Good morning, welcome everyone to the Viaplay Group Q4 results Webcast and Conference Call. My name is Matthew Hooper, and I will be your host for today. As usual, I am joined in our Stockholm studio by our President and CEO, Anders Jensen, and our CFO, Enrique Patrickson. Welcome, gentlemen.
Thank you.
You can find the results presentation materials on the investor relations section of our website as usual. You can pose questions at any time on the message board by clicking on the Ask a Question tab at the top right-hand corner of the webcast window. You can ask questions yourself by registering through your phone keypad, but more about that later. Let's get started. First of all, over to you, Anders.
Thank you very much, Matthew. Good morning, everyone, and happy Valentine's Day. Q4 brought to a close an extraordinary year in which so many things changed around the world. A year that began with the COVID pandemic supposedly behind us, then witnessed what few believed was possible, a land war in Europe, which in turn sparked global supply chain disruption, spiking inflation, rising interest rates, and economic recession. Such periods test everyone, and we were no different. The resilience and potential of our products, our people, and our plans enabled to end the year having grown our Viaplay subscriber base by some 83% to 7.3 million subscribers. With Viaplay revenues up 52% to SEK 7 billion, of which SEK 1.4 billion came from our international markets.
We added 3.3 million paying subscribers last year, with the Nordics markets growing by 1.2 to end the year with 4.6 million subscribers, and the international markets growing by 2.1 million to end the year with 2.7 million subscribers. Viaplay now accounts for almost 50% of our quarterly revenues, and we are well on track towards our five-year goals. We launched Viaplay in two new markets in 2022, firstly in March in the Netherlands, to coincide with the start of local hero Max Verstappen's ultimately successful defense of his F1 world title. By the end of the year, we already have more than 1.2 million subscribers in the Netherlands, as many as we have in Poland, swiftly catching up with our yet largest market, Sweden.
We acquired Premier Sports and launched Viaplay in the U.K. in November, where we are establishing ourselves with existing and new distribution partners. We are building our brand, and we are carefully considering the addition of attractive new content. We will now shortly launch Viaplay direct to consumer in the U.S. and Canada, which will take our Viaplay footprint to 13 countries. The Viaplay brand is also present in a further 20 countries through our Viaplay Select service, where we make our curated and branded content available to ingest on third-party streaming and broadcast platforms around the world, from Latin America to Australia, Central Europe to Japan. We started 2021 with 3 million Viaplay subscribers, we are now almost halfway towards our five-year target of adding 9 million subscribers after only two of the five years in our strategy period.
As a group, we delivered on our guidance for 20% full-year organic sales growth, with 24% in Q4, including a further acceleration to 73% Viaplay sales growth. We also delivered on our 10% full-year organic sales growth target for the Nordics with the same pattern of accelerating Viaplay growth, up 33% in Q4. This accelerating growth not only reflects the subscriber growth, but also ARPU growth, as we have commenced our well-planned series of price increases. 2022 was always the year of substantial subscriber growth, while 2023 is more about price, prices being adjusted upwards to reflect our enhanced content offerings and our now more established positions in our new markets. The subscriber growth has been particularly driven by successful partnering across all of our markets.
Be it Canal+ in Poland or new and extended deals with KPN in the Netherlands and its subsidiaries, Telia in Sweden or Norlys in Denmark. These revenue-sharing deals are linked to our local recommended retail price, so the price increases that we are now putting through impact both D2C and B2B basis and will help drive our growth this year and into the future. To be very specific on pricing, we have already put our base tier prices up by between 8% and 16% across the Nordics this year. We have also increased the premium price by over 20% in Sweden, the first time since 2016. We have increased the premium price in Norway by a further 15%.
With regard to Norway, where we launched the Premier League pack, premium package in the middle of last year, we now have more subscribers than we anticipate the previous rights holder to have had, but we're still a little shy of our initial very high ambitions. We have therefore increased our prices a little earlier than the original plan. The record-breaking goal scoring feats of local hero Erling Haaland for Premier League champions Manchester City continue to heighten interest levels. It is no accident that we have replicated the exclusive content deal with Erling, similar to the one we have with Max Verstappen, so that we have fascinating documentary coverage of the professional and private life of this extraordinary man and player.
We raised prices in the Netherlands by some 40% last year. We have now introduced tier pricing in Poland to coincide with the additional of the Formula 1 rights from March this year. The premium price is going up 60%, while we're also introducing a base and medium tier as we have in the Nordic countries. The basis for these increases is not inflation, it is the content offering. We have added a wide range of new rights with the Premier League now available in nine of our markets, Bundesliga in 10 markets, Formula 1 soon to be in also 10 markets, and the world's largest hockey league, NHL, in all 11 of our European markets.
In addition to this, we have an even wider range of national team sports coverage, winter sports and local favorites like field hockey in the Netherlands, KSW fighting in Poland, and rugby in the U.K. Our mix of original and acquired programming is bigger and broader than ever. We premiered 75 Viaplay original features, series, and documentaries last year, as well as a further 51 non-scripted and repertoire shows. This year, we will premiere more than 130 more original productions. You can see that customers are getting fantastic value for money in a very competitive landscape where they can pay a lot more for a lot less from rival services.
