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Edited Transcript of NENTb.ST earnings conference call or presentation 4-Feb-20 8:00am GMT

Q4 2019 Nordic Entertainment Group AB Earnings Call

Feb 11, 2020 (Thomson StreetEvents) -- Edited Transcript of Nordic Entertainment Group AB earnings conference call or presentation Tuesday, February 4, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anders Hede Jensen

Nordic Entertainment Group AB (publ) - President & CEO

* Gabriel Catrina

Nordic Entertainment Group AB (publ) - Executive VP, CFO and Head of Strategy & M&A

* Matthew Hooper

Nordic Entertainment Group AB (publ) - Executive VP & Chief Corporate Affairs Officer

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Conference Call Participants

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* Johanna Ahlqvist

SEB, Research Division - Analyst

* Martin Arnell

DNB Markets, Research Division - Analyst

* Mikael Laséen

Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst

* Peter Testa

One Investments S.A.G.L. - Analyst

* Thomas A Singlehurst

Citigroup Inc, Research Division - Director and Head of European Media Research

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and thank you for holding. (Operator Instructions)

I will now hand the call over to your host, Matthew Hooper, NENT Group Chief Corporate Affairs Officer.

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Matthew Hooper, Nordic Entertainment Group AB (publ) - Executive VP & Chief Corporate Affairs Officer [2]

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Thank you very much, operator, and welcome, everybody's to NENT Group's Q4 and Full Year Results Conference Call. I'm joined here today in Stockholm by our President and CEO, Anders Jensen; our CFO, Gabriel Catrina; as well as Stefan Lycke and Emelie Alm, from our Investor Relations team. Anders will provide comments on the results, key strategic developments and the progress we are making as the leading streaming entertainment and content production company in the Nordics, after which Gabriel will comment on the financial performance and position of the group, and then we will open up for a Q&A session. Slides to accompany our comments are available at nentgroup.com/investors.

I will now hand the call over to Anders.

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [3]

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Thank you, Matthew, and a very good morning, everyone. 2019 was an eventful year for NENT, to put it mildly. And while many things have demanded much attention, we have managed to not only maintain but also improve on the strong momentum we have built up. In 2019, the full year sales grew by 6% on an organic basis and continued to be driven by the strong performance of Viaplay as well as return to growth for NENT Studios following the significantly higher scripted drama production values. The combined full year profit for our operating segments also increased by 6%, and our total operating profit was stable despite higher central costs as a result of being a separate and listed company.

Our total full year operating profit would actually have been up when excluding the advisory fees related to the agreement with Telenor regarding Viasat Consumer and Canal Digital. We are, as I've said many times now, committed to delivering profitable growth, but we are not, for the time being, seeking to maximize the margins or profits. And this is simply because we have a great opportunity to become the leading streaming service in the Nordics and also seek further expansion. Investing and scaling Viaplay is the best way to drive sustainable long-term shareholder value. The Viaplay base grew by over 25% or 310,000 subscribers in 2019, which means that our net ads more than doubled compared to 2018, despite the competition from both global and local players. Our early and aggressive investments in streaming are clearly yielding results, which is key to our long-term future. But we cannot and will not stand still, which is why we continue to innovate and transform ourselves. A major step in this direction is the proposed merger between Viasat Consumer and Canal Digital, which is expected to drive substantial synergies and customer benefits and also enable us in NENT to focus even more on scaling Viaplay. The project is on track, and we remain confident that it will close in the first half of this year.

We have implemented our new organization and operating model and this is vital in order to increase speed, focus and efficiency across NENT. This resulted in a reduction in the number of employees as well as the previously announced write-downs of legacy free TV output deals. The total charge of the SEK 731 million has been taken in our Q4 results, and we will have personnel savings of approximately SEK 250 million per annum, most of which will take full effect already in 2020. This will enable us to offset the U.S. dollar currency headwind we are facing and to invest further in Viaplay, including the launch in Iceland, which will complete our footprint in all 5 Nordic countries, and also, very importantly, demonstrate our ability to expand and scale in a fast and cost-efficient way.

