MTG Expects Competitive Video Gaming Arm to Turn Profit by 2018by and
Swedish media group bought esports league ESL last year
Money will follow eyeballs as millennial audience grows: CEO
Modern Times Group AB’s push into global competitive video gaming should turn profitable for the Swedish media company by 2018, as the popularity of e-sports among millennials surpasses that of ice hockey and is on track to catch the NFL, Chief Executive Officer Jorgen Madsen Lindemann said.
“The money will follow as long as we can continue to deliver the right eyeballs,” Lindemann said in an interview in Stockholm. “The e-sports business in 2018, aggregated, is something that we do believe we will make profit.”
The surging popularity of professional gaming is attractive to media companies struggling to reach younger viewers with traditional TV. Americans aged 21 to 35 already watch e-sports almost as much as they watch ice hockey and researcher Newzoo predicts annual audience growth of 17 percent in the coming years, meaning e-sports will soon rival the NFL, Lindemann said. MTG took a plunge into the market last year when it bought a 74 percent stake in the holding company of the ESL e-sports league for about $85 million.
Investments to expand the sport have burdened MTG’s earnings since then, and the MTGx unit that includes competitive gaming posted an operating loss of 111 million kronor ($12.3 million) in the first nine months of this year. Lindemann believes the tide is about to turn as viewership is growing and gaming is becoming more professionalized.
“We will have lower losses next year in MTGx than we have this year,” he said. “And in 2018, some of the businesses should definitely go into profitability.”
The total market for e-sports is worth about $460 million this year with average revenue per fan of about $3.5, Newzoo estimates. The market could grow to about $1 billion by 2019 with average annual sales per fan of about $6. That’s still below current annual revenue of about $15 per fan for basketball and far below the $60 that football generates, but this also shows the potential for growth in e-sports, according to Newzoo.
For MTG, capitalizing on the interest in gamers like n0thing, Stewie2k and Skadoodle of Cloud9, a team that last week bagged a $200,000 prize for winning a Counter-Strike competition in Brazil, is an important part of a transition from a traditional broadcaster to a digital content provider. That shift has also pitted it against the likes of Netflix Inc., whose 2012 launch in the Nordic countries was a direct challenge to MTG’s streaming service Viaplay, which was started a year earlier.
While Lindemann said that MTG wildly underestimated Netflix’s Nordic potential, Viaplay has managed the competition by offering premium sports and locally produced content. Since 2013, the number of Viaplay subscribers has quadrupled, and revenues are up fivefold, Lindemann said, adding that subscribers for the company’s traditional pay-TV channels have also grown.
MTG started offering Viaplay in the Baltics in July and this year also launched Viafree in the Nordics. The new video streaming service is a digital window for all the company’s advertising-funded content in Sweden, Norway and Denmark. The app has been downloaded more than 1 million times, according to MTG.
Lindemann joined MTG in 1994 and took the top job in 2012 after predecessor Hans-Holger Albrecht left the company to head Millicom International Cellular SA, another firm controlled by the Stenbeck family, whose holding company Kinnevik AB is the largest shareholder in MTG.
Lindemann has sold MTG’s Ukrainian pay-TV business and its Hungarian free-TV operations over the past year to fund the push into e-sports and digital content production and in May the company started broadcasting eSportsTV, the world’s first 24/7 dedicated channel for professional gaming.
E-sports could also be a part of the offering in Viaplay, he said, though the company is now focusing on expanding the reach of the sport, 12 months after the deal to buy the ESL was completed.
“It has been a crazy year,” Lindemann said. “We continue to invest and grow the audience. That is what we’ve tried to do and what we’ll do in five years as well, hopefully.”