The consumer wallet is undoubtedly under pressure, which is why it's so important that our unique and affordable offering of live sports, local original content, international series and blockbuster movies has universal appeal for all of the household and family. Our price points for all you can eat, and all you can watch packages are fantastic value when compared to a visit to a movie theater to watch just one premiere, or ticket to watch just one sports event, or even a family night out at your favorite pizza restaurant. The unprecedented and unpopular, I would say, timing of the Football World Cup in Q4 did cause a temporarily higher churn rate as all domestic football leagues paused for a month. When the leagues restarted with some fixtures and big ones, the churn fell again very quickly and all the football fans returned.
We are seeing some impact right now during the Formula 1 off-season, but we have a lot of other complementary sports and non-sports content on the platform to keep customers entertained 24/7. Our linear subscription and other sales accounted for around 30% of group revenues in Q4 and for the full year. We're up 7% on an organic basis for both periods, in line with our guidance. Wholesale, channel sales, sub-licensing, and studio sales were all up. We expect this growth rate to accelerate this year given the price increases that we are introducing for the linear channels. Our advertising revenues accounted for 23%-24% of total group revenues in Q4 and for the full year, and we're down 9% on organic basis in Q4.
Just over 2% for the full year. This is a slightly weaker development that we had expected. The Q4 results not only reflected the fact that all three countries ad markets decline in aggregate by mid-single digit percentage point, but also the fact that the Men's Football World Cup was shown on rival channels, and that we lost some penetration points due to the temporary removal of our channels from Telia's network in Sweden. We expect this trend of lower advertising spend to continue for at least the first half of 2023, albeit with lower levels year-on-year decline than what we saw in Q4. We are raising prices again this year by double-digit percentage points in the annual upfront negotiations in order to offset linear viewing levels and reflect the broader inflationary environment.
Norway has been the most resilient of the three markets, and radio is performing better than TV in both Norway and Sweden, given its lower cost, shorter booking cycles, and ready availability of inventory. On the profitability side, I will leave to Enrique to comment, other than saying that we delivered on our revised guidance for 2022 in terms of the Nordic margin. We had slightly higher cost on the international side due to the acceleration of our development. We are not making any changes to any of our 23 or 25 guidance at this stage. The progress we made in Q4 has strengthened our ability to deliver on our ambitions. In the current uncertain market environment, it is simply premature to make any upwards revisions.
We are working through our cost savings actions. We are balancing those against the benefits of new distribution deals and the unpredictability of the ad market development. Our international sales are ahead of plan. We continue to expect to deliver a combined profit for the international operations in 2024, one year ahead of schedule, as well as Group positive free cash flow next year. It is worth saying that our strategic goals imply total Group revenues of approximately SEK 25 billion in 2025, based on the midpoint in our guiding range. We expect to achieve a Group EBIT margin of approximately 13% in 2025, which would imply Group profits before ACI and ISE of above SEK 3.2 billion.
Group and Nordic sales growth is expected to accelerate this year with rising ARPUs and with a higher Nordic EBIT margin and lower international losses. In conclusion, as I said on our last call, all of our plans and actions are about building a sustainable business, one where financial performance metrics are also only part of the story. We have a strong culture at Viaplay Group, one that is purpose-led and values-driven, and one that embraces change precisely because of the opportunities change brings. We know this because of our internal surveys clearly show that we have a very engaged and energized organization. We also carefully measure our sustainability status, work, and ambitions against our local and global peers through ESG assessments by the likes of MSCI, Dow Jones, and Sustainalytics.
Which is why it has been so great to see that we have again been included in both the world and European S&P Dow Jones Sustainability Indices, as well as recognized as best in class in the latest Allbright's Green List when it comes to gender equality. We're being ranked eighth out of 294 global media peers. Still some way to go to number one. That is it for my initial comments. I will now hand over to Enrique for his comments on our financial performance, position, and outlook. Enrique, over to you.
Thank you so much, Anders, and good morning, everyone. I'm looking forward to taking your questions later, but first, a few comments then on our financial performance, position, and outlook. First of all, the weaker Swedish krona has again meant that our reported revenue growth was higher than our organic growth, this time by approximately six percentage points at group level and five percentage points in the Nordics. The acquisition of Premier Sports added about one and a half % to our group sales. Adjusted for that then, our Q4 organic growth was 24%, and our Nordic growth was 10%. Our reported cost grew by about the same % growth, so there's little impact on profits from that. Our full year Nordic and group sales came in in line with our guidance levels of 10% and 20% organic sales growth respectively.
The Nordic full-year margin also came in as expected, just above 7%, with the losses of our international operations slightly higher than expected as we consolidated Premier Sports, invested in our launch in the U.K., and prepared more for the launch in North America. Despite this, please remember that our full-year international losses came in more than SEK 100 million better than the originally anticipated number in the beginning of the year. Our operating expenses was up 46% in the quarter, which was primarily driven by our ongoing international expansion and the sports rights that we acquired or extended last year, including the new English Premier League agreement, which kicked off in August and expanded from three territories to nine territories.
The international expansion accounted for approximately half of the cost increase, then we have also continued to invest in other content, like original content, as Anders was mentioning. Our total content spend was up 63% in the fourth quarter. We straight-line amortize the originals investments over six years. Content accounts for about 70% of our total costs, with live sports being the largest category. The vast majority of our content costs are fixed for many years to come, we have very good visibility on this moving forward. We hedge the majority of our committed U.S. dollar costs with forward contracts, which delays the impact of FX changes, that gives us good time to take any measures as a result of FX movements.
