Modern Times Group AB

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Modern Times Group AB

Skeppsbron 18, Box 2094
S-103 13 Stockholm
Sweden
Telephone: (+46) 8 562 000 50
Fax: +46 820 5074
Web site: http://www.mtg.se

Public Company
Incorporated: 1995
Employees: 1,960
Sales: SKr 4.789 billion (US$541.48 million)(1999)
Stock Exchanges: Stockholm NASDAQ
Ticker Symbols: MTG MTGNY
NAIC: 513120 Television Broadcasting; 513112 Radio Stations; 511110 Newspaper Publishers; 511120 Periodical Publishers

Sweden’s Modern Times Group AB (MTG) is one of the Scandinavian market’s leading media companies, with interests ranging from television to radio, to electronic retailing and publishing. MTG operates not only in Sweden, Norway, Den-mark, and Finland, but also in Estonia and Latvia, as well as in other Eastern European countries. The company is also active in Western Europe, particularly in the Netherlands, Germany, France, the United Kingdom, and Italy. The company’s free “subway” daily newspaper, Metro, brought the company’s activities into the North American and South American markets as well; in May 2000, however, MTG spun off its Metro newspaper subsidiary as the independent and publicly listed Metro International SA. With sales of nearly SKr 5 billion (over US$500 million), MTG operates in five primary business areas: Broadcasting, Radio, Publishing, Modern Interactive, SDI Media, and Modern Studios. Broadcasting, grouped under the company’s Viasat subsidiary, includes MTG’s 17 television stations, including its flagship TV3 group of stations broadcasting to more than 17 million Swedish, Danish, Norwegian, Estonian, Latvian, and Lithuanian viewers, with plans to add a TV3 Finland as well; the company’s channels also include the TV8 financial news and documentary channel, acquired in 1999, and Viasat Sport, launched in the same year. In radio, MTG has built a position as one of Sweden’s leaders, with its RIX and Power Hit Radio networks. Since the Metro International spinoff, MTG’s publishing arm consists of the financial monthly magazine Kapital, the business newspaper Finanstidningen, and the monthly Silikon magazine. The company’s Modern Interactive division, led by its TV Shop subsidiary—Europe’s leading electronic-based direct-sales company—has operations including television home-shopping and other “infomercial” programming, and programming for radio, Internet, and teletext. The division also oversees the company’s Internet-based services, such as its online music store CDON.com and its shareholding in the Everyday Internet services group. The Modern Studios division holds all of the company’s production and other content provision activities. Lastly, subsidiary SDI Media is a world-leading provider of subtitling and dubbing for films and television programming. MTG, a former subsidiary of Industriforvaltnings AB Kinnevik, is listed on both the Stockholm and NASDAQ stock exchanges.

Commercial Television Pioneer in the 1980s

MTG began its operations in the mid-1980s when Swedish industrial conglomerate Industriforvaltnings AB Kinnevik moved to enter the newly opening television market in the Scandinavian countries. Up until then, television broadcasting in Sweden, as well as in neighbors Denmark and Norway, had been strictly controlled by the government, and Swedish television audiences were limited to only the state-run television stations. This changed in the late 1980s when the Swedish government opened the country’s airwaves for the first time to independent, commercially operated television programmers. The Danish and Norwegian government quickly followed suit.

Kinnevik was among those to be awarded licenses to operate the new commercial stations and became the first commercial television station ever to broadcast to a Swedish audience. Its station, TV3, began broadcasting on New Year’s Day 1987 via the Astra satellite system. Its initial potential audience was 1.2 million viewers, but by the end of 1988, the new station could reach as many as 3.4 million viewers. The company soon expanded its broadcasts to reach the Norwegian and Danish television markets, providing programming in all three languages.

This approach soon gave way to the expansion of the TVS concept into three separate, country-specific TV3 stations, as commercial broadcasting was allowed in Norway and Den-mark. The three TVS companies now broadcast in the separate languages, offering different programming to each market as well. Because television broadcasting had been a state monopoly in all three countries, TVS was faced with a paucity of independently produced programming. In order to provide programming for its stations, the company formed its own production company, Strix Television, in 1988. The company also began to compete against the government-run stations for broadcasting rights, winning bids to broadcast such events as the Wimbledon tennis tournament and the ice hockey World Cup in 1989. By the beginning of the next decade, TVS’s early entry into commercial television had given it a commanding lead in the race for the Scandinavian market’s advertising dollar; at the time, TVS commanded some 90 percent of all television advertising revenues.