We have also secured virtually all of our distribution agreements with the Nordics region -- with the Nordic region's leading operators for multiple years to come. All of this plays to the overall good health of the business, and the profitable growth that we have delivered in 2019 is reflected in the Board's recommendation to increase the dividend to SEK 7 per share or SEK 470 million in total to be paid in 2 equal installments, like last year.

Turning now to the Q4 results. Sales were up 4% on an organic basis. Our total operating income, before items affecting comparability, was stable as higher operating profits in both business segments were offset by the higher central costs of being a separate and listed company. The result also included SEK 11 million onetime advisory fees for the Viasat Consumer/Canal Digital deal. And this is a strong performance, especially when you consider our record profits for the same period in 2018. Subscription sales accounted for 61% of group revenues in Q4 and Viaplay accounted for 62% of our total subscriber base. Advertising accounted for 27% of net sales and studios for 12%.

For the Broadcasting & Streaming segment, sales were up 8% on an organic basis and EBIT was up 5%. Subscription and other sales were up 13% on a reported basis and accounted for 69% of the segment sales. Viaplay added a net 110,000 paying subscribers in the quarter, ending the year at almost 1.6 million paying subscribers, excluding subs, in the Viasat consumer base. With these subs included, Viaplay serves almost 2 million subscribers in the 4 Nordic countries. The strong performance also in Q4 was a result of both high gross intake and lower churn levels, and this reflects the stability of our platform and the quality of the user and customer experience.

Our Viasat direct-to-consumer subscriber base was stable as growth in our broadband TV offering in Sweden offset the gradual decline in the satellite base. Our third-party subscriber base increased by 18,000, and we now have a total subscriber base of 2.5 million, again, excluding the Viaplay subs in the Viasat base. Advertising sales were down 1% on a reported basis and accounted for 31% of segment sales. TV ad sales were down slightly as higher prices were offset by linear -- lower linear viewing levels, and all 3 advertising markets are estimated to have been down in the quarter. We're now in the middle of the annual upfront negotiations, so still a bit early to say what the outcome will be, but the demand for TV advertising remains high, and we do expect meaningful healthy price increases. Betting and gambling ad sales represented approximately 18% of the advertising revenues during the quarter compared to 25% in Q4 last year, and the full year rate for this segment was down from 25% to 21%. Nothing has changed in our view here. This segment will most likely decrease as a percentage of total sales moving forward, but we remain of the opinion that there is healthy competition for marketing presence and that will compensate for the decline in betting and gambling.

Radio sales were slightly down in the quarter. Norwegian sales were down, while Swedish radio sales were stable, which partly reflected the annualization of the new radio licenses granted in 2018 and partly the slightly softer market conditions. Our digital ad sales reported double-digit growth and the number of registered users and downloaded apps for our Viafree service continues to grow very nicely. Profits for the segment were up 6% and included a U.S. dollar transactional headwind of approximately SEK 35 million.

Moving on to the Q4 content highlights. We premiered 7 Viaplay originals during the quarter, including a very successful Love Me, Honour and Face to Face, which both set new -- all of them setting new viewing records. We premiered 21 high-quality originals in 2019 and expect to premiere at least 30 in 2020. The majority of these are locally relevant Nordic shows which are very popular and provide us with a very clear differentiator compared to especially rival international services. We have also signed a number of new sports rights agreements recently, including the Nordic rights to the Ice Hockey World Championship up to 2028. We already showed the tournament in Sweden until 2023 and now we will expand to cover the full Nordic region, including Iceland.

And as I'm sure you know that the Premier League tender is out for a period, commencing with the season 2022-'23. The process is ongoing, so I cannot comment more on it other than to say that we remain committed to the right, but we would never renew or acquire rights at any price. So healthy inflation is a must. We are long term, and as you should expect, we always have alternative routes to take. Next up after the Premier League is the UEFA Champions League, starting with the season 2021 up to 2023. So a busy eventful year in the world of sports rights, again.

Moving on then to NENT Studios. Sales were down 12% on an organic basis, after the very strong growth we have seen in the first 9 months of the year, and this has primarily reflected timing differences in the production schedule as several projects has been delayed or postponed, which also impact Q1 of this year. These quarterly movements we have seen before and are expected to see also going forward. The comps are, of course, tougher now, but the pipeline of signed development deals is very, very promising, and we do expect healthy growth in the studio segment for 2020, given the growing demand for quality scripted drama productions. Operating profits were up from SEK 26 million to SEK 32 million despite some additional costs for the continued development of our presence in the U.S.

