription sales to return to growth once we feel the full effect of the price increases and launch the new product offerings, and as we work to reduce account sharing and improve the terms of our partnership agreements. These actions will also boost our linear channel sales. We have continued to build our digital advertising inventory, which helped offset some of the effects of the continued decline in the linear TV advertising markets, and the launch of the new HVoD tier should further support this transition.”
“The growth in our operating expenses was mainly due to rising content costs, which were partly offset by lower SG&A costs after the changes that we have made in the last year. As expected, profitability for the core operations declined, with significant improvements required in the coming quarters.”
“Our commitment to restore profitability, enhance our product offering and rebuild sustainable stakeholder value is unwavering. It will take time and will be done with a laser focus on consistent operational improvements, mutually beneficial partnerships turning account sharers into customers, innovative revenue streams, the right content mix at the right price, and strict cost control.”
Meanwhile, during the company’s earnings call, Lindemann said that Viaplay – like a host of other streaming platforms – will soon look to combat password-sharing. The service already limits the number of concurrent streams available on live events, but it will seek to widen credential-sharing measures this summer. He said that Viaplay estimated around a third of its current subscriber base streamed content via a shared account, which is depriving the company of significant income.