Due to the previous appreciation of the dollar against the SEK, we will have a negative impact of approximately SEK 350 million this year. We are offsetting this impact through cost savings. We announced today also one of costs, or about SEK 130 million, of which SEK 86 million hits the fourth quarter accounts, and the remaining balance will land in the Q1 2023 results. All of this as Items Affecting Comparability. The one of items cover essentially three areas. First, the reorganization and redundancy costs as part of the new organizational setup that we announced in November. Secondly, it includes integration and transaction costs for Premier Sports, the acquisition we completed at the end of October.
Lastly, we closed down a studio here in Sweden and wrote down related content. Accounting-wise, we're not able to book all these costs in the fourth quarter, and part of it will be reported in Q1 2023. Please remember that we also had a positive one-off in Q1 of 2022 of close to 600 million SEK. For the full year of 2022, our total one-offs or IACs amount to a positive of 510 million SEK. A couple of words on Allente. Allente is performing broadly in line with expectations and contributed to 282 million SEK of Associated Company Income in 2022, with 78 million SEK in the fourth quarter. As expected, we received 200 million SEK in cash dividends in Q4, which took the total for the year to 300 million SEK.
We have now been a 50% owner in Allente for almost 3 years. The company has been restructured, and we have captured the synergies from that merger. It's a great business generating annual revenues of approximately SEK 6.8 billion with 19% EBITDA margin, healthy cash flows, limited leverage, and attractive dividend payout ratios. Over 70% of Allente subscribers now have Viaplay, and 37% have our V channels as part of their subscriptions. We do not believe that we are the best long-term owner of this asset, and we'll continue to discuss our options with our co-owner, Telenor. Our effective tax rate for the full year when excluding our share in net income from associates was 3%. Our average effective tax rate going forward is expected to be at approximately 21%. On cash flow.
Our cash flow from operations reflected really the investments in our international expansion, the Allente dividend, and the negative change in working capital arising from sports rights payments in particular. We had SEK 3.3 billion of negative change in working capital for 2022, and that was slightly above our previous guidance of about SEK 3.2 billion. That reflects the increased investments in sports rights and original programming. These investments will continue to grow, but at a slower pace, we continue to expect a further buildup of working capital this year to the tune of about SEK 2 billion. We ended the year with SEK 1.5 billion of net debt, or SEK 1.1 billion excluding leases, and we had SEK 2.8 billion of cash and cash equivalents, and SEK 3.9 billion of total borrowings.
We have proactively added about SEK 500 million of short-term borrowings through commercial paper programs, as we have a seasonal buildup of working capital in the first quarter. As a reminder, we have about a SEK 150 million bond maturing in June of this year, which will be covered with short-term funding. The remaining SEK 3.25 billion of bonds, which are all in Swedish krona denominated, fall due between 2024 and 2027. We're paying a blended rate of 4.1% on our debt at the end of Q4, and earning 2.4% on our cash deposits.
Our net interest and other financial items total a minus SEK 88 million in 2022. We're expecting this number to grow to about minus SEK 200 million-SEK 250 million for this year. As you note, we have a very good line of sight of the majority of our operating expenses, financial and tax expenses. Our 2023 and 2025 long-term targets and outlook remain the same. We're operating in a less certain environment and more challenging markets right now, which is why we're saving on costs to offset the headwinds that we see. We also have the benefit of the new improved Telia deal in Sweden, of course. Importantly, we are fully funded for our expansion. We have focused our resources on our key and larger markets.
Our growth and earnings profile for this year are expected to be as we presented it at the Capital Markets Day in November. The Nordic margin will be below 7% for the first half of this year, as we continue to see the cost increases from new sport contracts taken on in the second half of last year. The margin will increase in the second half as costs are in the comps with a better price increases that we're introducing in the first half of this year and they are then fully embedded in there. Our international losses are expected to gradually reduce during this year.
We are adjusting to a new economic reality, still remaining one of the fastest growing media and entertainment companies, with 83% Viaplay subscriber growth last year, 20% organic sales growth, and our prices now being raised in most markets as planned and to reflect the significant content and customer experience investments that we have made. This is all for my comments. Back to you, Matthew.
Thank you, Enrique, and thank you, Anders. We're now ready to take your questions. As I said before, if you would like to ask a question, press star one and then one again, or one one if you like, on your telephone keypad and then you will enter the queue. You can no longer withdraw questions, but I'm afraid, so be careful with that keypad. You can post questions on the message board by clicking on the Ask a Question tab at the top right-hand corner of the webcast window. Please don't forget to write down your name and your company name. Okay. We'll start off then with some questions in the message board, if I may. Anders, first of all, in relation to the price increases, quite a lot of price increases in quite a lot of markets there.
Yes.
How are they landing? What sort of responses are we seeing from customers so far?
Well, we have rolled out virtually all of our price increases now. We can see what is typically the pattern in a price increase. You get some churn up front, and then it goes silent, and then you see a sort of second round of churn when people start to sort of see the impact on their credit cards. The initial churn is slightly lower than we have anticipated, which is of course positive. That usually sort of sends a signal that the churn overall will be in line or slightly better than we have anticipated. I think if anything, it sort of demonstrates the importance of the products that we represent in this market where you spend less money outside your home.
Still early days, but this is positive. This is a very important sort of, you know, counterweight and counterbalance towards what we expect to be a generally slower market in terms of growth. Keeping customers, engaging them, making sure they stay for as long as possible is absolutely key, and this is a positive indicator.
