Good morning, ladies and gentlemen, and thank you for holding. Welcome to MTG's Q2 Earnings Call. At this time, all participants are in a listen only mode. After the presentation, participants will have the opportunity to ask questions. At which time, instructions for the Q and A session will be given.
Presentation slides to accompany the call are available via the link on the homepage of mtg.com. I will now hand the call over to your host, MTG President and CEO, Jorgen Lindeman, who is joined on today's call by MTG's CFO, Maria Redden and Anders Jensen, CEO of Nordic Entertainment.
Thank you, operator, and good morning, everyone. So just before we get into the numbers, let's take a few minutes to update you on our preparations to split MGG into 2 separate listed companies. We have made significant progress during Q2. MGG and Nord Entertainment Group have been operating as 2 separate organizations from the beginning of July with separate boards, management teams and corporate brands. A lot of work has been done on the operational carve out to ensure that the 2 companies can operate separately.
We remain committed to the split, but the process has been delayed following Generics' decision to distribute its NTT shares to its shareholders in Q3. We simply want to await this process and make sure that the new owners get a chance to properly get to know us before voting on the split. It's therefore clear that the split will not be completed in 2018. We will, of course, keep you regularly updated on our progress and hope to speak to as many of you as possible throughout this process. There are cost costs associated with this process, including restructuring related redundancy costs, which are included in the items affecting comparability, while legal and other fees related to the split are included in our corporate overhead cost.
If you turn to Slide 3, you can see that sales were up 9% on organic basis, which marks the 8th consecutive quarter of organic growth of at least 5%. Our strategic decision to disrupt ourselves, transform our cost base and reinvest the proceeds into digital content and products have clearly paid off. And our products and services are more relevant, available and popular than ever before. Our digital sales were up 70 6% in Q2 and accounted for 36% of total sales. Operating profits before items affecting comparability were up 12% and would have been up 19% if adjusted for the $32,000,000 of costs associated with the proposed split of NTG and the terminated merger agreement with TDC.
The fact that we have continued to deliver sales and profit growth, while at the same time making significant steps towards building HD into 2 separate listed companies, demonstrate our clear vision, effective and differentiated strategy and most importantly, an exceptional team of people who love what they are doing and are highly motivated. Moving to Slide 4, you can see the group reported sales were up 18%, driven by the 9% organic sales growth, 4% currency and the consolidation of Inu Games and Combo Game. The very positive trend in the performance of our Nordic and International Entertainment business continued into Q2 as both segments reported higher sales and profits. FGT students reported low organic sales and profits, but this primarily relates to timing differences in the production schedules and the forward pipeline looks promising. FPG sales FPGX sales were up 25% on a organic basis and the EBITDA loss of $19,000,000 last year was turned into a $34,000,000 profit this year after the consolidation of Innogames.
I will now hand the call over to Joh Anders for your comment on the more entertainment and NTT Studio business. Thank you very much, Jurgen, and a very good morning to you all. I think it's fair to say that this has indeed been yet another eventful quarter. We have successfully launched our new NAND brand. We have set the number of both linear and streaming records, and we have acquired several key sport rights for the coming years.
You can please turn to Slide 5. Nordic Entertainment, sales were up 7% on an organic basis. I think this is again a fairly impressive performance in a quarter where we last year delivered 8% growth. So comparison with last year makes the 7 percent very strong. The FIFA World Cup kicked off on rival channels.
And we have also seen this exceptional heat wave combined with the ongoing PUD reduction. The outperformance was possible due to the continued growth in our streaming services via Play and via Free as well as our very successful coverage of the Ice Hockey World Championships. In free TV and radio, sales were up 8% as a result of higher prices, continued double digit growth in Via Free and our Swedish Radio business. The rating boost that we received from the I Turkey World Championships delivered a lot of value to us as well. The final was viewed by 3,200,000 people in Sweden with TV3 reaching a daily audience share of more than 60%, its highest ever share since 1994 when the measurements started.
Also in Denmark, our TV3 plus channel had its best quarter ever in terms of audience share. Via Free continued its double digit growth and the recently launched classic sports and food verticals has been a great success for us, more unique viewers than ever and then a more equal gender mix adding to the reach of the VIA3 product. The sports verticals that we launched in April enables users to watch selected live events, documentaries, magazine shows and highlights from our unique range of sports rights free of charge. And we have now started to actively push users to log in to Via Free, which will enable better targeting and also and very importantly, a better up sell potential to Via Play. Our Swedish radio business has continued to deliver double digit organic growth in favorable market conditions with continued market share gains.
And the timing of this momentum is obviously very important given the upcoming launch of the new radio licenses that starts August 1st. It will significantly increase our reach at a lower license cost than before and also significantly lower to that of our competitors. Rix. Fm was awarded 1 of the 3 national licenses, and we have now also announced the launch of Star FM, which is based on 18 regional licenses and will become the 4th national network. These are 8 year licenses and the total cost is close to SEK 400,000,000 and this is an upfront investment that we'll be taking during Q3.