We recently announced that we are conducting a reorganization of NENT Studios in order to focus the business around scripted drama production and international original expansion. This initiative reflects our focus on the considerable growth potential in the scripted drama segment and the extensive benefits, with Viaplay already commissioning a significant proportion of original content from NENT Studios and we have ambitions for more. We have decided to divest our non-scripted and events businesses as well as Splay One. These fine companies primarily serve external clients, and we believe that they can be better developed under new ownership. This process is yet another example of our ongoing and never-ending quest to focus and optimize NENT Group for the significant opportunities with streaming.

With that, I will now hand over the call to Gabriel for his comments on our financial performance and position.

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Gabriel Catrina, Nordic Entertainment Group AB (publ) - Executive VP, CFO and Head of Strategy & M&A [4]

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Thank you, Anders, and good morning, everyone. Starting with Q4, the organic growth in the quarter was 4.4% and was driven by volume growth in Viaplay. The combined operating profit for our business segments, that is before central operations and items affecting comparability, was up 6% and included SEK 35 million of U.S. dollar FX headwind. The negative EBIT contribution from central operations was up from SEK 47 million to SEK 79 million and included SEK 11 million of costs related to the announced merger with Canal Digital. Our total EBIT before IACs was, therefore, slightly up.

Items affecting comparability totaled SEK 731 million and comprised 2 major elements. The first relates to SEK 190 million of redundancy costs, following the implementation of a new organization and operating model; and the second refers to a review of content-related agreements and investments, which resulted in a SEK 540 million impairment of historic pay-TV output deals and other assets that have limited remaining value. The cash flow impact on the chart is expected to be approximately SEK 250 million, of which SEK 34 million was taken in the quarter. The personnel savings are expected to be approximately SEK 250 million, with the majority impact in 2020. This will enable NENT Group to offset incremental U.S. dollar headwinds of approximately SEK 180 million and allow for continued investments in the expansion of Viaplay.

Moving on to the cash flow. Our full year cash flow from operations was down slightly compared to last year. We had a positive development of working capital of SEK 253 million in the quarter, taking the change in working capital to a total of SEK 791 million for the full year. This was slightly higher than we expected at the end of the Q3 as we made some payments in Q4 related to content instead of as originally expected in Q1 this year. As a result, our net operating cash flow for the year was down. Our working capital has increased materially in 2019, but it is important to understand the large part of the buildup arises from investments in future sports rights and originals, which are of strategic importance and will secure the continued growth of our business and of Viaplay.

Our net debt ended the year at SEK 4.1 billion, which is 2.2x our trailing 12-month EBITDA before items affecting comparability. This is in line with what we expected and within our target. The financial net debt was SEK 3.5 billion at the end of the quarter. The Board will propose to increase the dividend to SEK 7 per share to the AGM in May. This corresponds to a payout ratio of 39%, which is in line with our policy to pay out between 30% and 50% of adjusted net income. In line with last year, the dividend will be paid out in 2 equal tranches, one in May and the other one in October this year.

Moving on to the business outlook. All comments are based on the current setup and be mindful that this, of course, will change if and when we close the merger of Viasat Consumer and Canal Digital and also by the planned disposals of part of our studio businesses. We do expect to continue to generate positive organic growth primarily due to the growth of Viaplay. We remain committed to delivering high profits in 2020, but do remember that our central costs will be impacted by transaction costs for the Canal Digital deal as well as the strategic review of NENT Studios. It is too early to provide any guidance on the working capital. We do expect that our investments in Viaplay Originals and the decision to do even more internally will continue to tie up more capital, but the full year number will be heavily dependent on the level of prepayment on sports rights that we secure during 2020. We expect that our CapEx will remain around 1% to 1.5% of sales with an effective tax rate of approximately 20%.

