Viaplay's Odyssey: announcing the return of distribution agreements?

Viaplay announced in June 2023 a significant downward revision in its short-term prospects. This turmoil has led to the departure of Group CEO Anders Jensen from the company, a 30% cut of the streamer’s workforce, and the withdrawal of the company’s 2025 financial and operational targets. After having been delayed twice, Q3 2023 results were eventually published at the beginning of December. These successive news came crashing the previous success story of the biggest Nordic streamer. In recent years, Viaplay experienced rapid international expansion, extending its services beyond its initial Nordic and Baltic territories. In the United Kingdom, Viaplay acquired Premier Sports and secured various sports broadcasting rights to enhance its appeal. So what led to this year’s demise? Subscriber growth below expectations, costs no longer sustainable If net sales were continuously growing in the last years and even grew by 16% at Q2 2023, it wasn’t sufficient to compensate for the rising costs that the group had to account for. In the end, Viaplay's international expansion represents a heavy burden on the group's profitability; one that their activities in the Nordics - more diversified and better implemented - are no longer able to offset. The company had initially projected that its rapid expansion would be sustainable by attracting enough subscribers and generating sufficient advertising revenues to obtain acceptable levels of profitability. In 2022, the company restated the objective of 12 million subscribers in total by 2025, 6 million in the Nordics and 6 million internationally. Compared to the subscriber base at the end of 2022, this meant having a CAGR of 30.5% in international markets and 19% in Nordic markets in volume of users. At Q3 2023, Viaplay counted 6.6 million subscribers worldwide - a 13% decrease compared to the beginning of the year. The objective was consequently put into question and that forced the group to address earlier than expected a cost structure which didn’t seem sustainable anymore. Growth projections have probably been inadequately assessed and one of the key explanatory factors put forward in Viaplay’s reports is the faster-than-expected deterioration of macroeconomic conditions: lower-than-expected subscription sales due to an increase of households’ cost of living, which, in turn, has led to higher levels of churn following price hikes. This makes the questions of cost management for D2C players and return on investment even more pressing. Other elements are to be taken into account to explain this slower growth: relying on a small library of Nordic productions has hardly convinced customers to pay the subscription price and has not made the platform attractive to telecom operators for distribution partnerships in most of its international markets. In North America, Viaplay has not invested in premium sports rights, even though...