For pay TV, our Nordic pay TV sales were up 11%, continues driven by ViaPlay as the main driver of growth. Sports is leading the way. The Champions League coverage broke its unique viewer record 4 times during the quarter, driven by the fact that several English teams did well in the knockout stages. On the original side of things, our bioplayer originals continue to perform well with the latest Rig 45 being up to a flying start and we have 2 new originals in production, The Inner Circle based on the novel by Per Slingman and Cold Courage, our 1st Finnish original series. During the quarter, we secured several key long term exclusive sports rights, including an extension of the English Premier League.
We acquired the German Bundesliga, the French League 1 and the South American Copa America Football. We also secured the world and the European Handled Championships and the European Champions League Cup. We also extended the Formula 1 motor racing rights. It is safe to say that we continue to be the undisputed home of the premium sports in the Nordic region. It is vital, of course, as sports and local content are and will remain our key U.
S. Piece. The profits in Nordic Entertainment were up 7% to a new all time high for the Q2, and this is now also the 7th consecutive quarter of profitable growth, which underlines the health and the potential of this business moving forward. If you please move to Slide 6. MTG Studios sales were down 13% on an organic basis.
And as in Q1, we saw a decline in our scripted sales due to timing differences in the production schedules. However, the scripted pipeline and the order books looks very promising and is supported by a 40% increase in the number of signed development deals. So I expect this trend to gradually reverse over the coming quarters. Nordiskwift sales were also down as healthy growth in the Nordic region was offset by lower international sales with fewer productions of the survivor formats. Last quarter, I talked a lot about the opportunities as to in accelerating our digital first productions, and this is one of the reasons why we have acquired the remaining shares in the Splay Networks and merged Splay with NICE ONE to create SplayONE.
This is a new type of digital storytelling provider with smart distribution and well established influencer networks. Our ambition is to build a Nordic branded entertainment powerhouse. More and more brands are looking to create a competitive edge and cut through the noise in an effective and relevant way. And this is exactly what we want to help them to do with Splay 1. Profit were down slightly compared to last year, which is then primarily reflected as the consolidation of Splay.
Overall and for the business that will make up the NAND Group, we are in great shape in very competitive markets. We have demonstrated time and again that we can deliver profitable growth while continuing to invest in the best content and deliver the best products. More and more of our sales are digital. We have the market leading streaming content solutions with both Viaplay and Viafree. The new brand is launched.
The company is set up, is able to operate separately, and we're looking at new ways to drive growth from both existing and adjacent products and services. That's it for my comments. Back to you, Jorg. Thank you, Anders. And if I can ask you to go to Slide 7, you can see that the sales from international entertainment segment were up 7 percent on an organic basis and profits were up 44% compared to last year.
We have closed the divestment of TRACE, leaving our Bulgarian business as the only remaining asset in the international entertainment segment. We have signed an agreement to divest Nova Bulgaria, but the closure of the sale is taking longer than expected because we have a Phase 2 regulatory review. We still feel comfortable that the deal and expect to receive an approval before the end of the year. If you turn to Slide 8, you can see that FTTH sales were up 25% on an organic basis and 63% on a reported basis, and we have turned an EBITDA loss of $90,000,000 a year ago into a profit of $34,000,000 this year. Our e sport business delivered 44% sales growth in the quarter.
ESS revenue from owned and operated events were up over 50%, and we welcome key new scale sponsorship partners such as DHL and AT and T. As you know, we're focusing on our owned and operated tournaments and leagues, and this is where the long term value lies in terms of revenue ownership, profitability potential. Oil and operated accounted for 67% of revenues in Q2 compared to 55% a year ago. If there's white label events revenues were therefore down. DreamHack sales were up over 60% after successful events in Marseille and Austin.
This was the Q1 with our new title sponsor Corsair, and we have also signed agreement with a new partner such as Cinemax and Invicta. Our e sport launches were reduced slightly compared to Q1, but up compared to last year. There are three key reasons why the sales sales and profits fell a bit short of our expectations. Firstly, the mix impact where we lost a couple of large white label events in the first half of the year, the biggest being Madden. As I said before, we are much more focused on our own brands rather than work for hire, and this has also led to some negative fixed cost absorption effects.
Secondly, we launched 2 completely new owned and operated events this quarter, 1 in U. K. And 1 in Brazil. These investments are important to reach our long term to TBSL as a global e sport mega brand. We had 4 own and operate events in the quarter compared to 2 last year.