Great. Good. I think following along the same sort of vein, Tom from Citi has a question. We've introduced tiered pricing now or in the process of doing that in Poland. Is the same sort of structure possible in the Netherlands? Would it make sense?
Yeah. Thanks, Tom. That's a good question. Yes, it's absolutely possible, and yes, it would make sense at the right time. We have unlocked so much more interest in the Dutch households around our content in general, but of course around Formula 1 in particular. We wanna stay as focused as we can to unlock as much more potential as possible in the households before we start to work with the tiers and variated pricing. This is in a future upside that we are planning very, very carefully. But yes, in all of our broad European markets, you should expect a tiered pricing structure to be the case when the time is right.
Okay. Very clear. We'll take the first question now from the call line, if I may. I think first up we've got Klas Danielsson from Nordea. Klas, please go ahead.
Yes. Can you hear me?
We hear you. Hi, Claus.
Fantastic. Hi. Thanks for taking my question. First off, I have a couple actually, if I may.
Of course.
First off, clearly a strange quarter with the World Cup being in Q4, quite irregular, and so forth. But you're clearly picking up a good chunk of kind of subscribers despite that. I guess you detailed the churn effects earlier, but could you maybe also touch on the growth sides and how that has developed over the quarter? Then also on that side, if you're kind of seeing any irregular seasonality coming in during January instead, and are kind of picking up more subscribers then or how that's looking sort of there?
Yeah, thanks, Klas. Very good questions. if you look at the growth sides, during the fourth quarter, as I mentioned, the churn related to the World Cup came in more or less as we anticipated. The underlying growth in especially non-sports came out particularly strong in the fourth quarter, which means we're taking a little bit of ARPU pressure as a consequence of the churn due to the World Cup, but we are compensating then with significantly higher volumes on the entertainment package, the TV series and movies package.
Some very strong premieres that has performed well towards the end of the year, both features on series and movie side. Norway has continued to develop very strongly on the TM side. There is a lot of positive momentum underlying despite this, as you say, a rather strange quarter and hopefully one-off situation with the World Cup in the fourth quarter. When it comes to seasonality in the first quarter, it is a generally slower quarter in terms of growth and we anticipate this year to be no different. The churn has started out on the low side as well, despite the price increases that we are rolling out. Early indications are positive.
Remember that especially in our more mature markets in the Nordics, the growth for this year is on a significantly lower side than it was last year, and now it's more about price increases and ARPU development. These indications are very positive. In international, it remains to be about continued market maturity and growth of subs. We have seen that in general, in particular in Poland, I should say, where we have started the year slightly stronger than anticipated. As mentioned in my CEO comments, we now have more than 1.2 million, or we closed the year with more than 1.2 million subs in both Poland and Netherlands. Very strong.
We're not seeing any fluctuations due to seasonality.
All right. That's fantastic. I guess you started to touch upon it also in the international segment, but I guess some of us were pretty scared of the Netherlands and Poland in this quarter, you know, with the lack of F1 and the lack of Premier League sports also in December for a large part of that side. Could you maybe detail on the international specifically what's behind the growth? Is it primarily the U.K. or how is kind of the Netherlands looking as well?
No, it's not primarily U.K. yet. Matthew will fix that as he takes on his new role. It is actually about two things. It's continued solid growth in both Netherlands and Poland, but significantly lower seasonality churn that you mentioned. We, of course, we're also working very hard to avoid the Formula 1 related potential churn as the season was concluded and added a lot of both F1 related content with documentaries and programs around Max Verstappen. We added a lot of other new programming that made sense for the kind of audience that were very sort of F1 focused, and that paid off.
e entire base in Netherlands, less than 10% left when the F1 season was over. Most have now returned. Now we're just, you know, a month and a half into before we kick off the new season. That was a very, very strong vote of confidence in our product in a new market like the Netherlands. In Poland, we didn't see any seasonality churn at all, actually. When it comes to the World Cup driven churn, Poland was probably one of the better performing markets, actually
Okay. Okay. That's fantastic. Lastly, if I may sneak in a last one here.
Sure.
Looking at the ARPU side, that's clearly been in focus during the last two quarters. I guess in the Nordics, we kind of finally saw a bit of a step up there in this one. Still more to go, I guess.
Yeah.
It's quite difficult for us to track. When you mentioned that the timing of price increases will impact margins a bit. Could you help us understand what the puts and takes on the ARPU side is ahead of next year? What's the kind of progression, I guess, on that side as well? Thank you.
Yeah. Yeah, all D2C customers, as you know, will sort of start to pay the new prices immediately. That will be visible already in Q1. Then it takes us into Q3 and early Q3 until we see the full base, based on the agreements, the various agreements we have with distributors. In our new agreements, the link to recommended retail price is very strong, so the price increases will fall through quicker than they've done in the old kind of distribution agreements that we've had. Come Q3, we should be fully up to speed on the ARPU increases.
We do take the cost for the new rights and the inflation on existing rights already from the beginning of the year, which is why, as Enrique mentioned earlier, Nordic margins will be under pressure in Particularly Q1, and then gradually increase to be up for the full year. You should model an ARPU based on sort of increase throughout the year, but more modest in the beginning and then progressively upwards from end of Q2, early Q3.
All right. Thank you very much.
Thank you.
Good. Thanks for the questions, Klas. We're a tech company, so in the spirit of keeping things up to date, if you press star one one or star eleven as we call it on your keypad, you can cancel a question, so that will make life a bit easier for you.
