Viaplay is looking to introduce an advertising tier within its streaming offering as well as tackling account sharing and cutting back on original scripted content to keep its performance on track this after a fourth quarter that showed signs that the struggling Nordic streamer was beginning to recover from an extremely challenging year.
Viaplay was able to confirm financial targets for the year following its restructuring on the back of a stable performance in the fourth quarter, but the cost of exiting international markets continues to weigh on the business.
Viaplay has written off and provided for content costs in its international markets to be discontinued – the UK, the Baltic states, North America and Poland – but is left with cash costs for content that cannot be sold back or sublicensed. Sublicensing of content has become a new area of focus for the company as it refocuses on improving the bottom line.
Speaking on the earnings call, CEO Jørgen Madsen Lindemann said that Viaplay was now focusing on “value over volume” rather than pursuing growth for its own sake, with a focus on upping prices rather than growing its subscriber base.
Lindemann said that tackling account sharing and piracy would be key areas of focus alongside combatting churn.
“We are inspired by some of our peers who have launched very successful account sharing measures,” said Lindemann. “We will learn as much as we can.”
Hybrid VOD offering
The streamer is also looking to launch a hybrid VOD offering this year, meaning advertising to support subscription revenue.
“We want to make sure the revenue power of digital advertising is something we tap into,” said Lindemann. “It is quite important to create more digital eyeballs and we will do that by launching HVOD services, which will also happen in 2024,” he said.
Lindemann said “all options” would be looked at when asked if the company would consider introducing a more affordable Premier League offering with ads.
The launch of an HVOD offering will contribute, the company believes, to digital ad revenue growth ultimately offsetting linear ad decline.
Sub-licensing content
As part of its reset, the streamer has moved away from commissioning high-cost original dramas to focus on profitable local formats and Hollywood content, with rights to some originals being sold to other streamers.
The group is also reducing its sports rights portfolio and is sublicensing some rights.
“We are working super-hard on trying to improve subslicensing,” said CFO Enrique Patrickson.
Lindemann said that offloading drama and sports content to other media players could free up cash to invest in popular content that could deliver a better return on investment.
Viaplay’s Q4 organic sales growth of just over 3% to SEK4.9 billion was primarily driven by 9% organic sales growth in linear subscription and other sales – boosted by licensing of content to other players. Viaplay organic sales were down 0.3% and advertising organic sales declined by 3%.
Viaplay turned in negative operating income of SEK230 million, an improvement on the negative SEK284 million for the prior year period, with losses at its discontinued or soon-to-be discontinued international operations more than offsetting positive results from its Nordic operations.
Subscriber decline
The group’s Nordic subscriber base decreased by 39,000 subscribers’ quarter-on-quarter, which was primarily due to a decline in the subscriber base in Finland and was down 519,000 year-on-year as the streamer discontinued unprofitable promotional offers.
Traditional pay TV business Allente, in which Viaplay is a joint venture partner, is meanwhile continuing to perform “below expectations”, with subscribers and sales both down.
Viaplay’s own diminished international subscriber base stood at 2.396 million at the end of the quarter, down 11.1% year-on-year due to churn at Viaplay’s Dutch operation following the end of the Formula 1 season – the one international market in which it is staying.
Viaplay’s streaming service now accounts for 51% of revenue, with linear subscription and other revenues (including content licensing) account for 30% and advertising 19%.