Ladies and gentlemen, thank you for standing by. Welcome to Modern Times Group's Q3 2019 results conference call. I would now like to hand the conference over to Mr. Lars Torstensson. Thank you. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and welcome to MTG's Q3 2019 interim report presentation. As said, my name is Lars Torstensson. I'm responsible for communication at MTG AB. With me today we have Jørgen Madsen Lindemann, our Group President and CEO, and Maria Redin, CFO of MTG AB. Today we will start with a formal presentation followed by a Q&A. Please keep in mind questions are only enabled for those participating through dialing. Our webcast is listening only. Without any further delay, please, Jørgen, can you take us through the formal presentation of our quarter?
Thank you, Lars, and good morning, everyone, and welcome to our third quarter report. High activity has characterized this quarter at MTG, and I think it's resulting in a solid operational performance and delivering on the strategy for MTG. We are from seven months in operation since the completed split from the MT group, and the first two quarters have been a lot of focus on implementing and executing on the split division strategy, and we are seeing concrete output as a result of the work put in with important agreements and partnerships formed as announced. Let's dive into MTG's third quarter of 2019. If I can ask you to move to slide number two. Originally, our two business verticals, Esports and gaming, have shown good progress and delivered 6% growth in a quarter impacted by sequential seasonality and marketing investment.
In esports, sales grew by 12%, despite the vertical having one less market property in the quarter. ESL had a strong quarter with its operation growing revenue by 17% year-on-year, fueled by an impressive 42% growth in sponsorship sales. We have continued to develop the cooperation between ESL and DreamHack in the quarter with the ambitions to build the leading global esports ecosystem. We have demonstrated what they can achieve working together at scale beyond anything presented by their competitors. In the gaming vertical in Q3 2019, we invested in future growth on the back of improved lifetime value of InnoGames customer base, allowing for increased marketing spend. We believe that spending additional resources on user acquisition today will yield better revenue growth for the games going forward. Our VC fund continues to operate with high activity. We announced three investments in the quarter.
Overall, we believe that the third quarter was solid, impacted by sequential seasonality and showing that our sole focus on esports and gaming is yielding results. With that said, let's move on to what we are doing more specifically in the verticals. Let's begin with the gaming. If I can ask you to turn to slide number 3. The gaming vertical was impacted by sequential seasonality in Q3 2019, timing of bigger in-game events, and investments into marketing. The quarter net sales in the second quarter increased by 2% to 629 million SEK. Mobile sales grew stronger by 14% to 347 million SEK, which was 55% of the total net sales of the gaming vertical.
The new strategic direction implemented in 2019 for Kongregate intended to devote greater development resources to a smaller number of existing games with the potential to deliver stronger sales growth continued to yield positive results, and Kongregate posted double-digit improvements in net sales and adjusted EBITDA compared with last year. During the quarter, Kongregate released a new title, Iron Frontier, which demonstrated positive early results and Bit Heroes IP acquired in Q2 continued to report good development and sequentially growing net sales. With improved assumption on customer lifetime value at InnoGames, we have seen an opportunity to increase marketing spend to create a foundation for future growth. That resulted in a slightly muted margin development in the quarter.
On the back of higher marketing, we saw early and positive results in the form of improving MAU for InnoGames' biggest title, Forge of Empires and Elvenar, with a 6% growth in Q3 versus Q2 2019. Work is still ongoing with the newer mobile games Warlords of Aternum, as its role is to improve operational metrics in order for us to scale marketing. The most recent release from InnoGames, God Kings, have not yet seen the expected return from the growth market launches, hence we are currently evaluating the best way forward for the game. We will move on to look at the gaming vertical KPIs on slide number four. You can see that daily active users decreased by 5% to 27 million compared with the previous quarter.
The quarter-over-quarter decrease in monthly active users MAU was 4%, mainly due to Kongregate that had more games featured in App Store and traffic generated from platforms with no longer users. The average revenue per daily active user increased to SEK 2.9, plus 7% year-on-year, mainly driven by better in-game monetization, lower MAU in Kongregate, and positive impact from currency movement. The top three titles have remained unchanged throughout the year, Forge of Empires and Elvenar and Innovation Slowdown. Net sales generated by these titles was slightly low on the quarter at 68% compared with both preceding quarters and preceding year. Adjusted EBITDA in the gaming vertical was SEK 180 million, and the margin was 19%.
