Newsletter 9th of February
9 February 2022
These are the topics we focus on in this week’s newsletter:
- Warner Bros. sued over day-and-date HBO Max release of ‘Matrix Resurrections’
- Earnings season in full swing in the Nordics
- Alphabet, Amazon, and Meta reports on Q4 performance
- Spotify reports profit for the first time – but stock takes hit
Warner Bros. sued over day-and-date HBO Max release of ‘Matrix Resurrections’
This Monday, Village Roadshow Entertainment Group filed a lawsuit against Warner Bros. for breach of contract regarding the studio’s decision to release the latest instalment in the Matrix-franchise simultaneously on HBO Max and in theatres.
Warner Bros. has previously announced that its entire 2021 slate of theatrical films would be released in cinemas and on HBO Max on the same day. However, this practice was expected to be discontinued in 2022.
In the lawsuit, Village Roadshow claims that Warner Bros. pushed the release date of ‘Matrix Resurrections’ (originally slated for 2022) to boost 2021 year-end subscription figures for HBO Max. Further, Village Roadshow is accusing Warner Bros. of ignoring the wave of piracy that follows streaming releases, further reducing the movie’s earnings potential.
This lawsuit is expected to escalate the tension between two sides of the movie industry; major media companies that, especially during the pandemic, have chosen to prioritize growth of their streaming services, and those who could potentially benefit more from a theatrical release.
However, this is not the first lawsuit filed regarding this issue. In 2021, Scarlett Johansson sued Disney for USD 80 million after its simultaneous release of ‘Black Widow’ on Disney Plus and in theaters, claiming that she was deprived of potential earnings in the form of her box office-based bonus. The two sides later settled out of court.
This analysis covers both the and TV- and streaming markets in Sweden. It rests on three pillars: the consumers, the market, and the actors. Analysing the consumers takes us far – but not all the way. Studying the actors and the market as a whole is just as important. Published quarterly.
Earnings season in full swing in the Nordics
This past week, four Nordic actors have presented their Q4 2021 reports. These were some takeaways from the earnings calls.
Allente reported both declining subscribers and revenues in Q4 2021, compared to the same period in 2020. Net income (loss) amounted to SEK -104, compared to SEK -76 million in Q4 2020. However, for the full year of 2021, Allente reported a net income of SEK 82 million.
Nordic Entertainment Group reported that its Viaplay service now has more than 4 million subscribers, representing a 33% growth over the past year. Compared to Q3 2021, Viaplay has added 397’ subscribers – of which the Baltics and Poland represent 234’ and the Nordics 134’. Sales grew by 12% YOY to SEK 3.553 billion, and operating income amounted to SEK 69 million, a decrease from the SEK 117 million reported in Q4 2020.
NENT’s target for 2022 is to increase the total subscriber base across all markets to 6.5 million, partly through new investments in the Netherlands and later in the United Kingdom. This would imply that growth need to double compared to this year.
Ahead of the launch in Netherlands on March 1st, NENT has entered a multi-year distribution deal with T-Mobile, which will offer four months’ free Viaplay access to its customers in combination with a new T-Mobile broadband subscription. At a later stage, T-Mobile will make the streaming service available as an add-on subscription to its TV and internet offering.
Readly’s Q4 report reveals that revenues increased by 36.6% compared year over year, to a total of SEK 134.8 million. At the end of December, Readly had a total of 478.362 ‘full paying subscribers’, which entails an increase of 29.4% year over year. Further, Readly reaffirmed its previously set target to reach profitability by 2025 (referring to operating profit before depreciation and amortization).
Telenor’s EBITDA for Q4 2021 fell 6.5% year over year to NOK 11.7 billion Norwegian crowns (NOK 1.33 billion in 2020), which is lower than market expectations. Telenor’s share price has fallen -1% year-to-date (9th of February 2022).
The company’s overall revenue declined by 4.8% in 2021, reflecting the pending sale of its Myanmar operation. Adjusted for the sale, it increased by 1.2%.
Telenor expects its earnings to be largely flat or slightly up in 2022 compared to 2021.”Entering 2022, we will maintain our focus on returning to growth,” CEO Sigve Brekke said in a statement. Expansion is expected to come from Telenor’s push into cloud and 5G technology as well as from planned tie-ups in Thailand and Malaysia and continued development of its Nordic infrastructure.
Mediavision’s Insight: Nordic Media & Markets tracks the progress of individual and household payments per service and actor, as well as overall media expenditures. The primary focus is mapping out the allocation of expenditures across audio, video, text, and access. Published bianually.
Alphabet, Amazon, and Meta reports on Q4 performance
The quarterly reports from three of the largest global companies last week, Alphabet, Amazon, and Meta (Facebook), caused substantial movements on the stock market. The biggest decliner was Meta, who closed at –26.4% after reporting results that did not meet Wall Street expectations and revealing a number of worrying factors that could impede growth in 2022. Google was up +7.5% after its earnings report, and Amazon soared +13.5% (also recovering from a –7.8% sell-off post Meta’s results).
These were some of the headlines that emerged from the reports.
Alphabet reported strong figures for Q4 2021, seemingly unaffected by Apple’s privacy changes or negative macro trends.
Total revenue growth amounted to +31% year over year in Q4 2021, slightly lower than in 2020 (+33% year over year). The main drivers for revenue growth were Google Services – management cited “broad-based advertiser strength” and “strong consumer online activity”, in addition to lapping COVID-related weakness in Q4 2020.