I would like to end my comments by giving an update on the merger between Viasat Consumer and Canal Digital. The preparation work is progressing according to plan, and we expect to close the deal in Q2 this year. Viasat Consumer sales increased by 3% for 2019 to SEK 2.9 billion. EBITDA amounted to SEK 485 million for 2019 versus SEK 508 million in 2018, and the operating income amounted to SEK 469 million compared to SEK 490 million in 2018. The total subscriber base was broadly stable compared to last year and ended the year with 490,000 subscribers.

That's it for my comments. So now back to you, Anders.

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [5]

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Thank you very much, Gabriel, for that. So like I said initially, 2019 was indeed a very eventful year for us and successful. We have delivered on our profitable growth commitment and Viaplay's growth has accelerated, which demonstrates that the investments that we're making in further enhancing the user experience and adding significantly more content is yielding results. We have taken a number of strategic decisions, such as the implementation of a new operating model and the proposed Viasat Consumer/Canal Digital deal, which will generate significant cost savings and enable us to capture -- further capture the significant opportunity we see with Viaplay.

We have also invested in the future through the addition of more Viaplay Originals, new sports rights, new Hollywood deals and the acquisition of a minority stake in the U.S. studio PICTURESTART and the JV with FilmNation in the U.K. and continuously investing in our tech environment. Simply put, we have a very strong foundation to continue to deliver on our commitment to profitable growth, while at the same time, scaling Viaplay, which we remain absolutely confident on being the most effective way to drive substantial and sustainable shareholder value.

With that, we conclude our commentary on the results and then over to you now operator to start the Q&A session, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is coming from the line of Johanna.

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Johanna Ahlqvist, SEB, Research Division - Analyst [2]

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This is Johanna Ahlqvist from SEB. I know you can't comment on any details on the Premier League process, but maybe I mean you can say something about the timing here. I know that there were speculations that everyone sent in bids and so forth, and if you can say anything on the timing? If we should expect anything in the coming weeks or if it can prevail months? Or what are we talking about here before we know? And then a question for Gabriel both related to the non-scripted divestment that you plan. You mentioned some advisory costs in relation to this. I'm just wondering how much one-off costs we should expect in 2020. And also if there were any sort of one-offs within working capital this quarter. And then third question, if I may, related to Viaplay, the strong intake in this quarter, how much of that was driven by B2B deals?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [3]

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Thank you very much, Johanna. I'll take your first and your last question, and then Gabe will comment on the advisory cost. Regarding the Premier League, it is difficult for me to comment on since there are limitations as to what I can say given the way the rules for these kind of bidding processes are stipulated by, in this case, the FA. So on the timing, they can decide to change whenever they want, basically. So it can move quite quickly or it may take time. It's all a matter of them deciding how they sort of believe they can generate the best value for the clubs in the Premier League. So on the timing, we don't know, and I can't comment on the speculations. What I will say is that we are the incumbents in Sweden and in Denmark and in Finland. We have the rights for another 2.5 years. I remain confident that we have a very good chance of extending this. We are in a strong position. We're developing the rights in a very good way. And we are ready to deal with some inflation because these are very sought-after rights. But there is a point where the inflation, should it go completely crazy, there are alternatives to the Premier League that will allow us to further enhance and develop sports also without it. So there are 2 sides to this. Yes, we want to renew it. And yes, I believe we are in a good position. But I'm also not jeopardizing our ability to develop other parts of the business. We do not stand and fall with it. I think that's as much as I can comment on that one. Your question around Viaplay and the subs intake. There are no significant B2B deals in the Q4 numbers. It is all direct-to-consumer-driven. So none -- no big one-offs in the numbers. Gabriel?

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Gabriel Catrina, Nordic Entertainment Group AB (publ) - Executive VP, CFO and Head of Strategy & M&A [4]

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Yes. So first, on the advisory costs for the NENT Studios, it's difficult to put a number because we have engaged 2 advisers for the disposal of the 2 assets that we announced. But you shouldn't expect to see a number higher than what we've had so far in the Viasat Consumer transaction for 2020 related to this asset. But it obviously will depend on the value of those transactions since advisers have some variable compensation when it comes to those. When it comes to the working capital, you had a question, if there's any one-offs in the quarter. And the answer is, no. We had normal payments, especially with the sports rights and then the increased investments that we have done in originals that is increasing in -- as far -- as long as we increase the number of originals. So there is no one-off effects when it comes to the quarter.