Looking forward into fourth quarter, we are anticipating a stronger performance in terms of both revenue and EBITDA in our gaming vertical following the marketing push in the third quarter and improved in-game events with InnoGames' October revenue so far being up 8% in EUR compared to the same period last year. If we then move on to slide number five, our esports service products continued to yield positive results, and the business vertical grew by 12%. ESL did particularly well driven by the owned and operated growing by 17%. As a result of the growing fan base and increasing viewership, more sponsors got involved in both our marked and challenged properties. In the quarter, sponsor revenue grew strongly by 42% compared to the same period last year. We continue seeing sponsors align, increasing their commitments to our properties.
Adjusted EBITDA loss of SEK 54 million was broadly flat year-on-year. Revenue growth meant that our margin improved somewhat in the quarter. Underlying ESL had lower losses in the quarter, however, one less property in DreamHack had an adverse effect on the margin development in the quarter. We continued to invest in two channel properties. We had our first all-female DreamHack Counter-Strike tournament in Valencia that was very well received. Top-line growth remains our priority in esports. Both owned and operated and esports services are scalable businesses, as this revenue stream grows, we expect margins to steadily improve over the coming years. That said, as you can see, we will continue to expand and invest in our esports vertical, both in the amount of properties and also the geographical reach. If we move on to slide number six.
Within our owned and operated, we focus to professionalize the revenue streams around the strong and relevant audience in esports, and we had the third quarter showed a high level of activity with important pieces put in place to achieve just that. In September, ahead of the ESL One New York event, ESL and DreamHack announced a new ESL Pro Tour, the world's largest Counter-Strike circuit, a unique global product combining DreamHack and ESL circuit, received very well by the teams and fans, and important for the long-term commercial focus. As we have stated before, increased access to quantitative data and the production of relevant esports commercial products is the focus to improve monetization of the sport. That's also why we have announced a comprehensive and strategic agreement with Nielsen, the global measurement and data analytics company.
Together we'll deliver relevant and industry-standard statistics to our partners, validating the attractive commercial ROI that esports can deliver. If you take a closer look at this particular relationship and some early data points around the esports as a media sponsorship product, if you move to slide number seven, you can see that the Nielsen partnership will help the esports industry in general, and MTG in particular, to validate and therefore accelerate monetization of this young and attractive esports fan bases. Compared to any other sport, Nielsen suggests that esports is by far the best channel if you as a media channel or a brand would like to reach the next generation of consumers out there.
Together with Nielsen, we will help our partners to validate the return on investment to measure media value, to standardize the industry metrics, and generate fan impact that will support to better monetize ESL and DreamHack audiences. Going forward, all ESL and DreamHack competitions in the ESL Pro Tour and beyond will be professionally measured by Nielsen. This is a milestone for the Esports vertical and a solid example of how we raise the bar in the Esports industry.
If we move on to slide number eight, you can see that DreamHack and ESL have established several additional publishers partnership in Q3, new agreements with UEFA and Konami, EF2 and their AAA title in the U.K., the Dutch Football League Eredivisie, and the opportunity to arrange two large Fortnite tournaments with a combined prize pool of $500,000 are just some of the notable achievements from our esports portfolio companies in the third quarter. It also shows how the two companies are broadening and deepening their publisher relationship across the vertical. If we can ask you to turn to slide number nine, you can see that just two years ago, it hardly existed, but mobile esports has experienced rapid development and attract many fans.
In the quarter, we continued to develop our ESL Mobile Open initiative together with our partners, Vodafone and AT&T, holding competition within titles such as PUBG, Asphalt 9, and Clash of Clans. It now makes up to about 10% of the total revenue in ESL. If we move to slide number 10, you see all in all that esports comes down to what resonate with the fans and the teams, judging from the performance in our two larger properties in the quarter, it's doing really well compared to competing tournaments. Here are two relevant examples from the quarter. Take the ESL One in New York that we held in September, compared to the Overwatch League final taking place the same weekend.
