INTERNATIONAL: Scandinavian TV pioneer learns to live with the competition as commercials win favour - Alasdair Reid plots the turbulent journey of Scandinavia’s leading commercial broadcasting group

When David Chance, newly departed from BSkyB, accepted a seat on the board of Modern Times Group back in March, he maintained that this was a company with a big future. ’I’m delighted to be working for MTG - there is a huge potential for growth at the group,’ he stated. Analysts tend to agree, but add that it could hardly be otherwise. This is an organisation that has consistently punched well below its weight.

When David Chance, newly departed from BSkyB, accepted a seat on

the board of Modern Times Group back in March, he maintained that this

was a company with a big future. ’I’m delighted to be working for MTG -

there is a huge potential for growth at the group,’ he stated. Analysts

tend to agree, but add that it could hardly be otherwise. This is an

organisation that has consistently punched well below its weight.



MTG - only recently floated off from its previous parent, Kinnevik - is

now Scandinavia’s most powerful broadcaster but it is not an

organisation oozing with confidence. And this despite excellent news on

the financial front. Figures for the first quarter this year indicate

that a recovery is under way, ending two years of heavy losses.



But this is not a naturally outgoing organisation. It’s a company that

will take an embattled and suspicious stance at the slightest excuse -

and that, according to ad agency sources in the region, is all down to

the company’s history. David Chance may find much that is familiar. MTG

has faced the same uphill struggle against liberal-left establishment

opinion in its native territories - especially in Sweden - as BSkyB has

in the UK.



In the 80s, Swedish media was still stuck in a 50s time warp. There was

only one broadcaster, and this was state-owned, rather pious and

extremely dull. It didn’t go in for advertising. It didn’t dare.

Commercials were seen as a pernicious social evil, one that would debase

public morals and corrupt children.



Denmark and Norway were slightly more liberal, but not much.



There was certainly a gap in the market for an ad-supported

entertainment channel but the political challenge was huge. Kinnevik, a

Swedish timber-to-telecoms conglomerate which was a founder member of

the Astra satellite group, decided to take it on, but it had to come to

London to do it.



In 1987 it launched TV3, a pan-regional satellite channel targeting

Sweden, Denmark and Norway. Uplinking from London allowed it to evade

Swedish law and gave it the status - at least in the minds of

Scandinavian governments - of a pirate station. Viewers loved it, of

course, and even developed an appetite for the potentially degenerate

things called commercials that popped up every now and again on

screen.



There was only one snag. The Scandinavian advertising industry wasn’t

geared up for television advertising, and sluggish growth in that

department has remained one of MTG’s biggest problems as it has evolved

over the last ten years. Ironically, it has also suffered from the fact

that it managed to win the intellectual argument: back in 1991, the

government in Sweden caved in and allowed the launch of its own

commercial channel, TV4. After that, MTG acquired a stake in TV4, but

the new channel’s success only hurt MTG’s flagship TV3, and the launch

of a third commercial station, Kanal 5, hasn’t helped either.



Throughout the 90s, MTG decided on a path of steady diversification.



It split TV3 into five separate dedicated channels, one each for Sweden,

Denmark, Norway, Estonia and Lithuania. It also launched a subscription

channel, TV1000, and its sister subscription management operation,

ViaSat (now the dominant pay-TV platform in Scandinavia), plus a

portfolio of niche free-to-air channels, including ZTV and TV6 in Sweden

and 3+ in Denmark.



It developed a substantial programme production division, acquired radio

stations throughout the region and built Europe’s largest television

home shopping company, TV Shop Europe. It controls the Swedish financial

daily, Finans Tidningen and Metro, a freesheet newspaper title published

in Stockholm, Gothenburg and Prague which the company now intends to

roll out across the continent.



But last year, as MTG was heading for a loss of SKr293 million (pounds

23 million), Kinnevik decided it was time for MTG to go it alone. In

September, MTG was floated on both the Stockholm and New York Nasdaq

exchanges. The timing could have been better but it added urgency to the

task of turning the business around.



Cost-cutting was a priority. MTG shed large numbers of staff and

restructured.



’This has been a necessary but occasionally unpleasant process, with

some trouble and turbulence which is unavoidable when companies must

radically streamline their operations,’ stated Pelle Tornberg, MTG’s

president and chief executive, in a speech back in May.



It looks as if it could be paying off. In the first quarter, MTG was

only a whisker away from returning to the black.



Many observers believe that subscription and pay-TV is where MTG’s best

hopes lie. But in the long term there is only room for one Scandinavian

pay-TV player, and informal talks between Canal Plus and MTG began

earlier this year. Ensuring their favourable conclusion will be the next

big challenge facing Pelle Tornberg.



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