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Eastern Promises – Capital Markets Day, May 2011
 

Eastern Promises – Capital Markets Day, May 2011

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Presentation from Modern Times Group's 2011 Capital Markets Day on 26 May 2011 at the Emirates Stadium in North London.

Presentation from Modern Times Group's 2011 Capital Markets Day on 26 May 2011 at the Emirates Stadium in North London.

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    Eastern Promises – Capital Markets Day, May 2011 Eastern Promises – Capital Markets Day, May 2011 Presentation Transcript

    • EASTERN PROMISES
    • Why these markets are attractive! Minutes per day watching TV TV Ad spend / Total Ad spend300 70% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 60%250 50%200 40%150 30%100 20%50 10% 0 0% Minutes per day 2010 CEE, 2000-2010 • TV viewing is significantly higher in CEE with a stable growing trend, making TV very attractive to advertisers EASTERN PROMISES • Share of TV advertising spend of total ad market is higher than in Western Europe 2 Sources: ZenithOptimedia 2011, TNS
    • Why these markets are attractive! TV Ad spend per capita (USD) TV Ad spend, WE and CEE180 360160 310140120 260100 2108060 16040 11020 0 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Index, CEE markets Index, Western Europé • Advertising spend per capita is significantly lower in CEE, rendering a significant growth potential EASTERN PROMISES • CEE markets are growing faster than average in Western Europe 3 Sources: ZenithOptimedia 2011
    • An exciting journey through time… Launch of Acquisition Acquistion of Catch-Up Acquistion of Baltic of 100% of 100% of services 75% of DTV Free-TV Slovenian Nova TV in launced in Russia operations operations Bulgaria across CEE 1997 2000 2001 2002 2005 2006 2007 2008 2008 2010 2011 …22 channels in 9 Emerging Markets! Acquisition Acquistion of Acquisitionof Launch of Acquisition Launch of of 95% of 50% of Prima 50% of Prima LOVE of 36% of Viasat1 in Hungarian TV in Czech Diema in in Czech CTC Media Ghana operation Republic Bulgaria Republic EASTERN PROMISES4
    • Market Positions Czech Estonia Latvia Lithuania Bulgaria Hungary Slovenia Ghana Russia Republic #1 FTA Broadcaster in the Baltics #2 #2 #3 #2 #2 #4Market positionCommercialaudience share 41.9% 38.1% 40.7% 23.4% 28.2% 7.5% 10.1% 17.0% 15.6%FY2010 (15-49) (15-49) (15-49) (15-54) (18-49) (18-49) (18-49) (18-49) (14-49)(targetdemographic)Media house(secondary X X X X X X N/A N/A N/Achannels &bundled sales) MTG DTH X X X X platforms MTG Pay channels X X X X X X X X X MTG Radio channels X X X EASTERN PROMISES MTG Play channels 5 X X X X
    • • Baltics • Estonia • Latvia • Lithuania OUR CORE MARKETS• Czech Republic• Bulgaria 6
    • Baltics Macro perspective 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (FC) -10% -20% -30% -40% Total Baltics, GDP (% yoy) Unemployment, Baltics Consumer expenditure, Baltics TV Ad market, Baltics• TV ad markets grew faster than GDP upuntil the crisis• Already in late 2010 TV advertising market started to grow again after two OUR CORE MARKETS consecutive years of very strong decline• Solid growth continues in 2011 7 Sources: IMF, TNS/MTG estimates
    • Baltics Ad market TV Ad spend/cap. (USD) TV Ad market, Baltics (MSEK)200 1 300160 1 100120 900 80 700 ~ -500 40 500 MSEK 0 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Baltics Scandinavia Top Five Advertiser segments Mobile operators Mobile operators Retail Retail Food Food Beverages Beverages OUR CORE MARKETS Financial services Pharmaceuticals International/domestic clients (%) 70/30 25/75 Media agencies / direct buy (%) 90/10 95/5 Annual commitments/ad hoc sales (%) 75/25 75/25 8 Sources: Zenith Optimedia 2011, TNS/MTG estimates