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Operator [5]

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The next question is coming from the line of Mikael.

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [6]

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Mikael Laséen, Carnegie. Yes, I have a few questions, also. And the first one is on the studio changes that you're planning. Can you comment on the timing of this process when you expect this to be completed? And how far you are in this process already now?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [7]

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Yes. We have just started the process, but the process has been sort of preceded by a number of bilateral discussions -- an interest in our assets that has made us even more firm on the timing being right for this process. We expect this to be conducted in the first half of this year, potentially with the closing in the second half of the year. But the sales process, we absolutely aim to conclude before we break for some summer holiday.

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [8]

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All right. Can you also give an update on the profitability of these 2 areas, the one that you expect to divest and what will remain?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [9]

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Yes. So if you look at the -- there are 3 elements in this. The non-scripted companies that serve -- to the absolute majority, serve third-party clients, i.e., customers outside our own group. Then we have the event companies, and we have Splay One. The first 2 categories, non-scripted and the event companies, they are low-margin businesses, and increasing the margins in those businesses is difficult. It's a very sort of settled market predominantly serving linear TV. So given that we don't sort of buy that much internally and never have, we don't see sort of that margin contribution as very attractive for NENT. While the companies are very strong in their own respect, we believe they can be better developed by somebody else. And the same goes for our event companies, which is a very small part of this. Splay One is a growth business. So profitability is up to a new owner to decide how you want to optimize and how you want to harvest growth. But it's a growing business sort of taking care of and serving a completely new segment on the market where content marketing through video is a complete new segment. So fast growth, but very limited profitability at this point. And again, there is no synergies -- there are no synergies with NENT Group and delivering a content -- or developing a content marketing business is not core for NENT, so hence, the decision to divest of these assets.

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [10]

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Okay. Got it. And just one quick question also on this delayed projects, postponed projects from Q4 to 2020, what was behind that? Was quite a lot lower than in Q3, Q2.

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [11]

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So this is the content -- sorry, I'm not with you on the question. Can you repeat it, please?

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [12]

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Yes, you said that Studios was affected by the...

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [13]

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Yes. Yes. Okay. Sorry. Now I'm with you. Yes, well, there is -- as we've seen before, these are very moving targets, whereas script is committed and then is being sent back and you try to plan accordingly. The commitments remain firm, but there are simple timing delays. And it is just the way it is part of our industry works. Sometimes, everything comes in exactly on plan and sometimes, things are all getting a little bit delayed. As long as the commitments are all where they should be, we have no concerns, and that's the case also now.

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [14]

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Okay. And I also have a question about Viaplay. And if you can comment on the ARPU development or ARPU mix development and the price outlook for Viaplay in 2020, please?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [15]

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Well, since we're not breaking down the customer base into various segments, it's difficult to give you something exact on that. What I can say is that the correlation between sports and TV series and movies remain stable, so there is no sort of ARPU change coming from that. But the acceleration of direct-to-consumer, of course, means that the margin that we would be sharing with a B2B partner is retained by us. So the development in Q4 is, if anything, affecting our ARPU for Viaplay in a positive direction. But that may swing throughout the year depending on the opportunities we see with B2B versus direct-to-consumer. So no major movement on that. You will see, at some point, when we talk about streaming revenues isolated, and you have the number of Viaplay subs, then you will see a residual of all that business will be an ARPU that is a blend of sports, TV series and movies, B2B and direct-to-consumer.

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Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [16]

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Okay. And also, I was wondering about the outlook for 2020 when it comes to Viaplay in net ads. You had quite specific targets for 2019, and what do you think could happen in 2020?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [17]

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Well, we've said that we will grow in line with or better than the market. The market was estimated to have grown 20% in '19 when we started the year. It ended up with roughly 18%, and we, as you know, grew 25%. So we grew significantly ahead of the market. All the numbers we are looking at now from various research institutes points to an additional decline in the total market growth as a consequence of maturing markets, so around 14%, 15%. We do expect to be higher than that. We started the year with saying 200 and then up to 250. I think it's reasonable to say that we start this year at an outlook of roughly 250, and then we take it from there.