Oh, good.
Um-
we developed that during-.
We have developed that in app, in call. Next up on the call we have Omar Sheikh from Morgan Stanley. Over to you, Omar.
I've got three questions if I could. Maybe, Anders, to start. On the price rises, we've talked a lot about the price rises you're putting through this year. Could you maybe just talk about your strategy beyond this year in relation to pricing? Where do you want Viaplay's pricing to be relative to the competitors, both within the Nordics and in international? That's the first question. Secondly, on advertising, just wanna make sure I understand exactly what you're sort of guiding to for the full year. Are you saying that advertising will decline sort of in line with the decline that you saw in 2022, or do you expect some growth in the back half of the year to offset the early declines in the first half as you've guided?
I guess the message on that I think would be helpful to clarify. Finally, maybe for Enrique, what's the guidance on leverage for the full year? Where do you expect or which quarter do you expect peak leverage to come in? Is it sort of, you know, Q2 and then deleveraging thereafter? Just some color there would be helpful. Thanks.
Thank you very much, Omar, and good morning. Yeah, let me start with the price increases. In essence, we are more or less following exactly the plan that we laid out when we started this journey in early 2021. The price increases that has now been rolled out are of slightly higher nature than we then have planned for 2024 and beyond. We are now on the back of more content and new content resetting our cost baseline, sorry, the price baseline in most of our markets. You should expect yearly inflation-related price increases across our packages.
We of course want to be priced at a premium because of our exclusivity and particularly in our sports content, but of course we don't wanna price ourselves out of the market. We need to strike that balance between what is sort of fair price for the products and people's willingness to pay. 2023 is the year where we are resetting a lot of baselines and start the journey with additional packages like we're now doing in Poland. You will probably see more of in more markets in 2024 and beyond. We work with our sort of generation of revenue based on our assets in a different way the coming years.
This is why it's so positive that the early indications of churn being on the low side is so positive, because once we've reset the baseline, then based on the largely fixed cost base, the upside on margin is quite substantial, as you know. On the advertising, we expect the first half of the year to be not down 9% as we saw in Q4, slightly less bad than that, but nonetheless, down. Everything that we're seeing and every discussions that we're having is talking about a slightly backloaded market.
On aggregate, when I look at the numbers, we're probably looking at a mid-single-digit decline for the full year, with some potential upside if the market gets stronger in the second half. Our very ambitious and very competent advertising teams are pointing to a slightly lower decline than 5%, but there are many swings in this market. If you think about a 5% or so decline for the full year, with more so in the first and less so in the second half, that's probably what we're seeing right now. Enrique?
Yeah. Thanks, Omar, for your questions. It's really the working capital. You can hear me, right? It's working capital.
Yes, we can hear you.
impacting the. Very good. The leverage. It's really a contest between the first and the third quarter. If you kind of ask for kind of like how it looks in the year. First and third quarter has the kind of more of a seasonal buildup of working capital. That is really what will be what we expect to be driving kind of peak leverage during the year. We expect for the first quarter, we expect to get in the kind of area of three and a half. You know, it's not super easy always to predict working capital, but around three and a half billion SEK of net debt. That could be about the same level for the third quarter.
Great. That's very clear. Thanks, Enrique.
Yeah. It, it means, then kind of reversals in the second and fourth quarter.
Good. Thanks, Enrique. We have a question from Pär Johansson at DNB. This is a multilayered question. Can you elaborate on the competitive environment in the Nordics and the different international markets, given we see Telia comments about not being a content owner anymore? We see international companies focusing on the core, and are there other tangible evidence of a changing competitive landscape or environment, and what are you doing yourself?
Where do you see most adverse market developing? It's a lot of questions in that, I think you get the gist of it.
Yeah, I get the gist of it. There, it's a very good question, and it sort of frames a lot of the moving parts that we have to consider for this and for the coming years. If I try to sort of, you know, make a little bit of a prediction what is ahead of us and try to interpret what we're hearing from various corners is that some players will scale down their ambitions with content in general and sports rights in particular. That is positive. That will lead to a more predictable outcome on future tenders and renewals.
Bear in mind that we have nothing coming up that is of fundamental importance to us, but it can open, of course, opportunities along the way, and it sets the pace for things further down the line. This is actually true for all markets. The other side of the coin is of course the high competition leading to some form of consolidation and settling in many of the markets. That will open for some opportunities. We have seen some in-market consolidation in for example, the Netherlands not being approved by the regulatory authorities. That will lead to some changes. You mentioned Sweden, where we have seen some comments made by other players in the markets.
That will lead to some form of changes. The question is very broad and a very good one, but what I think is the essence of what we're having in front of us is now sort of the second phase of a massive growth journey for a lot of players, is that not everybody will be left standing when the dust settles. Costs will have to come down. The further market maturity that we are now moving into is one of lower churn, less of a growth race, and more stable price increases every year. We have built a sustainable future for streaming at the core of our business.
We are very well-positioned in that journey, both when it comes to improving our cost and seeing new opportunities, and also participating in market consolidation opportunities. It's a multilayered, like you said, Matthew, question. Good one. I think, in essence to boil it down to something is that what is happening now is positive.
Yeah. Shifting sands-
Yes.
People focusing on core.
Indeed.
We'll go back to the phone lines now. The next question comes from Martin Arnell at DNB. Over to you, Martin.