And for the remainder of the year, we had the same number as last year. Thirdly, we have strategically invested money into the booming Battle Royale segment of the gaming market. We are well positioned given the events that ESL and DreamHack have both been running with players unknown Battleground called PUBG, and it is our ambition to become strong as strong here as we are in the 1st person shooter segment. As always, there's still room for improvement, of course, which is why we launched the restructuring that we talked about briefly on the Q1 call. This program is meant to bring down our fixed cost and make sure that we focus our resources on ESL core strategic owned and operated selected large games opportunities and strategic product innovation.
So we will outsource more of the functions that we feel are non core, and we will also increasingly say no to business, which we don't feel add long term value so that we can invest our time and money where it matters. Looking forward for the remainder of the year, we expect limited esports sales growth in the second half as continued growth in the owner operator segment is offset by the decline in white label and industry services. Given, of course, the tough comps last year where we enjoyed 50% growth in Q3 80% growth in Q4. As a consequence of the measures we are taking, we then also expect losses to come down in second half, but we do not expect the business to be profitable. Moving on to online gaming, the combined sales for InnoGames and ComboGate were up approximately 10% on a pro form a basis.
Forged in Empires recorded its highest daily revenue ever, but we had relative true game updates and events in the quarter combined with lower ROI on our advertisement. We are now carefully starting to ramp up our marketing for our new game Warlords ahead of the full commercial launch in Q3. CombiGate sales were stable in the quarter. CombiGate has a healthy pipeline, and we expect to launch between 6 7 games in the second half. Zulint revenues were down 12% due to slowdown in the German and Brazilian content and advertising businesses.
We have now acquired the remaining shares in the company, and we are working hard to transform Zummin from a traditional YouTube model into a broader content provider and branded entertainment creator. Xiumin is 1st and foremost a Gen Z Entertainment company, but also a fantastic global margin vehicle for our e sports and our gaming businesses. So to sum up on NGX, Q2 was the 3rd consecutive quarter of EBITDA profits. Our e sports business again grew sales around its own and operate tournaments, and we refocused away from less profitable and value creating third party wide label events. Growth would be limited in the second half of the year given the tough comps and why we make this transition in product mix.
Losses are gradually coming down and we would be further reducing and will be further reducing during the second half of the year as we continue to restructure the cost base to reduce fixed costs. Importantly, we are investing to make sure we are testing the leading position in the Battle Royale segment, just as we have done successfully in the past with the 1st person shooter segment. Online gaming business has continued to deliver higher margins than expected and we expect the growth rate to pick up in the second half as both InnoGames and Kongregate launch new games. We now have full control of Zummen, and we are working to transform the business, but this will take time. So that concludes my comments.
So I will now hand the call over to you, Maria, for your comments.
Thank you, Jorgen, and good morning, everyone. If you then please turn to Slide 9. Reported sales were up 18% in the quarter. This included 9% organic growth and a 6% contribution from acquired businesses, primarily driven by the consolidation of Innogains and Kongregate. The current impact was a positive 4% in the quarter.
Operating income before items affecting comparability was up 12% compared to last year. Our entertainment businesses and income continued to be the key profit drivers. Q2 was burdened by €32,000,000 of transaction costs. Items affecting comparability totaled a negative €13,000,000 and included a net gain from the trade and Simeon transaction, which was then more than offset by the restructuring cost in ESL, which Jurgen just talked about and in then relating to redundancy costs in relation to the formation of the new leadership team. If you then please turn to Slide 10.
Net cash flow from the operations were up 20% in the quarter, but overall stable compared to last year for the first half of the year, reflecting the working capital buildup in Q1 this year. Our net debt increased to 2 point $3,000,000,000 which corresponds to 1.3 times trailing 12 months EBITDA before identifying comparability. Remember that we have paid out our highest dividend ever during the quarter and that we are yet to receive the payment for our shares in Nova, which amounts to approximately DKK1.7 billion. That's it for my comments and back
to you, Jorgen. Thank you, Maria. And if I can ask you to turn to Slide number 11, just to sum up, where you can see we delivered 9% organic growth and 12% profit growth, meaning that the strong momentum we have seen for quite some time now continued into Q2. Our Nordic Entertainment business performed very well against very difficult comparisons, which was again driven by our market leading streaming positions. FPGX reported healthy organic sales growth and was EBITDA profitable for the 3rd consecutive quarter.
We have made material progress in our preparation for the split of MGG into 2 separate listed companies. The process has been slightly delayed following Kinnevik's decision to distribute its MTG shares to its shareholders, but we remain committed to split and convinced that it will drive further growth in shareholder value for both businesses. So that concludes our commentary on the results. Over to you now, the operator, to start the Q and A session, please.
Thank you. Ladies and gentlemen, we are now ready to register your questions. The first question comes from Victor Hoglund from SEB. Please go ahead.