With our content, we are showing impressive user stats, and it has superior performance and relevance even in fierce competition. This is proof that the fans are enjoying our events both in real life and also in digital channels. If you also look at the DreamHack Masters in November and compare it to a popular franchise such as League of Legends, once again, the same trend showing that ESL and DreamHack are doing this really well together in attracting large audiences, which make our commercial products very competitive, not only in the world of esports, but also if you benchmark with other sports, where you also will find the commercial dollar. That concludes my comments. I will now hand the call over to Maria to take you through the numbers in more detail.
Thank you, Jørgen, and good morning, everyone. If you then can turn to slide 11. Let me go over the revenue and the adjusted EBITDA. Net sales in the first quarter of SEK 1,066 million, or SEK 39 million higher than last year, with a core % positive FX impact and flat organic growth. As Jørgen mentioned, Esports had a strong quarter while gaming was more stable, affected by the timing of in-game events and marketing investments. Together, the two verticals achieved sales SEK 56 million higher than in the third quarter. Growth and interest in gaming was, however, partially offset by the adverse movement of SEK 70 million in our other operations, principally Zoomin, which reported sales down 42%, to SEK 22 million. As announced yesterday, we have now divested Zoomin, and it will report as discontinuing operation from Q4 2019.
Please remember also that as a result of the sale, we will book a net loss of approximately SEK 80 million also in the fourth quarter. Adjusted EBITDA in the quarter was SEK 19 million. If we move on to slide number 12, we will look at the rest of the income statement in a bit more detail. The group-adjusted EBITDA included SEK 400 million due to the application of IFRS 16 compared to the corresponding period last year. Excluding the impact of IFRS 16, adjusted EBITDA was SEK 5 million. The adjusted EBITDA margin in the quarter was 2% and 0.5% excluding the impact of IFRS 16. The margin development in the quarter was mainly driven by the gaming vertical, which recorded higher marketing investments and flat sales development following the year-over-year movements of in-game events at InnoGames.
This was partially offset by significant lower margins in Kongregate as a result of its operational turnaround. Furthermore, the shift of 1 Master property from Q3 2019 to Q4 2019 in DreamHack had an adverse margin impact in the Esports vertical. Within adjusted EBITDA, central operation costs in the quarter were SEK 33 million, slightly lower cost base run rate than what you saw at the Capital Markets Day, and versus last year was affected positively by the lower cost following the sale of NENT and MTG. With the announced restructuring program today, we will see this come down even further, and we will have a run rate of approximately SEK 100 million by 2021.
Adjusted EBITDA reflects the underlying performance of the business. We had SEK 70 million in costs related to the LTI program, as well as SEK 90 million in M&A transaction costs that were both excluded. There were no impairments of previously capitalized costs in the quarter, which in that case also would have been excluded from the adjusted EBITDA. Group EBIT in the quarter was negative SEK 98 million, with an EBIT margin of -9%. Net financial items amounted to SEK 8 million, predominantly driven by exchange rate differences, and the group tax cost was SEK 8 million. The net loss from the period from continuing operations thus amounted to negative SEK 98 million. If I could then ask you to turn to slide 13. We look at the cash flow and the balance sheet.
CapEx in the quarter was SEK 69 million, which was predominantly driven by the second down payment for Bit Heroes' IP at Kongregate. Above and beyond the acquisition, most of our CapEx is spent within the gaming vertical, where we capitalize game development cost up until the game goes live, after which all the costs are expensed, and pre-launch CapEx starts to get depreciated. We invested around SEK 10 million in our thesis fund in three companies, two new portfolio companies and one follow-up investment. In total, MTG has invested and committed approximately SEK 211 million in 18 companies thus so far, in its thesis fund to complement its majority stake investments in ESL, DreamHack, Kongregate, and InnoGames. Cash flow from continuing operations was also at SEK 33 million, of which SEK 5 million is working capital outflow. We ended the quarter with a net cash of SEK 2 billion.
That concludes my comments. Thank you, and I will hand back to you, Jørgen.
Thank you, Maria. If I can ask you to turn to slide 14 and our announcement on a strategic review of our gaming vertical. Historically, our gaming vertical has had a very strong performance, of course, most notably since the acquisition of the 51% stake in InnoGames. During 2019 and since then, we have been approached with a broad range of alternatives for us to become even more competitive. The strategic review we announced today is to evaluate the next move to create and crystallize value for shareholders.