Question is on the content, cost. It looks like it was a little bit higher in Q4 than you thought. How should we think about the full year now? You say gradually diminishing loss internationally. Can you just elaborate a bit on the cost side in international?
Yeah, absolutely. Morning, Martin. The slight overrun on cost in international was related to one of costs that we decided to just take and get it done, related to Premier Sports in the U.K. We had some other sort of one-time costs that we decided not to bring with us into this year. There is no run rate in what you saw in Q4. It is on the balance roughly SEK 30 million vs what we anticipated for the full year. Like Enrique also said earlier, remember that we came in more than SEK 100 million better than we anticipated on losses for the full year when we started the year.
There are no indications or anything from the proof points that you're looking for in Q4 that will change the outlook for this year. Rather the opposite, actually.
Yeah. Okay, great. You expect a gradual improvement there, throughout the quarters in the year, right?
Correct. Correct.
Okay. Thanks a lot. Just on Norway, I think you mentioned price hikes a little early, earlier than originally planned.
Yeah.
Could you just say what was the logic behind that again?
Well, if you just take a step back to our ambitions for Norway. When we took over or decided to invest in Premier League, we did it on the back of a belief that there are more households ready to sort of buy into Premier League than was previously covered by the previous rights holder. We proved that when we launched. As I mentioned, we anticipate to now have more households connected than has been ever before in Norway. Slightly less so than what we aimed for, but still better. What we did was that we took down the price vs the previous rights holder from NOK 699 to NOK 649.
We had an ambition to increase the price after the first year. Given the slightly lower volume, we decided to make that price increase that was planned for the beginning of next season to do that already now, to make sure that we can continue to invest in the experience in Norway, and that we have an RPU and a revenue generation from Premier League at the level that we need it to be. That's the whole reasoning. Slightly lower volume. Price increases according to plan, slightly earlier. Baseline reset. That's the way to think about it.
You still expect to be able to tap into the market, which is the story, I guess.
Absolutely. Norway has quickly moved from back in, not that many years ago, being an underinvested, unprofitable problem market to now becoming one of our most attractive markets in the Nordics. It is performing very, very well, and some of our biggest hits on the non-sports content side sits in Norway. Yes, absolutely.
Just finally, one final question. You added the Telia partnership in Q4, but you didn't revise the guidance after that despite the new contract is better than the old one according to you.
Yes.
What, can you just elaborate on the rationale there?
Absolutely. I think that that's potentially an elephant in the room that on the back of everything that we've achieved and what we're now delivering, why are we not improving on our outlook? And is that actually a sort of a hidden downgrade to what we, what we have said? No it's not at all. But it's February. It's an uncertain year ahead of us. And we have made some very important mileage to improve on the prerequisites to deliver on this year. To upgrade this early in the year, in this environment would simply be wrong. So you're right to assume that we have a better starting point now.
We have added the Telia agreement and a few other components that has actually strengthened our starting point. If everything else is equal, then we're in a good position to beat what we've said for the full year. I just think that is premature, and I think it would be borderline careless to do that in the economy environment that we find ourselves in. We need more line of sight to what the current macro environment actually means for this year. Then we will gladly, as we've done in the past, revise our targets upwards.
That's very clear. Thank you so much.
Thanks very much, Martin. You're right, Anders. That was certainly an elephant in the message boards anyways. That was next up for me. Glad we took that one there, and I hope that answers the questions you've been posting in the, in the message boards so far. Next up we have our newest analyst actually with an old friend, Erik Lindholm-Röjestål from SEB. Erik, over to you.
Yes. Good morning, guys. Can you hear me?
We hear you fine.
Perfect. Perfect. Well, a couple of questions from me. Starting off on the Nordic margin, I mean, Martin just touched on this, but you mentioned that Nordic margins will be lower than 7% in H1. I mean, is it possible to quantify this? Are we talking the same levels as in Q4 and Q1, and how is this affected by the new and improved Telia deal? Thank you.
Thanks a lot, Erik. I will let Enrique answer that margin question.
Thanks, Erik, for your question. I think it would be fair to say that we expect margins to be at around the Q4 levels. That would probably be Our best estimate at this time. It's also a reminder that, I mean, some of the price increases. Sorry. What Anders just said around some price increases take a little bit of to come through. I mean, all things, you know, considering everything, that's our best estimate.
Yeah. Is that true for Q1 as well as Q2, or what should we expect for Q2?
Well, I mean, we, as we said, we expect a gradual increase.
Yeah.
Yeah. you know, I think we painted the picture at the CMD that, you know, if we expect to, we expect the second half to be above for the full year. Yeah. Painting
Yeah.
Draw a line.
Those of you, I mean, you'll probably remember that line chart that we had lots of conversations about at the CMD. I'm sure you can get the rulers out and see where that takes us. I mean, that logic still pertains for sure.
Yeah. Gradual improvement-
Gradual. Yeah, yeah.
is probably the way to summarize it.
Okay. Perfect. That's good. On the sort of, I mean, we had Pär Johansson's question here about the competition in Sweden and so on. Can you comment a bit on Champions League rights? I guess they're coming up for renegotiation now. Maybe you can't say that much, but can you talk about how do you view these rights? How do you think competition would look? Will the usual suspects be there? What you think?
Well, Erik, you know, this is a theme better not discussed in a larger group. I consider this being a larger group, and we typically prefer not to comment on rights that for a specific market that we don't have. That's a very boring answer. I will not be that boring. What I can say is that we know the value of the UEFA Champions League. We know what it's worth. We've been dealing with it for a long time in Sweden, and we still do in Denmark and some of our other markets. If the price is right, all potential rights are considered. There is no secret in that.