Yes. Good morning and thanks for taking my question. One question here on Nordic Entertainment Group. You mentioned costs in Q3 related to content. I think it was my line was a bit bad.
So can you just repeat what you said and explain that a bit? That would be great. And then for Jorgen, I suppose, on e sports here and InnoGames. On the Esports parts, when you say what is it really you are saying for the second half here? How should we think about that?
And then when white label mix and everything is back to levels you want in 2019, what kind of growth levels do you expect to see them for esports? If you go back to the 30%, 40% growth or has something happened that makes you want to take down expectations on that? And for IMO Games, do you expect growth to improve from Q3 and ahead? Or is that too early?
I think we need just to Anders, the line at our place was a big head as well, I'm sorry. So could you repeat the question to Anders? Yes.
That was a comment you made in the beginning where my line was bad on the costs from Q3 and onwards related to auctions you won, I suppose. Could you just explain repeat what you said and explain a bit what how we should think about that?
Yes. We were talking about the radio licenses, Victor. We were paying we acquired the national license and a number of regional licenses in Sweden. And the total cost for that is that was the SEK 400,000,000 cost that we will take in Q3. It covers the coming 8 years of national licenses.
Okay, perfect. And just to
clarify that, that is a cash effect that we will see. There is not a cost effect in
the change increase. There will
be free cash CapEx and then the license is once over 8 years.
Okay. And one important addition to that, which you keep in mind, is that we acquire these licenses at significantly lower cost than competition. And our cost per year in the coming 8 years, despite this significantly improved position, is lower than what we've had historically. So it's a pure cash effect, and it's a very strong platform for us in the coming 8 years. Perfect.
On the InnoGames part and the gaming part, I think we would like to see increased growth in the second half. As we said, we are launching Warlords in the 3rd quarter, and we're also having 6 or 7 new games coming out of CompliGate. So there, we would like to see increased revenue growth, of course. On the Esports side, what we have said all the time is, of course, that we will make sure that we focus on long term valuable partnerships. And that is what we see in this owned and operated, which is quite different from being just a production company.
So what we see and please bear in mind, we are still in July and there is some time before the second half end. So what we can see right now is that we will see double growth, obviously the growth we think in our own and operated. So that is the events. We will have same amount of events. But obviously, on the back of the sponsorship, immediaties and so forth we have done, we do see a topological growth on that.
Then we will see decline in the white labels as well. And we have lost events. I can give you an example that we there's 2 events which we have lost, which is quite significant loss as well. Again, a decision in all fairness where we are saying that we don't want to facilitate these loss making events going forward and we see strong competition as well in the white label where we are uniquely supporting the owner operator. So that is where our focus lies.
And then not to forget, obviously, that we had very strong growth last year. We're 80% in Q4. So still happy about the on and off road performance, and that is where we also put our investments as well. I also mentioned that Battle Royale channel and that is interesting for us as well to continue to invest in. As you know, PUBG and Fortnite and others in that China has done extremely well within very short time.
And of course, we want to take part of that. And as I also said, we already have strong relationship with the PUBG guys, both in Dreamhack and then also in ESL. So that is how we look at the second half right now.
Okay. But and just moving a bit over to 'nineteen, and I understand you don't want to give a guidance or anything like that. But if you think about the things you say now with why people coming down, events are gone, and that would be like for like in 'nineteen, what kind of underlying growth rates are you seeing? Is it in line with the market growth, 30 something? Or is it less than that?
How do you view your position into 'nineteen versus the market? And what kind of growth that can
I think the ambition is, of course, to continue this on and operated? And that is, as I said earlier, where we see a lot of interest from sponsors and media and so forth. That is where we see the great potential. Also, if you look at the value drivers forecasted by news who are the guys for the next 3 years, it is in that a sponsorship in media rights where we should see the biggest growth rates. And at this stage, we don't guide for 'nineteen.
I think the market has been I think the next the 3 year horizon CAGR for 'nineteen, '21 is something around plus 20%, something like that. And so that is what we'll be looking at in terms of market growth. But again, we are growing our own and operate and that's where we can monetize and meet the rights and partnership and so forth and stronger partnership. That is a key important for us, which we have said all the time. And then we have now managed to get some of the loss making products out, And the Northland has also lost some of the white label, which is quite important.
We are happy about that, of course. But we did decided not to move on at low prices.
Okay. Thank you.
We will now take our next question from Mikael Larsen from Carnegie. Please go ahead.
Yes, hi, good morning. I also had a question regarding ESL. Can you say something about the cost that you had this quarter, restructuring charges of €101,000,000 for NAND and ESL, what you have done?
Hi. Yes. We had 2 restructuring costs, one for ESL, which I think is slide about in Q1 as well. And it's what we set in the organization based on our strategic focus. So in total, we put $48,000,000 of charges.