The review could result in a joint venture partnership for the gaming vertical to enhance its competitive position and to get access to capital and new geographies, or that MTG fully transition to become a global pure-play Esports company, dedicated more resources to capitalize on the global rise of Esports from our already leading market position through our ownership in ESL and DreamHack. We have the opportunity to establish MTG as a global leader in the Esports industry, and we will accelerate value creation by further combining and extracting synergies in our ownership of the two dominant Esports brands globally, aided by our solid financial position and commercial operational expertise. Within the context of the strategic review, we'll also explore an additional listing in U.S., one of the biggest and most important Esports markets in the world.
After the completion of our strategic review, we intend to assess our financial principles and cash requirements going forward in accordance with the company strategy of growing organically and through acquisitions. The outcome of the review could lead to potential redistribution of any excess cash to our shareholders. Independent and in parallel to this process, MTG intends to implement an operational efficiency program to ensure a right size and more efficient organization. The program is a result of a comprehensive internal analysis of the operations since MTG launched in 2019 and includes a downsizing of MTG's headquarters that will include personnel and facility costs. If we turn to slide number 15, as I said at the start, we have delivered on the strategy with a solid Q3 2019 performance in both our core verticals.
Esports is growing, both own and operated properties and esports services are contributing, and these are getting bigger and better and drawing in the eyeballs. Most important of all, these viewers are attracting sponsors and media as well as new publishers. There's, of course, still a lot of work to be done, but the third quarter showed a lot of progress when it comes to commercially professionalizing the esports vertical. In gaming, we are happy with the development in Kongregate, with sales and EBITDA going in the right direction again. InnoGames remain a solid performer. Therefore, we're happy to invest more into marketing, which we did in the quarter. We saw positive results from this investment already in September, with both Forge and Elvenar growing its monthly active users by more than 6% compared to Q2 2019.
In the quarter, the MTG VC fund has completed three exciting seed and Series A investments into gaming startups. The strategic review we announced today is to evaluate the best route to create and crystallize value for shareholders. We will keep you updated on progress on a regular basis through our coming quarterly report. That was it from our side, back to you, Lars.
Thank you, Jørgen, that ends our formal presentation for the third quarter 2019. We are now ready to take any questions that you might have. Operator, could we have the first question, please?
Thank you. Just a reminder, to ask a question, please press star and one on your telephone. To withdraw that question, you will need to press the hash or the pound key. Please stand by while we compile the Q&A roster. Once again, for any questions, please press star and one. Our first question comes from the line of Oscar Eriksson. Your line is open. You can now ask your question.
Thank you. Good morning. First, a few questions on the operational performance in Q3. First off, a question on God Kings. After Q2, you suggested higher marketing for God Kings, now you mentioned that you're reviewing its progress. What has happened there?
Thank you, Oscar, for that question. The question is around one of our newer games, God Kings, and our comments around the performance of God Kings. Jørgen, would you like to start with that one?
Yeah, I think the discipline that we're having, which is a good discipline, is of course, that we have a range of metrics and KPI which needs to be fulfilled in order for us to invest heavily into marketing of the game. That is not the case with God Kings. That is why the staff of the studio is taking the game back and understand what to do in order to make sure that we have better traction of the key KPIs. That is also why we did not put a lot of marketing behind it, because we saw that we didn't render into the KPIs that we expected. That is, of course, what you need to do in order to understand if the game flies or not, is if you need to start marketing it.
Got it. Thank you. Heading over to the strategic review. In terms of the gaming review, what considerations would you make regarding whether to choose a JV or an outright sale? Is it purely a price question, or are there any other considerations that you would make?
No, that would be a purely data decision to say what would bring the most shareholder value? What construct would we be most comfortable with? That is a process that we are initiating. As I said as well in the call, that is on back of a range of inbound calls and discussions with different parties. We see new entry into the space. We see private equity coming in. We see consolidation in the space as well. We see strategic partnership. That is also what we obviously have had several discussions with several parties, and that is what I want to make sure that we explore it now and see where that leads.
All right. What would the advantages be going for a JV rather than an outright sale, given that you so far have quite limited gaming operation in terms of just InnoGames and Kongregate?
Again, it is something that we would evaluate what the biggest and the best outcome would be in terms of value creation. Obviously a JV, as I'm also saying, would give us eventually access to capital. It could give us access to a North American market, in more detail in Southeast Asia market or whatever. That could be something which could be meaningful for us. Let's just say it could also be a write-off sale if we found that to be the most value creating.