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Operator [18]

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Next question is coming from the line of Martin.

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Martin Arnell, DNB Markets, Research Division - Analyst [19]

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This is Martin Arnell from DNB Markets. I'll start off with a question on Viaplay. Maybe a follow-up on this B2C and B2B, how should we think about that in 2020? Will you go more into B2B agreements or what you say?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [20]

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Yes. Good morning, Martin. We -- one of the benefits we have seen throughout '19 is that there was -- has been a lot of demand and interest from distribution partners to add Viaplay to the distribution components. We have concluded the majority of those agreements, not all, but the majority, and we've seen a positive impact on the growth, and that's our proportion. We expect to be roughly the same like-for-like going into 2020. Of course, there is a joint venture between us and Telenor, where we have both a significant share of Viaplay subs that are paying for Viaplay through their Viasat consumer bill and then we have commitments from our partner that we will continue to work with Viaplay also on the new base in Canal Digital. So just the Viasat Consumer part will add in excess of 300,000 subs -- paying subs when that merger is concluded and the deal is closed. So of course, that's a step-up, and that was what I was referring to in my commentary is that we will step up to over 2 million subs at the time of the closing of that proposed merger. And then you have sort of a proportion of B2B roughly in line with what we've seen throughout 2019. It is, of course, very positive to see, and especially now in the fourth quarter, the pull effect that we get on the product from consumers. And we are adding even more content in 2020, so we remain hopeful.

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Martin Arnell, DNB Markets, Research Division - Analyst [21]

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Okay. And when you look at the Nordic OTT market, there seems to be a lot going on from competitors. How do you view sort of the latest OTT initiative that we saw yesterday?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [22]

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I believe you refer to the Com Hem Play Plus, I think it's called. Well, I'm not entirely sure what it is yet, so we need to sort of get our head around what plans Tele2 have for that. If the ambition is to launch sort of a new stand-alone OTT SVOD service, then, of course, there are significant content investments ahead for Tele2. If it's a distribution aggregation platform, then there is a discussion to be had what that actually means. And Tele2 is a good partner for us, so we look forward to have those discussions. The one that I would like to mention that we know a little bit more of is, of course, Disney. And Disney has, as you may have seen, delayed their launch in the Nordic countries to summer or after summer. We are concluding our negotiations now with Disney on the core elements of Disney. And if you look at our platform, you still see all the Disney contents on Viaplay. So whatever happens with Disney+, we remain a very strong partner for Disney. And our additions of kids contents coming from the Sony deal, the NBCU deal, the SF deal will make Viaplay a very firm leader of sort of young skewing content for kids. So those are the 2 that I think should be commented on. The rest, for everything that we know, is the well-known competitive landscape.

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Martin Arnell, DNB Markets, Research Division - Analyst [23]

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Okay. And then on this Telia Com Hem conflict this Q4, were there any effects on you from that that's worth mentioning?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [24]

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I would say, no. They were marginal. We were dealing -- both of them are our partners, and we are selling our content accordingly. So there is no impact for us in any positive way. Of course, when TV4 is off the grid for some time and advertisers have to place their money, but it was not long enough to make any sort of significant impact, so very marginal.

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Martin Arnell, DNB Markets, Research Division - Analyst [25]

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Okay. And just a final question. On the key Premier League negotiations here, I mean, would you consider extending these rights sort of jointly together with any of your partners for the Swedish market, as you've done in Denmark, for example?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [26]

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I can't really comment on that. I think partnerships and ways of working together, as we have demonstrated, is a healthy way of taking the business forward. Going crazy and driving inflation is not so smart. So we hope this land in a good way. But I can't unfortunately say anything more than that without risking being in breach of the rules for the tender.

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Operator [27]

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(Operator Instructions) The next question is coming from the line of Tom.