I can be very, sort of explicit saying that if it doesn't come down significantly, and I mean significantly from current levels, we have no interest in it.
Okay. Perfect. Perfect. A final one from me. I mean, I guess you mentioned introducing a premium package in the Netherlands and maybe Poland as well. Can you talk a bit about where would this be priced at relative to the other packages?
Yeah. We are introducing it now in Poland with the addition of Formula 1. The new top tier in Poland will be the one that includes Formula 1. That's a new price point in the market. The mid-tier, which is our current package, will get a price increase, not that steep, but there will be a price increase. We're also introducing a TV series and movies package, priced very low, for households with no sport interest. Poland is a large market with 14 million households and very diverse interests.
The price points will be from the PLN 60 on the top, and then downwards down to the lowest price point. Still very, very affordable, but a significant step for us in generating ARPU in Poland. For the Netherlands, we're not planning anything of this sort of this kind, at least not for this year. As I answered earlier on a question, that is part of our roadmap for all markets going forward.
Okay, perfect. Thank you.
Thanks.
Good. Thank you very much. As a reminder, again, just press star one one if you want to ask a question in the conference call, and similarly to take that question away if you would prefer or it's already been answered. Next up on the call, we have Rasmus Engberg from Handelsbanken. Rasmus, please go ahead.
Yes. Hi. good morning. thanks for taking my questions. just firstly, on the new contract that you have with Telia, is there any kind of timing differences that sort of delays revenue into the future, or is it similar in structure as the previous one? I guess I'll just take the question one at a time, so if you wanna answer that maybe.
Sure. Sure. Good morning, Rasmus. No. There are no delays that sort of backloads the agreement. If anything, it's actually the reversal from our point of view. It's a multiyear agreement that I think is very attractive for both parties, and we have improved on our profile for the contract. It is similar or better than the previous one.
Yeah. Good. Thanks for that. The savings that you announced in conjunction with the CMD, is there anything that you felt like maybe we're cutting to the bone here, maybe we shouldn't do it, or is the plan still intact?
No. When it comes to the actual savings, those who have run rate effect on our operation going forward, they are being executed as planned. There are some IACs related to them in the fourth quarter and in Q1, for example, the close down of a non-profitable studio. The kind of savings that we're taking to create positive run rate, there's nothing that we sort of have reconsidered on that. On the other side of the sort of total savings package, there is more what is actually not really savings, but more cost avoidance vs our base case.
There we can, if, for example, the ad markets turn more benign, in the second half of the year, we can then, with very quick sort of turnaround, decide to invest a bit more in the, in the linear channels. It's a bit premature to say anything about that. I don't think we have any situation in the kind of savings that we're looking at right now that in any way cuts into the core or means that we are saying no to growth because we need to save. We're not there with this savings program. If that would be the case, then it's a much bigger exercise that will then touch our entire strategy, and that's not where we are right now.
Very good. Very good. Claes. Then I was thinking about the Nordic ARPU on Viaplay. What type of subscribers did you get? Can you also explain, since you only had the Telia customers really at the end of the quarter, you only got paid for two weeks, I guess. What I'm trying to understand is how to think about that ARPU, whether it's actually a bit if I calculate it, I get to a too low figure, is my thinking.
Yeah. No. It's, it's a, it's a very good question. I mean, the fourth quarter is a tricky one from an ARPU point of view because we have a high volume of intake predominantly through the TV series and movies package, and then some churn, seasonality churn related to the sports package because of the World Cup. Basically all of those subs came back before the end of the year. It's not easy to draw any sort of intelligent conclusions based on the ARPU profile from Q4.
If you look at the sort of the run rate that we have in Q4 and then going into Q1 and onwards with the price increases on top, we have reinstated our sort of entire sports base based on the churn from the World Cup. Then we have increased prices. Then we have added more TV series and movies packages, and then we do a price increase on those. The ARPU, the ARPU uplift, the sort of hockey stick effect on that gradually as we flow through the year is quite significant actually. The fourth quarter is a bit of a mess from an ARPU calculation point of view because of all these many moving parts. Underlying what we have achieved is positive.
Just to be clear, did you only got paid for two weeks, not for the entire quarter?
On If you refer to the Yes. That is correct. That is correct.
Yeah.
That I don't really consider that as even a component in our outlook for the assessment of Q4. That's a 2023 thing.
Yeah. Very good. Thanks so much.
Thanks.
Okay. Thanks, Rasmus. Next on the call we have Derek Laliberté from ABG. Derek, please ask your question.
Good morning. I wanted to follow up on Martin's questions about the guidance and Telia. Just to clarify further, I mean, the guidance is unchanged since you recently introduced it, but Telia has clearly added to that. I mean, are there any other movements within this, like, for example, has advertising your outlook for that on the margin declined slightly?
No. I mean, to clarify again what I said, with everything we know, with the addition of Telia, which was sort of excluded from the guidance that we gave at CMD, this is what we're gonna achieve also without that agreement. That has been added back, so that's a positive. There are no additional negatives to the case. What I think you're asking is, okay, so things are then improving both on the sub side and on the revenue side, why don't re-revise the guidance?
