Viaplay Group AB (publ) (VPLAYB) Earnings Call Transcript & Summary

Hi, everyone. Good morning and welcome to NENT Group's Q3 2021 Results Presentation. My name is Matthew Hooper, and I am NENT Group's Chief Corporate Affairs Officer. I'm joined here today by our President and CEO, Anders Jensen; and our CFO, Gabriel Catrina. As you can see, we are in the studio today for a live stream to you today on today's results. After a presentation of the results, we will then go into a Q&A session to answer as many of your questions as possible today. [Operator Instructions] You can also post questions in the Message Board at any time by clicking on the Ask a Question tab at the top right-hand corner of the screen, and I will then introduce you. Please remember to include your name and organization when asking the question. Presentation materials are available on our website as usual. And I will now hand over to Anders to start the presentation.

Matthew, thank you very much and a very good morning, everyone. I would like to start with a thank you to so many of you who joined us virtually for our recent Capital Markets Day. I hope that you enjoyed the presentations and the Q&A sessions. We announced 5 new markets, raised the bar for most of our 5-year targets, and also introduced a short-term outlook. Both of these reflected the considerable momentum that we've built up so far this year. Today's Q3 results are further evidence of this momentum. 28% Viaplay subscriber growth, 15% Viaplay revenue growth, and 10% Group organic revenue growth all tell the story. Viaplay was again our largest revenue-generating unit, accounting for 36% of Group sales. Our Nordic profits were up 60% and we continued to invest in the international expansion as planned. We remain well on track to achieve our short-term and long-term goals. The launch of Viaplay in Poland on 3rd of August was a success and a carefully executed and high-impact marketing plan generated a lot of attention and awareness. This, combined with further growth in the Baltics, contributed to an addition of 286,000 new international paying subscribers in Q3. Having already achieved a total of 313,000 international subscribers, we fully expect to reach our year-end target of at least 500,000. Our coverage of Bundesliga and Europa and Conference League Football from our state-of-the-art studio together with our offering of 70 Viaplay originals have proven to be the sales drivers that we've planned for, and top the viewing charts as well. The partnership with Vectra, UPC and Play have already added a significant number of B2B subscribers. The Polish sports offering will be bolstered further with NHL Ice Hockey coverage from this month, the IndyCar motor racing from February next year, the English Premier League coverage from August next year, and Formula 1 motor racing from March 2023. The new Champions League, Europa and Conference League seasons have also boosted viewing and sales in the Baltics. And we will be the home of the UEFA National Team football in the Baltics from next year. Again the B2B deals with Tet in Latvia, Eliza and Estonia are contributing to the growth. The international revenue numbers remain low as it is early days and a large proportion of the Polish subscribers only came of free-trial periods late in the quarter. And to be very clear, in the early stages of our new country launches, we are favoring penetration over ARPU, especially in the markets where streaming penetration are at fairly low levels. We are investing to build these markets. For the year, we expect revenues of between SEK 50 million and SEK 100 million for the international Viaplay operations and losses, as previously mentioned of approximately SEK 500 million. Next up is the U.S. in December. We are well prepared for the launch with a very focused Nordics storytelling proposition that will bring around 1,400 hours of Nordic content to 130 million home market that we know loves Nordic storytelling. We will expand our long-term partnership with Comcast by making Viaplay's international content available on the Xfinity and Flex platforms in the U.S., and we will add other partnerships as we progress as well. Our direct-to-consumer app will follow in due course. Then is the Netherlands in Q1 next year with our strongest launch lineup to date and then the U.K. in the second half of the year. Both these markets will have our direct-to-consumer app from day 1. Our total Viaplay subscriber base then grew by 322,000 to 3,608,000 paying subscribers by the end of Q3. In what is a normally seasonally lower sales and higher churn quarter and in the first quarter with some expected post-pandemic slowdown, we still managed to grow the Nordic paying subscriber base by 36,000. We now have 3,296,000 Nordic subscribers, and we are comfortably on track to meet our year-end target of adding at least 