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Thomas A Singlehurst, Citigroup Inc, Research Division - Director and Head of European Media Research [28]

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Tom Singlehurst here from Citi. Just a couple of questions, if it's okay. Firstly, underlying content cost inflation. Can you just give us a sort of straight figure for sort of overall envelope of program cost spend growth in 2019, and then roughly how we should think about it for 2020? And even if it's not necessarily a specific percentage number, conceptually, should we think about programming cost inflation in line with organic growth for the Broadcasting & Streaming division? So that was the first question. And the second question, I know you're reluctant to comment too specifically on Premier League and the minutiae of the tender process. But based on what's publicly available now, is there anything wacky in terms of the way the packages are being structured? I mean if I think about the U.K. and the last big renewal, the Premier League came up with this idea of sort of putting in some packages where they had all the games on 1 day available for purchase by 1 bidder, and obviously, it was designed to get Amazon and potentially some other platforms into the ecosystem. So anything you can tell us about just the structure in terms of packages would be very, very much appreciated.

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [29]

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Thanks, Tom. On the content inflation, it's like-for-like. It is very difficult to give you sort of a number because in our content costs, we have transactional effects, and then you have to think about the volumes, so we're buying more and more content. But the best analog I can give you is a mid-single-digit inflation number. But on top of that, we're, of course, investing heavily in new content, which is then outside like-for-like. But as much as sort of like-for-like is possible, I would talk about a mid-single digits, including what we are sort of absorbing in terms of not translational headwind, but transactional headwind on the dollar. On the Premier League, I have to be extremely boring and say I can't really comment on that. It is at the sort of the FA and the Premier League's discretion to say what they want to say about what they put to the market. So I cannot comment on that. I think what I could say is that the timing for this tender well ahead of these new rights kicking in, in the season 2022-'23 and onwards is probably a residual of wanting to test the market, and the clubs are quite eager to see where they are. And that could, of course, be an effect of what happened in the U.K., I don't know. We are kind of positive to the timing for this since we have 2.5 years to go on the current rights. And should we, for whatever reason, not renew this rights, there is both ample time and opportunities to build another sort of portfolio with assets that we currently don't hold, even though we hold quite a few. So -- but I'm very sorry, I can't say anything more about sort of the bid structure.

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Thomas A Singlehurst, Citigroup Inc, Research Division - Director and Head of European Media Research [30]

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No, that's fair enough. And then one final question. Can you just give -- remind us of the sort of timing of any other big sort of content renewals on the sports side? Is there anything else outstanding outside of Premier League and Champions League?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [31]

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No, Champions League is the big one coming up. And then we'll probably wait a year or 2 -- or at least a year until the next ones are coming up. But I think if you're a rights owner, you consider your options given what's happening with some of these rights. Premier League, of course, sets the tone for some of the others, which is why when I say, we always have a plan B and C and even a D, is that there will be a lot of moving parts on the back of this in different on whether we retain it or let go of it. So as valuable as Premier League is, I would be sort of cautious to be too dogmatic around this one single rights because there is so much moving out there. But the 2 big ones this year are Premier League that came out now and Champions League.

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Operator [32]

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Next question is coming from the line of Peter.

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Peter Testa, One Investments S.A.G.L. - Analyst [33]

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It's Peter Testa from One Investments. I have a couple of questions as well, please. Firstly, just on Viaplay. Can you give any sense as to where you stand on the Telenor distribution side, the extent to which that may have helped Q4 or launching into 2020?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [34]

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Yes. The Telenor distribution agreement that we announced in Q4 after the -- that was concluded after the suggested merger of Canal Digital and Consumer -- Viasat Consumer was announced hasn't really kicked in yet. It's very early days. So as I mentioned, there are very few package additions from B2B in our Viaplay numbers in Q4. So that is -- that deal is very much ahead of us.

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Peter Testa, One Investments S.A.G.L. - Analyst [35]

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Okay. If you look at your marketing with them, is that something, which -- when would you expect, say, full swing co-marketing to start?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [36]

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Well, they've started quite well with Christmas campaigns. So it's very late coming in, doesn't really impact Q4. But we're seeing very positive results. And it's a good partnership that we expect to be sort of very fruitful for both parties.