Great. Obviously if it came to an outright sale, you would naturally have quite a large cash position of over SEK 5 billion-SEK 7 billion, depending on the value of gaming. How much cash do you need for esports in terms of organic cash flow needs and also M&A?
That is premature to discuss. I think what we are saying is that we will review our cash position based on the outcome of the strategic review. Also, as we said, we will update you on a regular basis on the
Great. A final question from me, if I may. In esports, is there anything that you would like to invest further in that you have not been able to? Will this strategic review, depending on the outcome, change anything in that regard?
We have a list of interesting opportunities, of course, which we are exploring, and that is something we will continue to look for, things which can help us accelerate the esport path. That could be capabilities, that could be geographies and so forth. There is a range of opportunities that we have in which we will explore and continue to explore.
Oscar, we've been quite generous. Do you have any follow-up question there?
No, thank you. That's it from me for now. Thank you.
Thank you, Oscar. Very good. Operator, could we have the next question, please?
Thank you. Our next question comes from the line of Rasmus Engberg. Your line is open. You can now ask your question.
Yes. Hi, good morning. Let's see what we have. If we talk about the savings program, what functions are you scaling down in this program? Secondly, as I understand it, as you say, this is independent of whatever you decide to do strategically with New Business.
Sorry, Rasmus, you're breaking up, sir. If you could repeat your second question, please.
Sorry. Do you hear me better now? I'll say again.
Yes, we do. We hear you.
What functions are you targeting in the savings of, I guess, SEK 80 million or so? Secondly, is it correct that if something happens strategically with gaming, there will be further changes to the group composition?
Thanks, Rasmus. I'm just going to repeat. Savings program, if we're targeting any specific parts of the organization, and as we mentioned in our release, this is independent of the strategic review. Would there be additional efficiency programs if the review would come through? I would hand that over to Maria to answer.
Thank you. On the savings program, firstly, I think that we said the ambition is to have a run rate saving of SEK 50 million, starting then in 2020 and forward actually in 2021. What we're looking at is across the whole organization. It is not a specific department, but it's across the whole organization. I don't want to go into further details because that is mid-term discussion that we will have now. If you then look at the second phase or in the gaming review, I think this is a little bit premature to say if that will make additional savings or not.
What we're doing right now is to make sure that based on where we are right now, how do we ensure that we get the right type of organization in place, and that we are doing it, so we do it properly and we do it once, ideally.
Okay. The second question, where do you see the VC fund in the future of MTG?
That is also a little bit premature. That depends again on the outcome as such. I think we have made VC fund investments into esports, also through SANA. We have made a range of VC investments into games. In theory, depending on the outcome, of course, you could argue that the gaming VC fund would fit well into a strategic partnership eventually. Again, it's premature. Rasmus said something that we need to understand how we shape that.
A final question. When do you anticipate that this review will be finished?
This is a review which will take as long time as we want it to take, meaning we want to make sure that we have analyzed the different opportunities, and as we also said, we will come back on a regular basis to inform you on the progress of the strategic review and potential outcome.
Okay, thanks.
Thank you very much, Rasmus. Operator, we could have the next question, please.
Our next question comes from the line of Thomas Singlehurst. Your line is now open. You can now ask your question.
Good morning. Tom here from Citi in London. A few different questions, if it's okay. Firstly, on the strategic review, I just wanted to double-check that of all the different options, committing more capital is off the table. This is definitely going to be a sort of either you injecting the assets into a third-party JV or partially monetizing the asset. That's the first question. Second question, I suppose sort of linked in a funny way is, any update on progress on the due diligence process in terms of who your ESL transaction. One operational question to finish up on, which is ESS or Esports Services. Obviously an area that I suppose thematically, you sort of want to de-emphasize in favor of owned and operated shows, but both in the quarter and in terms of outlook, it looks like an area that's doing really well.
I suppose the question is, can you give us an update on sort of profitability profile of ESL? We've moved into a phase now where that will be consistently profitable revenue base.
Yeah. Thanks, Tom. Just repeating then on the strategic review then. If we would commit additional capital, if that's off the table or still on the table when it comes to MTG investing more into gaming, if I get you right, Thomas. Update on the due diligence process in Huya, if there's anything we can share there. The last one is on ESS and how that specific part of the Esports gaming vertical is looking like. I guess the first two questions is for you, Jørgen, and then the last one for you, Maria.