It relates to roughly taking down positions of 90 different positions in the company. And it's about resetting the organization in that sense. So you should expect, of course, that will help drive the fixed cost base down in the second half of the year. And when it comes to NIM, I mean, what we've been doing there is, I think you've seen, we've set a new management team in place where there are also restructuring the local organization. And by doing that, we have a run off cost in the quarter.
So those are the 2 costs adding up to SEK 101,000,000.
Okay. So it's only ESL that you have done these changes for, nothing for NAND?
No. It's additional. It's to make up for the NOK 101,000,000 we also have NOK 53,000,000 of charges for NAND. So it is a combined 101.
Okay. Good. And just to clarify what you mean with limited growth. Is it 5%, 10% for the second half for esports?
As I said, it is still early in all the patents. But I think if you if we're talking about double digit growth, which we do expect in our own and operated, the important part for us, we will have limited growth in the white label. That is what we're seeing right now. Also in this in some of the constant deals that we had last year, we will not have this yet. Of course, they were not giving us anything.
So it will be single digit as we see right now. But again, please, it is early. And of course, you do have hopefully orders out and hopefully you will get more. But as we see right now, we see what we can see is, of course, the media deals we have, the sponsorship deals we have and so forth, which relates to the owner and operator. And we then also can see that we have lower ingoing on white label.
Therefore, I think it would be some brown, where am I, single digit. And then bear in mind that we had a super strong Q4 last year with 80% growth.
Okay. How much of ESL revenues is coming from white label approximately?
Yes. That we haven't given, but I can tell you that we see the owner operated in the quarter the owner operated in the quarter is up 60% and also that 60 7% of the revenue in the quarter is comes from owned and operated. And that obviously leaves the bucket of the rest, which will then be a third, something like that, where you have the white label solutions, you have also what we call industry services where you have a lot around the different events and so forth. But around onethree of the revenue we have owned and operated stands from now 67%. Remember, when we acquired the company, I think the owned and operated was 30% and we were basically a production company.
But obviously, what we saw was that a range of the revenue streams were not developed and that is what we have developed now. So we have changed that trend completely now, which we're happy about, that we see owned and operated growing and we see the white label in the production things goes down. Still we want to do white label, but when it makes sense strategically, meaning that we also then can convert them into being an own operator partner going forward. That is, of course, the ambition that we are having. So that is how we see the revenue mix.
Okay. Thank you. And my final question is regarding a competitor here, Thilia or partner maybe, Tila, potential acquisition of the TV4 Group, Bohemia Broadcasting, Limor. What is your view on that and the implications for Nordic Entertainment? Can you say something about that, please?
Yes. Anders, can you have a view on that? Yes. I think it's hypothetical because there is no sort of presentation of a deal yet. Of course, I received this question many times and my answer sort of remains the same.
We conduct our business in different of who owns what. We consider both these two companies that is now serving the limelight of this discussion, Vonni Broadcasting and Telias are our partners. And we hope to continue to develop that partnership with both of them. If and when something happens with a transaction and they present a new strategy, then we have something concrete that we can actually comment on. Currently, it would be pure speculation and we prefer not to add to the speculations.
All right, fair enough. Thank you.
We will now take our next question from Martin Arnold from DNB. Please go ahead.
Yes. Good morning, everyone. My question is firstly on this sort of lowered communication for MTGX. You've touched a lot on it already. But I'm just trying to understand what's changed incrementally here from the start of the year in Q1.
You said you're talking about this white labeling. I understand that. That was also an issue before. And number of events in the second half of the year, is that something that you didn't know before? Or could you just help me try to understand what's the incremental change from when you reported the Q1 numbers?
Thank you.
Yes. I think we have said all the time that we have the transformation of the focus. So we want to make sure that we capture the growth, the future growth. And that lies in the partner deals, the media partner deals and also in the sponsorship. And that is what we have been focusing on.
What we have seen then is that we have lost content fees as well. So in the second half, there is a content deal which we had the first half last year, which was not materializing in the second half. That is what has changed. We didn't get a prolongation. We have lost a fairly big white label solution, white label contract as well.
It was quite big and or lost, but decided not to go to those levels. And that has impact obviously on that is obviously impact on the second half. Then what we have seen as well, as a consequence of these Battle Royale Sharma products being much stronger. And it also has an impact, of course, on our subscription business Ysea, where we are having the Counter Strike product. So we are seeing lower revenue in our subscription business in Ysea due to the fact that we see more people are playing obviously PUBG than in Fortnite, and we see an impact on that on our counter strike product.
So it's a mix of things which you have seen throughout the year. I think, again, quite important to see is if you compare Q2 'seventeen to Q2 '18, you see a range of new sponsors, that's important. And you see a range of new media deals, that's important. And then it is a very competitive white label market because that is probably where most people can produce an event eventually. But they can't deliver what we're delivering on the owned and operated, and that is where we going forward see more value instead of just being a production company.