At the start of the 1990s, the Kinnevik media interests—which had already made a foray into publishing—expanded in several new directions. The first was the launch of TV 1000, a set-top based pay-TV venture. This station was soon followed by the company’s entry into satellite television, when Kinnevik was awarded licenses to operate satellite television stations in Scandinavia. The company launched its Viasat satellite television subsidiary in 1991.

Meanwhile, Kinnevik’s media group recognized another growing market and moved to form TV-Shop, providing direct sales marketing via television. TV-Shop would quickly grow to become Europe’s largest provider of direct-sales programming, featuring both home shopping programming and the so-called “infomercial” format. Another subsidiary was formed at this time, as Kinnevik moved toward greater vertical integration in its media holdings, with the acquisition of a majority stake in Svensk Text (later renamed SDI), giving the company subtitling and dubbing capacity. SDI later grew to become one of Europe’s primary media services operations.

TV3 showed its first profits in 1991, less than four years after its launch. Not all of Kinnevik’s media ventures were as successful, and by the end of 1991, the company had exited its pay-TV venture, merging the TV 1000 venture with Succe, its chief competitor.

Ruling the Airwaves in the 1990s

Kinnevik continued to develop its portfolio of television assets, including taking a 30 percent share of the new TV4 network, Sweden’s first land-based, commercial broadcaster. The company also extended its interests to a different wave-band, launching its initial radio station in 1991, marking the Swedish market’s first commercial radio broadcasts as the last of the state-run media monopolies were abolished in the early 1990s. Norway, too, was opening its airwaves to commercial radio, and Kinnevik built a position as largest shareholder in P4 Radio Hele Norge. That station won one of Norway’s licenses to operate a nationwide, commercial radio network in 1993. By then, Kinnevik’s TV & Media division was celebrating the first full year of programming of its new station, the ZTV special interest satellite channel.

Kinnevik’s TV & Media division showed its first profits in 1992, despite its continued costly expansion into new areas. Aiding the company’s balance sheet were the successful spin-offs of two of its investments, as both TV4—which had quickly grown to become Sweden’s most-watched television station—and P4 Radio Hele Norge were taken public as independent companies in 1994. By then, Kinnevik had won several commercial radio licenses for the Swedish market, forming the national radio network RIX and introducing the Power Hit Radio format to the Stockholm and Gothenburg markets. The company also launched its first Text-TV broadcasts, offering news, programming information and other text-based content via the TVS broadcast network.

The year 1994 proved a turning point for the company. In that year, Kinnevik’s TV & Media division adopted the Modern Times Group name. The company also made the decision to migrate its satellite broadcasting from the Astra satellite to the newer Nordic satellite. At the same time, the decision was made to encrypt its broadcasting, requiring access via subscription plans. The company could then generate revenues through both advertisements and viewer subscription fees. Joining the Modern Times’ broadcasting family at this time was the newly launched TV6 station. Meanwhile, the company was quick to recognize the potential of the Internet, forming the basis of the Everyday concept, in conjunction with NetCom AB. By 1999, Everyday had matured into a full-grown Internet “portal,” providing Internet connection and email, as well as content and access to the World Wide Web.

In 1995, Kinnevik boosted its publishing credits when it launched the free daily newspaper Metro. With revenues generated solely through advertisements, Metro was offered free to commuters in Stockholm’s subway system. Commuters eagerly greeted the new arrival, and Metro quickly beat its own fore-casts, turning a profit by the end of its first year. At the same time, MTG expanded its publishing holdings, buying a minority stake in the Finanstidningen business publishing group.

Company Perspectives

The business concept for MTG is to be the best at capitalizing on the daily contact with consumers delivered by the Group’s media. This is achieved by packaging products in ways that attract the audiences that advertisers demand and for which consumers are also prepared to pay in the form of subscription fees. In addition, MTG conducts other business related to media to the extent that such businesses either produce services more efficiently than external suppliers or provide extraordinary opportunities for profit or value growth. The business concept is pursued through a dual strategy: to establish MTG’s products in geographic advertising markets with growth potential and to position them in segments of these advertising markets that have growth rates above average.

Back on the television front, MTG continued its expansion, introducing the 3 + television channel in Denmark, through a merger of the TV6 and ZTV formats, before moving outside of Scandinavia to launch the TVS concept in both Estonia and Lithuania. By early 1997, the Kinnevik concern had gained sufficient size to strike out on its own. In March of that year, the company voted to spin off MTG as a separate, independent company with listings on both the NASDAQ and Stockholm stock exchanges. By then the company’s revenues had grown to nearly SKr 3 billion; yet its expansion had come at a price, with the company showing net losses of more than SKr 300 million for the 1997 year.

