Exclusive Interview: MTG’s Hans-Holger Albrecht

PREMIUM: The Modern Times Group’s president and CEO, Hans-Holger Albrecht, talks to World Screen Newsflash about operating successful over-the-top services as well as thriving pay- and free-TV businesses.

WS: In Scandinavia you launched Viaplay, the market’s first over-the-top Internet on-demand service. How has it been received?
ALBRECHT: Viaplay is rapidly gaining momentum as it offers viewers a unique proposition they can’t find anywhere else. We are continuously working on further developing the service, adding new content and making it available across more platforms—all in line with our ambition to offer premium content anytime, anywhere and on any device.

WS: Several media companies feel over-the-top services are a threat to traditional linear cable and satellite channels. How do you view over-the-top services vis-à-vis your free-TV and pay-TV channels?
ALBRECHT: Instead of seeing them as competing distribution methods, we see them as complementing each other. In fact, Viaplay has increased the footprint of our pay-TV business. We try to secure the distribution rights for all platforms, which in turn offer the viewers greater flexibility for when, where and on what device they would like to consume the content offering.

A good example is our broadcast of [the soccer] UEFA Champions League in Scandinavia, where we show matches on free TV and pay TV, as well as offering most matches for live streaming on Viaplay, giving everyone a chance to follow their favourite team.

To make over-the-top entertainment work, you need premium, exclusive and local content from recognized brands. In Scandinavia, Viaplay is an online one-stop shop for premium TV, sports and movies, and we can offer several thousand movies, in addition to more than 1,000 sports events every year, as well as premium local productions from MTG’s free-TV channels.

WS: What demand are you seeing for HD channels?
ALBRECHT: Our pay-TV subscription numbers are increasing. Part of the explanation is that viewers not only demand a greater choice of channels, but also an enhanced viewing experience that HD offers. The number of subscribers to Viasat’s recordable digital set-top box, multiroom and HD services continues to grow every year.

Over the last year we have launched several HD channels in the Nordic region and in emerging markets, and more can be expected. Apart from HD, we were also the first broadcaster to launch a 3D service in Scandinavia.

WS: In the markets in which you operate, is television still commanding the largest share of the advertising market?
ALBRECHT: In Scandinavia television has a stable market share on a national level. There is, however, much room to grow in the regional ad markets, which are very big, particularly in Scandinavia where they constitute 40 percent to 60 percent of the total advertisement market. We are subsequently moving into this space by expanding our regional presence, starting in Sweden.

TV viewing is much higher in the emerging markets than in Scandinavia, but the advertising spend per capita is significantly lower, rendering a significant growth potential. The emerging markets are subsequently growing much faster than they are in Western Europe.

WS: How have your investments in content helped your free-TV and pay-TV businesses?
ALBRECHT: Content is king. That goes for both free and pay TV. A strong content strategy underpins our multichannel media-house strategy where we position our channels in order to cater to particular audience groups. On the pay-TV side, we are clearly the premium content provider of choice. We have throughout the years built a very strong content platform that delivers entertainment at your command.

A good example of how we can combine this for both free and pay TV is the groundbreaking deal we made with Twentieth Century Fox earlier this year that covers the broadcasting rights to a range of blockbuster movies and hit TV series not only on our Scandinavian free-TV channels but also on Viaplay. This is also manifested when we acquire major sports rights, with the most recent example being our extension of the broadcasting rights to UEFA Champions League in Scandinavia.

WS: MTG reported a 4-percent sales growth in 2009, a very difficult year, and a 12-percent increase in 2010. How has 2011 been so far and what factors have contributed to MTG’s strong financial performance?
ALBRECHT: The first half of 2011 has delivered record results. The group’s year-on-year sales grew with almost double-digit figures when excluding currency effects, and all four broadcasting segments contributed to the growth.

One of the main drivers for this has been the strong TV advertising markets in the Nordic countries. We have also increased our viewing shares in a majority of our markets, which demonstrates the effectiveness of the media-house model that we employ. Another driving factor has been the subscriber intake and ARPU increases in our pay-TV operations.

We are particularly pleased that we have managed to deliver higher operating profits despite significant investments in both content and technology.

WS: MTG is present in many territories. What trends have you seen in the advertising markets in the countries in which you operate? Scandinavia is quite strong; how is advertising in emerging markets?
ALBRECHT: All of the Scandinavian advertising markets are exhibiting strong growth during the first half of the year, continuing the strong trend shown last year. Recovery in emerging markets is still lagging, however. In that respect, we are not talking about one homogenous market. The Baltics and Czech Republic are showing modest growth, whereas the other countries where we operate are showing a slower development.

WS: How are Modern Studios and Strix performing?
ALBRECHT: Our content business fits well into our operations. Strix Television sells options and licenses to its formats around the world and has made strong exports recently to big markets. Their own format Home Delivery has been sold to the U.S. and is being shown on OWN: Oprah Winfrey Network. Moreover, Class of will be shown in Australia and The Farm started showing in Brazil in September.

WS: What has driven the strong financial performance of CTC in Russia?
ALBRECHT: Strong advertising market growth coupled with execution on the media-house strategy. MTG was recently offered the opportunity to acquire the 25-percent stake previously held by Alfa Group [the Russian conglomerate that sold off its CTC interest this year]. We passed on this opportunity and have now entered into a new shareholders agreement with Telcrest, the buyer of Alfa’s shares, and CTC Media to govern the relationship between the parties. The new agreement is valid until June 6, 2015.

WS: Do you have plans for acquisitions, whether channels or other companies?
ALBRECHT: We are continuously deploying new channels in the market, both on the free-TV and pay-TV side. Our focus is to continue to grow the company organically, although given the right circumstances we remain open to other possibilities. Our healthy cash flow and low leverage level puts us in a flexible financial position to invest further in the group’s existing operations and seek new growth opportunities.