Yeah. The strategic review is exactly as it is a review, meaning we want to understand what opportunities we have out there and be open to the solutions out there. We will not put ourself in a specific solution mode right now. We want to explore the different opportunities we will be having in the future. That is what, and again, as I said, we will come back on a regular basis. Due diligence on Huya, we have the due diligence process ongoing, and I think what we have communicated that we expect by Q4 that we expect the transaction to materialize. Those are two questions for me. I think now we go on the ESS part.
On ESL, you are too right. We saw very nice growth in our Esports business and back on the ESL as well in the quarter, which we're very happy about. I think what we always said is a strategic publishing partnership that we have within ESL, we want to continue to drive and nurse and develop. That's what we've seen the results of in Q3. We have moved away from non-core services within the ESL package, and that is not to be defined as a publishing partnership that we're having. We have healthy development and also of course, that is a big margin business that also nicely contributes to the bottom line.
It should be said, yeah. Sorry, Thomas. You go.
Listen, I'd like to hear the extra bit because I was going to have one final question in a slightly different area. If you don't mind.
Just a clarification on ESS. As you know, we have in our strategy focused more on strategic partnership within ESS, which has been helpful when it comes to the profitability of that part of the Esports vertical.
Very clear. The final follow-up, you've sort of given a rough indication of cost savings, and I know there's still consultations and things to happen, which is obviously very important. Just the rough cost of achieving savings. Should we just think about it being a one for one sort of cost to saving ratio?
Yeah. I think it's a little bit premature to give you an exact number, but you should expect to have it within a year-ish on the cost program.
Very clear. Thank you very much.
Thanks, Tom. Operator, could we have the next question, please?
Thank you. Our next question comes from the line of Erik Lindholm. Your line is open. You can now ask your question.
Yes. Hi, guys. Okay, two questions from me. First off, you mentioned that most KPIs for Esports are up double or triple versus last year. Can you give a few examples of these KPIs?
Yeah. When it comes to the Esports part, as we said as well, we have seen 17% growth in the owner operated part. We have seen 42% growth when it comes to the sponsorship. If you look at the figures as well, which we showed on the slide when it comes to viewing as well on the event, it's very strong viewing, and you can also see that our newest event is three times bigger than the Overwatch Final. That is of course an important comparison for that not only we are strong in this universe of Esports, but also obviously we are going outside Esports universe to collect commercial partnership. That is also important as well. You see the young audiences.
If you see the previous slide that we can deliver in the target groups of 16 to 44, we have 88% of that audience is that age group, which of course is extremely attractive commercial age group. There's a range of interesting KPIs parts which we are happy and proud, of course. The industry is growing fast and so is our ambition in Esports as well.
Okay. Thank you. On the ESL Pro Tour, you signed a deal in Denmark with TV 2. Have you received any other feedback from media buyers on the ESL Pro Tour so far?
Yeah. We have actually, and we are in negotiation. If I can answer your question two ways. First of all, TV 2 Denmark was a fairly easy sell in that respect, that here we have the TV meter panel, like you know in normal media, which has stipulated the quality of the audience that TV 2 had on the events that they had with us. There you get the rating figures, you get the target group. Obviously when they benchmark with other sports that they are having and what they deliver and what they pay for that, then we came out very strong. There, of course, we are blessed with a measurement system, which is the TV meter panel, so it's very easy to assess the valuation or the value of that promise.
We just attended SPORTEL, which is a big sports fair with all kind of global media companies
Companies participating, and we have also been on a tour now presenting the ESL Pro Tour to a range of media partners as well globally. There's a lot of things going on right now in order to introduce this new ESL Pro Tour. It's a different animal for the media partners now because obviously they have a set schedule now. That also means that it is easier for them to onboard it and also to begin to work with the product as such and also to start to market the product and so forth. It's a commercially stronger product. That is the feedback we are getting from the media partners. Negotiations are still ongoing with a range of potential partners.
Okay. Thank you. Very helpful. Do you expect to sign a deal together with broadcasting companies such as Twitch or Mixer as well? Or are you primarily focusing on traditional TV sorts?