Independent for the 21st Century

The public offering nevertheless gave MTG the backing to pursue its expansion, not only within its Scandinavian base, but also farther flung on the international front. After the launches of TVS Estonia and TVS Lithuania, which were followed by TVS Latvia, the company turned to its Metro subsidiary for further growth. In 1997, the company launched the Metro Prague edition; the success of the Metro format soon brought the company back home, however, as it launched an edition geared specifically toward a Gothenburg commuter readership. Metro was to quickly become one of MTG’s primary growth vehicles, as the company began introducing still more Metro editions, starting with Budapest in 1998, and then editions in the Netherlands, Helsinki, and Malmo in 1999.

If MTG prided itself on its organic growth—most of its subsidiary operations had been launched by the company itself—it was not averse to expanding through acquisitions. MTG’s publishing arm in particular benefited by acquisition, as the company acquired the remaining outstanding shares of subsidiary Finanstidningen in 1998, then added to its publishing holdings that same year with the acquisition of publisher Brombergs Bokorlag. In 1999, MTG launched two new publications, the financial monthly magazine Kapital and the monthly general interest magazine Moderna Tider. These were followed by another monthly magazine, Silikon, itself based on a popular TVS television program.

MTG had already returned to profitability by 1998, and by 1999 the company’s net profits had grown to SKr 130 million on sales of nearly SKr 4.8 billion. The company’s growth reflected a number of strategic moves, not least of which was the continued expansion—and success—of the Metro format into new markets, particularly in several cities in the United Kingdom; Zurich, Switzerland; Toronto, Canada; the South American market represented by Santiago, Chile; and the United States as well, with the first US Metro appearing in Philadelphia. The success of Metro was such that by the end of 1999, the company was said to be in negotiations to introduce the Metro format to another 60 countries worldwide.

Radio, too, was providing strong growth for the company, as MTG began broadcast operations in Latvia and Estonia under the Star FM format, and in Finland under the Groove FM and Star FM brands. The company also took over operation and financing of radio stations in the P4 broadcast network. Mean-while, the company’s TV-Shop subsidiary had grown to become Europe’s largest media-based direct-sales company, reaching more than 100 million households in 34 countries. The company’s acquisitions of Media Watchers Group in 1998 and Gelula & Co. Inc., of the United States, in 1999, made its SDI Media subsidiary the world’s largest dubbing and subtitling services provider in the world.

MTG was also preparing for the advent of digital television; the company held one of Sweden’s digital television licenses and was bidding for new licenses at the turn of the century. The company had also acquired a digital television license in 1999 when it purchased small news-and-documentary broadcaster TV8, which held its own digital television license. Yet the lack of reliable digital decoders and the lack of flexibility in the early digital set-top boxes left the company unwilling to pursue investments in the new technology.

The company showed more interest in the booming market for Internet and electronic commerce endeavors. Joining with partner NetCom, MTG expanded its Everyday concept into a full-fledged Internet portal, providing Internet access, content, and other Internet-based services. The Everyday concept was quickly rolled out internationally, with country-specific portals opening in France and the Netherlands, and plans to roll out the Everyday concept throughout Scandinavia and the rest of Eu-rope early in the 21st century. MTG also began to build up a position in the electronic commerce arena, with online sales sites such as CDON.com, selling music over the Internet.

Key Dates

1987:: Industrial conglomerate Industriförvaltnings AB Kinnevik forms TVS.
1988:: TVS viewership reaches 3.4 million and expands to Norway and Denmark.
1991:: Kinnevik launches the satellite TV venture Viasat.
1993:: Kinnevik enters the radio broadcasting business.
1994:: Kinnevik’s TV & Media division is renamed Modern Times Group (MTG).
1995:: Company enters publishing business, launching Metro, a free daily newspaper.
1997:: Kinnevik spins MTG off as a public company with listings on the Stockholm and NASDAQ exchanges.
1998:: MTG is broadcasting on televisions in Estonia, Lithuania, and Latvia.
1999:: Internet portal known as Everyday is launched; Kapital and Moderna Tider magazines are introduced; TVS is acquired.
2000:: MTG’s Metro International publishing concern is spun off as separate company.

MTG moved into the 21st century with a new structure, reorganizing its holdings into the following divisions: Viasat Broadcasting; Radio; Publishing; Metro International; Modern Interactive; SDI Media; and Modern Studios. The success of the Metro newspaper format, however, led the company to spin that division off as a separate, independently listed company, a decision made in May 2000. The spinoff of Metro International returned MTG’s focus to its core Nordic countries base, where the company expected to continue to play a major role as a media provider for the 21st century.