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
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
’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.