No, we have had a partnership already, as you know, with Twitch, and we have also partnerships with other OTT platforms around the world. What we are looking at is, of course, how we can put together the best and most attractive media packages globally, and that is what we are assessing based on the conversation that we're having with media partners right now.
Okay, thank you. That was all from me.
Thank you, Erik. Operator, can we have the next question, please?
Thank you. Our next question comes from the line of Rasmus Engberg. Your line is open. You can now ask your question.
Yes, just on nitty-gritty stuff. Just coming back to the central costs. If the run rate for central cost SEK 150 million, I thought it was SEK 170 million, SEK 180 million. Can you clarify that?
Yeah, I think that you're right. We said at the Capital Markets Day a run rate of around SEK 180 million, and I think that based on what we've seen, it come down to around SEK 160 million. What we're saying with this new service program going forward in 2021, when we see the full impact of it, we should expect a run rate of approximately SEK 100 million.
Okay, thanks. On the deal you announced yesterday, this disposal of Zoomin, did you get all the paid for that? Secondly, this accounting loss, is that also going to be reported in discontinued, I guess?
Yes. On the deal we announced yesterday, that's a final one-off. We took SEK 18 million, and we did get paid for it. Basically, the asset deal, it was a small amount.
It will be reported in-
It will be the full segment. Other business will be reported as discontinued operations starting Q4.
Okay, thanks.
Operator, do we have any more questions?
We have another question, our last question, actually, from the line of Mr. Oscar Eriksson again. You can ask your question now, sir. Your line is open.
Thank you. I was going to ask about central cost clarification as well. I have one more question on the gaming segment, actually. We've seen a few mobile gaming peers reporting higher user acquisition costs and thus lower marketing efficiency. Are you worried about the lower organic growth for InnoGames this year, even if including a strong Q4, which you are guiding for?
Absolutely. You are right that, of course, on the marketing side, it's very competitive. I think what we are seeing in our two companies is we have an extremely strong user acquisition team and marketing team. We are quite happy with the results we're seeing there. I think where we have ramped up marketing, we're seeing a positive investment in the quarter. Also where we see that games are not performing the way we want to see the underlying metrics, we are then scaling back marketing. We have a very well-developed KPIs team and intelligence system that makes sure that we are very reactive when we see the performance of our marketing campaigns. That is something that the teams are working very strongly on.
Great. Follow up, you have previously spoken about a potential new game release for InnoGames at the end of this year or possibly early next year. Is this something that still might happen?
Yes. We have three games currently in development, and we expect that one or two of those will gradually come out in a soft launch and then formally launch during 2020.
Great. Thank you very much.
Thanks, Oscar. Operator, do we have any more questions?
Yes, sir, we have one more from Paul Schempp. I'm sorry if I mispronounced your name, but your line is open. You can now ask.
Hello, this is Paul Schempp from AOC. Thank you very much for your time and the presentation today. May I just ask one question regarding the overall direction of the strategic review where you consider selling parts of gaming and focusing on esports, why end up considering a transformation the other way around by disposing esports and focusing more on gaming? The reason why I'm asking is while gaming is obviously tremendously interesting, it's been loss-making for a few years, while esports, on the other hand, is a more mature market, has maybe a more financial profile, so might be more suited for listed companies. Have you thought about it the other way around?
I think what we have announced now is the strategic review on the gaming part. As I also said earlier, that is based on the incoming calls that we have had and the discussions that we have had with different parties. We are constantly evaluating how to make our verticals more competitive, how to derive more value. I think the partnership that we are expecting to close with Huya is one way of creating a new way of partnership. We will continue to examine and to evaluate what is the best way, best path forward for value creation for our two gaming verticals. That can also be a partnership in esports there. Right now it is a strategic review of the gaming vertical, which we have announced and which we are conducting.
Great. Thank you very much.
Thanks. Operator, do we have any more questions?
We don't have any further questions at this time, sir. You can proceed.
Okay, thank you. That concludes the question and answer session. I will now hand the call back to Jørgen for his concluding remarks.
Yeah. I would also like to thank you for calling in today. We look forward to staying in touch until we release the next quarter report. That's Q4 2019, which will be sent the 6th of February. Have a great day, and see you soon.
Thank you. That concludes our conference for today. Thank you all for participating. You may all disconnect now.