    • Baltics Competitive landscape Distribution overview Major competitors Cable 34% Free DTT 24% IPTV 12% Pay DTT Analog DTH 9% terrestrial 11% 10% Kanal 2, K 11 Local owner LNT Total 2 387 000 HH Local owner LNKFree DTT Pay DTT Analog terrestrial DTH IPTV Cable• Digitalisation increasing penetration and reach. Lithuania to become fully digitalised in 2012 OUR CORE MARKETS• MTG is the only broadcaster with a Pan-Baltic footprint,• Pan-territorial sales becoming increasingly important• Operational synergies (centralized functions and Play-out facility) 9 Sources: MTG/Viasat statistics
    • BalticsOur Performance Recession strategy MTG Baltics, 2005-2010 50% • Stimulate demandSales 40% • Pan-Baltic sales 30% 20% 10% • Re-build operations with lowerCosts cost bases 0% -10% 2005 2006 2007 2008 2009 2010 -20% • Continue to invest in -30%CSOV programming to defend market -40% positions CSOV (A15-49) Market growth Competitor recession strategies MTG, Financial dev. (%, yoy) 2009 2010 • Schibsted continued to invest in Sales -28.4% -5.1% programming and lowered prices Costs 6.9% -16.3% • NewsCorp exited LNT, new owners with pure focus on cost cut. Strategy MTG, CSOV (15-49) 2009 2010 OUR CORE MARKETS to lower prices to gain market share. Estonia 40.2% 41.9% • LNT made selective cost Latvia 34.7% 38.1% reductions and reduced prices to protect market share. Lithuania 40.4% 40.7% 10 Sources: Zenith OptiMedia, TNS, MTG estimates
    • BalticsKey Formats 2011 Estonia Latvia Lithuania Come Dine With Me Come Dine With Me Farmer Wants a Wife The Money Drop The Money Drop Got Talent OUR CORE MARKETS11 Re-launched News Crime News Dance With Me
    • BalticsConclusions Highly operationally geared Pan Baltic FTA market leadership strengthened during crisis In the first step, approx. 500 MSEK of TV market to regain Pre-crisis TV market CAGR of 18% TV markets are growing OUR CORE MARKETS Region is out of crisis12
    • Czech RepublicMacro perspective20%15%10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (FC) -5%-10%-15%-20% GDP Unemployment Consumer Expenditure TV market development• Czech economy grew at a rapid rate until the crisis – and went through it relatively unharmed, with unemployment well below EU average• TV ad market has been volatile over the last 10 years, but with strong OUR CORE MARKETS underlying growth• Consumer spending picking up following only modest inflation pressure 13 Sources: IMF, Zenith OptiMedia, MTG estimates
    • Czech Republic Ad market Ad spend /cap. (USD) TV Ad market value (MSEK)200 4500 4000160 3500120 3000 80 ~ -800 2500 MSEK 40 2000 0 1500 W. Europé Czech Republic 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Czech Republic Scandinavia Top Five Advertiser segments Mobile operators Mobile operators Retail Retail FMCG Food Consumer goods Beverages Financial services Pharmaceuticals OUR CORE MARKETS International/domestic clients (%) 96/4 25/75 Media agencies / direct buy (%) 99/1 95/5 Annual commitments/ad hoc sales (%) 99/1 75/25 14 Sources: Zenith OptiMedia, ATO, MTG estimates
    • Czech Republic Competitive landscape Distribution overview IPTV; 9% Channel Owner* Target CSOV** DTH; 20% DTT; 41% 15-54 20-40 25.6% Cable; 30% 15-44 15-54 47.3% DTT Cable DTH IPTV * MTG is 50% owner of Prima, **Q1 2011 Total 4 404 000 HH• We continue to challenge the incumbent with our media house strategy• Major competitor has lost 11% in CSOV since 2009 OUR CORE MARKETS• Prima LOVE launched in Q1 2011 15 Sources: Infroma 2011, ATO