So a combination of less white label, a combination of lost original programming, the content, which was a bigger deal, that is why we see lower revenue growth. And then again, we had 80% growth in Q4, and that is something to match to be fair. Good news is that when we look at the pipeline right now for our own and operating second half, we see double digit growth on the back of the long term partnerships that we have with media companies and sponsors and so forth, which is our focus
there. Okay, great. Thanks for clarifying that. And in terms of this white labeling, I understand you exited them. But these content deals that you lost, can you add any flavor why you lost them?
Yes. Because it was not good enough, so the comp department didn't want to block. And all fairness, he was not that profitable either, to be clear, that content part as well. And it was quite a sizable deal in all fairness. Dallas.
So whatever, this is part of the new regime, meaning that we would like to make sure that the revenue we're having, we can see long term, it can deliver value, it can deliver profit. And again, we're not going away from white label. We are just making sure that the white label productions we are making, those white nail production needs to be able to see that that can one day be an older operator. So we need to we would love to show which we are doing. We have some top 30 publishers, IP owners who we are working with.
And hopefully, we can demonstrate for them that their game can come not just be a white label production one off, but can actually go into be a big tournament with us and we can facilitate that with the media deals we're having, the sponsorship deals we're having and so forth. So where we can see an opportunity for white label to be transformed, we'll take that, but we will not make losses on a white label deal just to get a deal. That is and that is you have seen us doing since we acquired the company. As I said earlier, 30% of the revenue came from owned and operated when we acquired the company, 70% was production. And now that has reversed completely.
So now it is 70% coming from O and Operator and in this quarter 67%.
Do you think that you will be able to be at growth from white labeling for the next year?
That is the focus. The focus is to be to grow old and operated. The focus is when we see news, when we see the forecast for the revenue streams, then we do see that sponsorship and media rights are the ones which should be growing. So these partnerships should be the one be growing. But yes, we will hopefully, we are credible, strong white label partner and we will continue to have that strategic view that white label, which makes sense long term, we will continue to do.
We will not say no to that, obviously. And we also are ready to lose money on a white label. In theory, if we can see long term that it will give us something on an operator. We need to show the partner that we have something unique. We are ready to take that bet.
And right now, we are taking a lot of bets also with the Bellroy Air channel, where we are going out and we are posing a lot of PUBG. We have a lot of prepack events. We have PUBG in the Kasovich event. We have PUBG coming up now. We were producing as well the Prop G Global Invitational, which then had a final in connection to Cartovichi.
So there's a lot of investment being made there, which is quite important. And then over time, hopefully, it should bring strong revenue and profit to us.
Yes. And then just a final question on this eSport. When you think about expansion for the next years, I mean, just so we get a feel for how many events we should be expecting next year owned and operated. Are you targeting any new big markets right now? Or have you paused that sort of expansion journey?
No, we have not caused expansion. I think what first of all, in the second half of the year, we expect the same amount of events that we had last year. So that is what we're looking at right now. The next year, I will say as well on the owner operator side without having the full calendar up, we expect the same amount of owner operator as it looks right now. Good news is, obviously, that we have revenue attached to these owner operators as I said as well, these long term partnerships we're having with sponsors and media rights and so forth.
So I think it's quite important that we are just trying not just we are optimizing. We are making sure that the business we are creating is long term stable. So what we don't want and what we don't want to create is to continue to have some historical productions, which we cannot see materialize going forward in owner operator. It's also why we changed a lot of people now as well. Also with the original programming that we want to make sure that we are getting paid well for the original program, just like we have done historically with our production companies.
And if that is not the case, we don't produce it. It may have given us revenue, but it definitely also gave us costs and losses. That was changed in all fairness. And good news is, as I said earlier, that the owner operator will grow to our digital as we see right now in second half.
Okay. Thanks a lot for that.
We will
now take our next question from Henrik Nielsen from Nordea. Please go ahead.
Hi, good morning and thank you for taking my questions. Staying with the Esports business, the partnership with Facebook seems to not really have been applauded by the gaming community that much. What have you done in order to improve the experience? And what are the trends you've seen during the quarter and if possible also now in July? Thank you.
Yes. No, you're right. I think we had a fairly tough start if you look at the communities and also the UI experience and so forth. That is something obviously we have worked with them about. Facebook is a fantastic partner for us and it's a fantastic partner for theScore.
Obviously, with their global reach, with their marketing opportunities, it's a very important partner. And what we will continue to do is, of course, to explore even further opportunities opportunities with Facebook. So the relationship or the partnership or the communities, I think, is more happy. Like this right now, as you know, those products moved away from Twitch and then it was with YouTube, which also was very successful. And then Facebook obviously had a very good plan on how to increase the reach and the relevance of those probably further and that is what they are delivering to us as well.