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Peter Testa, One Investments S.A.G.L. - Analyst [37]

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Okay. And then just on pricing in Viaplay. Can you give some sort of sense on what the tailwind going into 2020 is on the year-end price position versus average price position, just so we can try to put that together with subscriber numbers?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [38]

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Yes. We are -- we haven't announced, as you know, any price increases. We are working on it. And I think it's the best that can happen for the streaming market is, of course, that there are some price adjustments where prices are a bit too low, in my opinion. But we are very sort of conscious about finding a price point and a route into the future that has to do with Viaplay and the value of Viaplay for our customers not comparing too much with competition. And we are carving out such a position very sort of efficiently by adding more and more original unique content. So while we do think that there should be room for price increases this year, we haven't made any firm decisions on it. So any price increase net of any potential churn would be an upside to the numbers that we are mentioning now.

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Peter Testa, One Investments S.A.G.L. - Analyst [39]

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Yes. And last thing is just on the production side. Can you give some understanding as to where you are on external booked position on production and maybe how the financial commitment by third parties has changed year-over-year at this point?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [40]

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Yes. I think the -- when you say external third parties, it's the production that we do where we take one part and then work with distributors and others. Is that what you're referring to?

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Peter Testa, One Investments S.A.G.L. - Analyst [41]

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Yes, correct, that and any sales in the foreign markets on top?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [42]

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Yes, there is a good increase in the willingness to commit to more and more of our content productions. And it's very much related to the fact that we use Viaplay as a starting point. So whenever we'd produce something and we take it to a third party, it's on the back of Viaplay being committed to the Nordics. And that's a very strong proposition. There is no real alternative out there if you don't want to do sort of global deals with the likes of Netflix and HBO and others. And even HBO now is doing sort of -- we're having a couple of productions where we take the Nordic rights, and they take the rights for the rest, so to speak. So it's an increasing positive development. I want us to work more with what I would call production slates, meaning a package of 5 to maybe 10 large-scale productions that we commit together with a partner upfront, instead of doing it case-by-case because that will give us more predictability and an ability to increase even further the quality, especially on the international productions. But clearly, we're getting a lot of interest. Viaplay is now a well-known phenomenon and not just in Europe, but also in the U.S.

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Peter Testa, One Investments S.A.G.L. - Analyst [43]

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Okay. Are there any particular numbers you can give in terms of financial commitment or proportion or anything can help us get some context?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [44]

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I think there are 2 sides to that coin. One side is, of course, where we talk about Nordic original productions where we would be the lead investor. And our share of that investment will in any proportion -- I can't give you the exact number for competitive reasons, but we will be the lead investor. When you talk about international productions, we want to sort of piggyback on our position and pay a reasonable share, but a minority share, for the Nordic rights for those large-scale international productions. And that has a lot of value for a big global distributor, where we commit to one very attractive region and it makes the sale easier, so to speak, outside since we have a proven track record. So those 2 is how you should think about it. One, where we lead and one where we are a minority. Right now, the proportion is most Nordic productions, but we are increasing our international productions rapidly.

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Peter Testa, One Investments S.A.G.L. - Analyst [45]

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Okay. And then just with the reorganization of production here, you're looking for a minority partner on the scripted side. Is there anything you could say about your ambition there and how you're framing that discussion?

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Anders Hede Jensen, Nordic Entertainment Group AB (publ) - President & CEO [46]

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Well, it is starting now. We will work with an adviser on that. We have some interest. And it's -- the reason why we think it's attractive is it's a way to get fresh money into the development. And secondly, if the partner is either of financial character, that has one value. If it is a distributor, then, of course, it creates a partnership that could be very fruitful. So it's both financial and strategic thinking behind that.

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Operator [47]

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That concludes the question-and-answer session. I will now hand the call back to your host, Matthew Hooper. Please go ahead.

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Matthew Hooper, Nordic Entertainment Group AB (publ) - Executive VP & Chief Corporate Affairs Officer [48]

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Thank you, Anders and Gabriel, and thank you all for your time and questions today. We will be road showing in Stockholm, London and New York over the coming days and look forward to seeing as many of you as possible there. As ever, please do not hesitate to reach out to Stefan or Emelie in the IR team with any questions or requests.

Our first year as a listed company in 2019 was a very eventful and positive one, and we look forward to taking further substantial steps in this new year and decade. We have a unique story to tell, and we hope that you found it interesting. That's it for this call, so speak to you or see you very soon. Until then, goodbye for now. Thank you.

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Operator [49]

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That does conclude our conference for today. Thank you for participating. You may all disconnect.