Again, there are definitely sort of fundamentals in place to do that, but I also think there are so many uncertainties in the world around us, especially on the growth side, will the households continue to invest, or are we looking at a more bearish situation than we are currently seeing? I don't wanna have to come back and revise guidance. I rather take another quarter to make sure that we have full line of sight to everything. So there is nothing underlying suggesting that we are doing a hidden downgrade by not upgrading. That I need to be very, very clear about. This is just simply a matter of taking a cautious approach to a very uncertain year, but we have de-risked our current guidance.
That's very, very clear and understandable, Anders. That's what I suspected as well. Just wanted to extra clarify that, so to speak.
Sure.
And if I may ask on the churn, following the price increases you said overall has been lower than expected. Could you give some flavor on original basis here, like for example, between Norway and Sweden, if there's been any difference in behavior amongst the customer base? Thank you.
No. The only sort of granularity I can give on that is that Norway, where we made a price increase in the middle of the season has been, of course, more negatively received. The churn is more or less in line with what we expected. The Swedish price increase that we announced in October for new subs and then took full effect from January 1st for existing subs, that's the first price increase in a long time, and we're actually more or less aligning with other price points in the market. That churn has been slightly lower.
Great. Thank you.
Thanks.
That was all for me.
Okay. Thanks very much, Derek. Just a couple of other things. On the restructuring and reorganization, the question is how far along are we with that? Is that something that's now been done or are we in motion?
Well, the short answer, it's done. There are of course, you know, wrinkles that need to be ironed out, and we need to get sort of full effect of the efficiency that we're creating through this new organization. From an operational day-to-day business, point of view, it's done. I think the early indications are very positive on people receiving this in a positive way. We're getting closer to our markets. We're making Amsterdam our Continental Europe hub. We can tap more into local talent without giving away the benefits of being sort of a centrally operated platform business.
After a couple of years of massive buildup, it is wise to take a, you know, a step back and look at, okay, so how are we operating and how will we optimize our business in the context of who we have become, and then adjust. I think, without claiming sort of luck as the underlying reason for the change, I think it was luckier that we got this done, in the fall, well planned, in the sense that the team took it on board in a very good way. Now it's gonna help us to navigate this somewhat trickier.
Good. The perennial favorite these days, FAST channels, AVOD, SVOD.
Yes.
Is there any change in terms of how we're thinking about that, the opportunity it seems to present for other players in the field vs our approach, having had Viaplay for a number of years and then merged with Pluto?
No. there is a very interesting opportunity in FAST channels and AVOD and SVOD and whatever VOD, you wanna think about. What we want to do is to make sure we have extracted as much value, and built as much maturity in the subscription-driven part of our business, continue our journey, in the Nordics with our partnership with Pluto TV, where we are tapping in to the advertising video on demand market. Then make sure that we're technically ready to adjust with the market as and where we are appropriate, as and when it's appropriate.
I think it's important to reiterate that it would probably not be accretive in the Nordics right now, given the maturity that the markets have and the competition situation and the fact that we already operate significant advertising businesses in the Nordics. In our new markets, I'm pretty sure it's gonna be a component, but then you need to have enough reach. You need to be sort of big enough to create a positive impact without risking too much for your subscription business. I think it's a matter of your starting point. I don't think it's a matter of whether one is right or wrong. There is room for all these models.
As the markets mature, the further the proliferation of opportunities will follow. Is this the year of the SVOD or AVOD boom? Well, yes, to some extent because of need for some players. No, because the market is not really looking for new ways of spending advertising money. I think we will see some delays on some of the bigger players that have announced we're gonna do this as well. If I look into the crystal ball, I think they will potentially in smaller markets like the ones we're operating in, probably delay things.
Good. Okay. I think last question as we're coming up to the hour mark now, and it's really kind of where we started to an extent, which is how sticky is streaming proving to be? If you look now into the crystal ball for this uncertain year ahead-
Yes
...that level of resilience that was seen in more traditional pay-TV products.
Yeah
in previous periods of economic pressure.
Yeah
...would we expect it to be the same now, more, less? What are your views on how that will develop?
Well, it's of course a very, very important question for us and everybody who's working with a product where there is no sort of artificial loyalty. In the traditional pay TV business back in the day, you could always argue that it was very sticky and people were very loyal, which was also the case from a usage point of view and people were committed to 12, 24 months programs. Today, the power is totally in the hands of the consumer, as it should be. Which means there is no silver bullet around the fact that you need to have content that is attractive enough.
If you have that, which I think we do, then I think it's indifferent on whether you're committed 12 months or one month to your product. You will stay because it is an affordable way of staying entertained, and the power of content in general and some of the sports rights in particular is very, very strong. While I think streaming hasn't been tested in this kind of environment before, I think streaming will prove to be even more resilient because of the flexibility in the hands of the consumer. If you're not strong enough, then it's a problem.
Yeah. Good. Affordability and relevance, a good place to stop for today. Thank you, Anders, and thank you, Enrique. That concludes the question and answer session. Thank you for your time as always and your questions. We really appreciate your interest and always welcome your feedback on the format and content of this session. We are road showing today in Stockholm and tomorrow in London, and then in the U.S. at the end of the month. We have a new member of the IR team, Anna Hedenberg, who you will meet, who has joined us recently from a glorious career in banking. Please don't hesitate to reach out to Anna or me if you would like to schedule a meeting or have any questions at all. That's it for today. Thank you again.
We wish you a very happy Valentine's Day to you and your loved ones. Goodbye for now and see you very soon.