Focusing on YouTube, advertising revenue grew +25% year over year, a deceleration from +43% growth in Q3 2021. Management did point out difficulties with year over year comparisons, as ad spend bounced back in Q4 2020, after being strongly impacted by the pandemic in Q3 2020. Further, management revealed that engagement with YouTube Shorts is growing and recently hit 5 trillion total views with and over 15 billion daily views globally. A key focus for the company going into 2022 is improving support for artists and creators. The number of YouTube channels bringing in revenue of at least USD 10’ grew +40% year over year.
In its outlook for 2022, Alphabet expects costs to increase, with a “strong pace” of hiring to invest in Cloud, investments in technical infrastructures and purchases of real estate.
The main story from Amazon’s Q4 reports was that for the first time, the company revealed just how big its advertising business has become. In 2021, advertising revenue amounted to USD 31.2 billion, with Q4 sales rising 32% year over year. However, advertising is still small by Amazon standards, representing 7% of total revenue in Q4.
Further, Amazon stated that it will increase prices for Prime Services in the US by USD 20 to USD 139 per year, the first price increase since 2018. Historically, price hikes to Prime have not affected churn or subscriber uptake, given all the benefits included in the membership – and management is thus betting that this will prevail, citing high utilization and benefits. Among other things, Amazon disclosed that more than 200 million Prime members globally have streamed shows and movies on Amazon Prime Video in 2021. Additionally, Prime Video posted its strongest viewership for live sports globally, while sports content on the service is still “in its early days”. Perhaps an indication of what’s to come…
Meta (Facebook) posted Q4 results that did not meet Wall Street expectations, driven by an advertising revenue miss in its US & Canada region, which caused the stock to fall drastically (-26%) in afterhours trading. Total revenue grew +20% year over year to a total of USD 33.67 billion.
Management pointed our several factors that contributed to the Q4 results, including:
- Competition for consumer’s time, specifically mentioning TikTok. For the first time ever, Meta announced that Facebook had lost daily active users during the quarter.
- The transition to Reels (Instagram’s TikTok competitor) shows lower monetization rate than the products it is replacing.
- Apple’s iOS changes, which in addition to nagging at Q4 sales, could cause an estimated USD 10 billion in lost sales in 2022.
- Macro headwinds has impact on ad spend – e.g., supply chain disruptions, labour shortages and inflationary pressures.
- Difficulties with year over year comparisons, as did Alphabet.
- Slowdown in online commerce.
Notably, the metaverse (a virtual reality world where users can interact, game and experience things as they would in the real world – and the inspiration for Facebook’s parent company name change to Meta) was barely mentioned at all in the investors call.
For the Q1 2022 outlook, management expects these factors to have continued impact – while the impact from Apples’ iOS changes is expected to come into play. Total revenue for Q1 2022 is expected to be in the range of USD 27-29 billion, representing a 3-11% growth year over year.
Spotify reported profit for the first time – but stock takes hit
While Spotify has been in the spotlight the past couple of weeks over controversies surrounding ‘The Joe Rogan Experience’ podcast, little focus was placed on that issue during the investors call. These are some of the main takeaways:
- For the first time ever, Spotify reported a profit in its full year report for 2021 – amounting to EUR 94 million.
- Spotify reported a total of 180 million paid subscribers globally and 406 million monthly active users by the end of 2021. MAU growth amounted to +18% in Q4 2021 – however, driven by heavy promotions.
- Advertising revenues grew to USD 445 million in Q4 2021, up 40% year over year, while total revenues hit USD 3.04 billion.
- The company stated that one of the biggest opportunities is the rapid professionalization of creators, and that it continues to focus on “building capabilities to support this theme”. There are currently 11 million creators on Spotify, an additional 3 million compared to a year ago.
- After exceptionally strong performance in 2020 (+110%), the Spotify stock saw a much more challenging development in 2021 (-26%) and thus far in 2022 (down –32% as of 9th of February). Spotify shares have fallen post 6 of the last 7 earnings reports – including the latest. The most recent decline is mainly a result of disappointing Q1 guidance, as well as the announcement that Spotify will no longer provide annual guidance to the market.
Side note: Spotify reportedly signed a sponsorship deal with Barcelona FC this week, estimated to be worth around EUR 280 million.
Mediavision in the News
Poddarna – makten och pengarna – SR
”Spotifys förflyttning berör hela branschen” – SVD
Därför kom Clubhouse-hysterin för ett år sedan – och därför dog den – SR
Hushållen tecknar fler abonnemang – rekordsiffror för S-SVOD under 2021 – Dagens Media
Swedish SVOD growth dominated by sub stacking in record revenue year – Digital TV Europe
Her er er de nye strømmevinnerne – Kampanje
HBO enjoys major growth in the Nordics and adds over 635,000 subscribing households following Max launch – Cineuropa
TV Drama Vision – Göteborg Film Festival: 2-3 February 2022, Gothenburg, Sweden
Berlin Film Festival and European Film Market: 10-20 February 2022, Berlin, Germany
CTAM Europe Executive Management Programme: 20-25 March 2022, Fontainebleau, France
MIPTV: 4-6 April 2022, Cannes, France
NEM Dubrovnik: 6-9 June 2022, Dubrovnik, Croatia
* Mediavision will attend
** Mediavision will present