So we are happy with the partnership. But you're absolutely right. The card we had was not what we had expected. So that we have in hand.
Okay. So the lowered guidance for the second half here, should we not interpret us as having anything to do with this partnership being having a
I think it is. It's quite a thorn again when we talk about the second half. So the second half is consequence of us saying yes and saying no to more of the deals which are not profitable. What we also have said for the core, which you need to bear in mind, is that we will have lower losses than the second half last year. And that, of course, must be then a quantum trend that the revenue we get in, we feel it is not growing that much as we are saying, we'll be tough, we'll be good revenue.
And that is, of course, the journey we are, as I've said. So again, it is a pure focus matter. Whatever I probably could produce for the whole world, e sports on a white label solution and pay the bill, but that we don't want to do. We want to invest with the people and the games, which we long term can see can be transformed into an open offering.
I understand. And just to understand the mix effects here going forward, I don't know if it is possible at all to split out the profitability of the owned and operated versus the white label Or at least give a comment on where it stands relative to the current average of the profitability?
We cannot do that. But of course, the white label, as you have heard me say sometimes, white label is, to a large extent, a fixed margin. And obviously, those should be covered, those white labels, if we would engage with them. Or they are loss making because that they make strategic sense for us that we can transform them into an owner operator. So therefore, it is a mixed bag.
But you will see that the white label that we do to a large extent should give us a positive contribution. Then we have the exceptions, the better oil channel and other places where we want to invest in order to make sure that we become as important in the better air channel as we are in the 1st shooter channel. So I think that's quite important. So it is a mixed bag, so it's a bit difficult to give you some granularity on this.
I fully understand. There were
some talks about these restructuring costs as well.
Part of that is related to ESL. How do you view now the setup and organization in ESL and I guess specifically to own and operate, if that is where the future is? In terms of structural cost, do you have the organization in place that you need to drive this going forward in the near term?
Or do you have a lot
of more investment need in to be able to support the growth?
Yes. It's a tough question. But obviously, we have a lot of strong new people on board. I think what we're missing right now is some key executive positions. We just got a new CFO on board.
We have operating officer in David and so forth. So the 92% position is a consequence of us. As I also said earlier in my speech, is cost win as well of us having lower fees cost base and outsourcing more. So 3 years ago, it might be people thought it was a USP to be able to produce something. I think we see particularly now that more and more production companies and others can actually produce.
So we don't need to have 100 people internally who can produce stuff that we can rent outside. We need people internally who can create super strong relevant stories, tournaments, sponsorship offers and so forth. So these are the people we are focusing And you will see more optimization here and there and shifts in competence and so forth like you have seen in all our other businesses as well. That is an ongoing journey. I think this one was a bigger one where we definitely wanted to make sure that we didn't have a fixed cost base in something around buying label and other places where we didn't which we didn't find that strategic important as such and rather go out and rent equipment if we are in whatever do something in South Africa instead of flying 100 PM to South Africa.
Like we have done when we are producing home in sports event around the world. It's not that Anders takes a boing and fly all the people around the world to produce something. Then you also use local equipment optimizing the nozzle branding.
Okay. And one or two last questions from me. You mentioned display were weighing on the results in Studios. And if I heard you correctly, it is the entire explanation of the decline in Studios. Mean, Splay is obviously then loss making.
What are you doing to improve on that? And what do you think the outlook to manage to improve it is?
On Studios, the decline that you see is a combination of the constellation of Splay into Studios and also the fact that we have some calendar effects with more productions kicking in and where we get paid later on. And as I mentioned, we have a very strong order book with 40% up also in development. So it looks very promising. And there is a shift in the market from non scripted to scripted that we are capitalizing on and building a lot of capacity up on. So that is what you're seeing.
On Splay, the merger between Splay and NICE ONE, creating Splay ONE allows us to benefit from 2 sort of distinct competencies in 1 organization. And that will yield both some sales opportunities going forward, but also obviously some efficiency measures in the fact that we merged 2 organizations. So the impact from Splay, I would argue is a one off. There is a delay in terms of the productions, and I'm quite sort of optimistic about the outlook for Studios.
Okay. Very good. Thank you.
We will now take our next question from Julia Matoszuk from Morgan Stanley. Please go ahead.
Hi, good morning and thank you for taking my question. I do apologize I missed in the beginning call due to technical issues. So could I just kind of confirm with your timing of split and what is the reason behind the delay? So that is my first question. And then the second question on advertising outlook in Nordic Entertainment.
And I also wanted to confirm when is the next price negotiation takes place on CPM? And then I will follow-up with a question on Esports.