    • Our PerformanceCzech Republic Recession strategy MTG Czech Republic, 2005-2010 • With a proactive approach and 30%Sales new channel launches, sales 25% were back to growth in 2010 20% 15% 10% • Swift cost reduction efforts, to 5%Costs preserve healthy EBIT margins 0% -5% 2005 2006 2007 2008 2009 2010 -10% -15% • Media house implementation -20%CSOV boosted total CSOV 12.5% -25% CSOV (15-54), MTG TV Ad market development Competitor recession strategies MTG, Financial dev. (%, yoy) 2009 2010 Sales -15.0% 3.6% • Aggressive pricing strategy through price decreases and Costs -5.2% 5.3% OUR CORE MARKETS bonus packages. MTG, CSOV (15-54) 2009 2010 Total 20.8% 23.4% 16 Sources: Zenith OptiMedia, ATO, MTG estimates
    • Czech RepublicKey Formats 2011 M20-40 A15-54 W20-44 OUR CORE MARKETS17
    • Czech RepublicConclusions Strong operational momentum Have gained significant CSOV over the last 12 months Approx. 800 MSEK of market value to regain in the first step Too early to conclude that the advertising market has started to recover OUR CORE MARKETS The country is out of the recession18
    • BulgariaMacro Perspective65%45%35%25%15% 5% -5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (FC)-15%-25% GDP Unemployment Consumer Expenditure TV Ad market dev.• GDP decline leveled out in 2010 with economy forecasted to go into growth in 2011 OUR CORE MARKETS• TV Ad market grew with 24% CAGR 2000-2008 and started to stabilize again in 2010• Strong underlying dynamics with low ad spend per capita19 Sources: IMF, Zenith Optimedia, TNS/MTG estimates
    • Bulgaria Ad Market Ad spend/cap. (USD) TV Ad market value (MSEK)200 1400 1200160 1000120 800 ~ -250 60080 MSEK 40040 200 0 0 W. Europé Bulgaria 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Bulgaria Scandinavia Top Five Advertiser segments Mobile operators Mobile operators Retail Retail Food Food Beverages Beverages Pharmaceuticals Pharmaceuticals OUR CORE MARKETS International/domestic clients (%) 50/50 25/75 Media agencies / direct buy (%) 92/8 95/5 Annual commitments/ad hoc sales (%) 85/15 75/25 20 Sources: Zenith Optimedia 2011/MTG est.,TNS
    • Our PerformanceBulgaria Recession strategy MTG Bulgaria, 2008-2010 • Proactivity and efficicent 35%Sales inventory utilization to counter pricing pressure from CME 25% 15% • Streamlined operations andCosts efficiency increases, to 5% optimize the cost base -5% 2008 2009 2010 • Programming investments to -15%CSOV ensure long term growth in -25% CSOV and Mini-pay revenues CSOV (18-49) TV Ad market dev. Competitor recession strategies MTG, Financial dev. (%, yoy) 2009 2010 Sales -22.6% 1.0% • Acquisition of bTV from News Corp., market consolidated to Costs -0.3% 5.0% OUR CORE MARKETS two players • Launched secondary channels MTG, CSOV (18-49) 2009 2010 • Aggressive pricing strategy Total MTG 32.9% 28.2% 21
    • Bulgaria Competitive landscape Distribution overview Channel Owner Target CSOV* Cable 50% DTH 18-49 28.2% 27% Analog terrestrial 21% 18-49 53.0% IPTV/Other 2% Analog terrestrial Cable DTH IPTV/Other * Q1 2011• MTG operates a fully integrated mediahouse, with clearly positioned channels• Primary channel Nova (FTA) remain the strongest in urban areas OUR CORE MARKETS• Digitalisation of terrestrial distribution expected to take place 2014-2015 22 Sources: TNS TV Plan establishment Survey 2010, TNS
    • BulgariaKey Formats and rights 2011 Farmer Wants a Wife OUR CORE MARKETS23
    • BulgariaConclusions Strategy in place to grow CSOV and market share Market consolidated to a two-player market Approx. 250 MSEK of TV market to regain in the first step Pre-crisis advertising market CAGR of 24% TV-market has not turned to growth yet Consumer confidence lagging GDP recovery OUR CORE MARKETS Economic recovery lagging other CEE countries24
    • The Eastern Promises 1.5 bn SEK of TV ad market to regain to get back to pre- crisis level Advertising market recovery is lagging, programming investments scewed to H2 11 Well positioned with media house strategy deployed in consolidated markets – high operational leverage25
    • 26EASTERN PROMISES