Yes. When you're talking about the split, I think, as you know, Schirvik had an EGM where they have distributed their shares to their shareholders. And that has meant at the same time that we have put our IPO on pause for a short period, meaning that we wanted to make sure that we were to engage with our new shareholders to make sure that they understood the strategic rationale behind the split, which we support and they can do support as well to that. It's just to make sure that everybody is on the same page. And that is what we have said that we are postponing it.
I think the next window will be March, I think, where we can deliver a full exposure result. We believe the Q4 result and full year result. So that is the next window. So nothing has changed. We definitely believe that there is a very strong rationale for creating those 2 equity stores or to enhance those 2 equity stores.
And that is also which we have said where you were not done on the call, something we have worked hard on. So actually, the net management, the net company is working completely on a stand alone basis now like the HDD companies doing. So the company has been split to guide it. We just want to be mindful that we get all shareholders on board. I think that is fair to be prudent and make sure we articulate our story to them.
And then we have the next window coming up in March. So I think that was on the split. Anders, then there was yes? Yes. Your question is on the ad sales markets.
Overall, the ad sales markets for the Nordics are looking quite strong. We delivered double digit growth in our advertising video on demand platform. And that combined with price increases is compensating for the decline that you see in traditional linear viewing. So combined, that is a very strong development. And in addition to that, we see strong development in radio, particularly in Sweden.
So ad sales is looking fairly strong, good demand. It's a matter of having the right mix where the reach is delivered by TV and the growth is delivered by Eibor and now also radio. We will negotiate the next round of yearly contracts early next year. The discussions typically start towards the end of this year. And we are in a strong position, very much driven also by the recently acquired strong sports assets where Handball is a very strong free to air asset that we will capitalize significantly on in both Sweden and in Norway.
So overall, the ad sales business as a portfolio is looking quite strong.
Great. Thank you very much, Elias. And in terms of esports, you mentioned Battle Royale, Is that the reason behind in a game's performance? That's the first question. And second one, I was just wondering, you are doing a lot of things for PUBG.
Are you going to do anything for Fortnite as well? It's a growth segment. People are quite keen to see it in SL portfolio. Thank you.
Yes. I don't think that the performance in InnoGames have anything to do in all fairness with the I think InnoGames, as we have said, the performance there is strong. But we have had issues when it comes to the churn of investment on some of the campaigns, and we have not launched that many new games updates either. So now we will then have all odds coming into Q3 and that we have full marketing launch now. So hopefully that will enhance also Innogame's performance.
Then when you talk about the Benoit channel and Fortnite, and so forth, of course, we think that is very interesting. And of course, you have dialogue with them and others in that China. Now, Stock Xi, of course, is proof of the pudding with all the events that we have done with them. So that we continue to explore. And then, of course, we will have conversations with everybody in the February Shanghai style.
As I stated, we would like to be as strong in that Shanghai as we are in the 1st shooter segment.
Thank you. And the last question for me please. Any guidance on Esports profitability? So spot is not going to be profitable in the second half of twenty eighteen. Do you expect to see it turning profitable in 2019?
Thank you.
As you say, when we see right now the mix we're having right now for 2018 second half, obviously, it would be lower losses, as we have said. That is also a consequence of the change that we have been doing for quite some time, but we're not guiding on any financials for 2019.
We will now take our next question from Martin Arnold from DNB. Please go ahead.
Yes. Just a question to you, Anders. If you could say something about the price inflation in the new premiership contract that you recently announced. And sort of are you still thinking that viewing shape of the Premier League football will increase in the Nordics this year and in the coming years?
There was inflation. As you know, we don't give the exact numbers. The inflation was within sort of the business case range that we carefully calculated and we still deem it very strong right at the price that is still relevant. Is there still growth? Yes.
Let me put it like this. If you take sort of Via Play as a complete proposition of which Premier League is one very key asset, The penetration on an aggregate basis across Nordics for SVOD services per household is hovering around 50%. You can then argue that the coming years that number will increase significantly and a good part of that would be the combination of TV movie series and sports. So yes, there is still growth to be driven in SVOD and having a very strong proposition including the Premier League puts us in a bold position to take more than fair share of that market share to be sort of handed out the coming years. So yes, making sure that you have sort of balanced and very strong sports portfolio, making sure that you set your propositions right on all the Hollywood content and then add originals to that.
That we believe and continuously believe very strongly and is the right thing to do to drive streaming service growth for us going forward. And it's looking very, very promising.
Okay. Thanks a lot.
That will conclude today's question and answer session. I will now hand the call back to Jorgen Linderman for his closing remarks.
Thank you all for your time today. We will announce our Q3 results on October 23 and hope to see many as many of you before then. We also look forward to keeping you up to date with our further progress on the speed of NGG. So thank you for your continued interest in NGG, and I wish you all a great summer. Thank you.
That concludes today's conference call. Thank you for your participation. You may now disconnect.