400,000 Nordic paying subscribers this year. We have continued to see positive viewing trends and it's clear that the consumer behavior that has changed for good and demand for stream services is definitely here to stay for all generations. The subscriber growth in Q3 was as expected, primarily driven by B2B sales of the TM package after an initial boost from our coverage of the Euro 2020 in Denmark. Direct-to-consumer churn levels were stable overall with sports churn improving substantially as the new season of the English Premier League, Bundesliga and UEFA Club competitions all kicked off. Competition levels are increasing, but the profileration (sic) [ proliferation ] of streaming service is exactly what we've expected and will continue to contribute to the market growth and service stacking. At some point, of course, we do expect a number of services to consolidate and our role as a content aggregator to become even more important in the coming years. We have seen insignificant impact from the Champions League rights moving to rival platforms in Sweden and Norway. And we are about to launch the winter sports pack coverage with our extensive and exclusive Nordic and Alpine skiing coverage. This will then tee up very nicely for 2022 when we expect to more than double the level of subscriber acquisition. This will primarily come from the addition of direct-to-consumer and sports subscribers, both of which will be ARPU accretive. First up next year will be the Formula 1 rights in Finland from March and then the English Premier League football coverage in Norway from August, both of which are first on Viaplay. And we will also be adding the national team football in Sweden. We will introduce price increases for the sports packages next year as a result, and we are now working with our distribution partners in the Nordics to agree new long-term partnerships for both Viaplay and RV channels. We have concluded a multi-year deal with UC in Denmark and more will follow in the coming months. Viaplay's 15% organic sales growth in Q3 was driven by both volume and pricing. This will accelerate further in Q4 and into 2022 for the reasons I've just described. From a viewing perspective, sports viewing was down year-on-year, given the delayed finish to the leagues last year at the height of the pandemic. When excluding sports, overall viewed minutes on Viaplay were stable with viewing of our originals up 38%. 5 of the top 10 scripted drama shows on Viaplay were again originals, including all of the top 3. Swedish, The Truth Will Out; Danish, Face-to-Face; and Swedish, A Class Apart. The record-breaking Norwegian drama Pernille, which I mentioned last quarter, has received awards for Best Comedy and Best Actress in Norway, while Norwegian original Furia set a new record as the most-watched Norwegian original on the Premier. Our original movie Suedi has made a terrific start and is already breaking even more records as it looks to be probably the most successful Swedish comedy movie in a number of years. The originals are a key driver of both new sales and retention, which is why we have raised our ambitions even further. Locally relevant content differentiates us from the global streaming players, especially at a time when the number of new movie releases from Hollywood has been rather limited. We are broadening out the genres we are investing in to include more documentaries and we are including more feature films. And we are bringing exciting new series, such as the adoption of Astrid Lindgren's, Ronja the Robber's Daughter, that we do together with Filmlance, as well as David Tennant starring as Alexander Litvinenko in an upcoming joint production with ITV in the U.K., and multi-market premium content partnerships like the new one with Independent Studio Wiip will bring more and higher and more high-quality content to the platform. In Q3 we premiered 11 new Viaplay originals and we now have a total of 97 and 140 seasons on the platform. Another 14 shows will have been premiered by the end of the year, which will take us to a total for the year to over 50 originals. And as previously announced, we expect to premiere more than 60 originals next year. On the sports side, we have added to the rights that we bought earlier in the year and continue to focus on signing long-term and multi-country deals. In Q3 these included extensions of our Premier League, NHL, IndyCar and women's Italian football rights in up to 10 countries. We have now bought the major sports rights that we targeted for many years to come, which gives us certainty on cost and horizon and the opportunity to build a sizable subscriber base. It is also a unique portfolio that we can manage and optimize, providing options and leverage as we may not necessarily need to keep all the rights exclusively to Viaplay. This amounts of live sports content, more than 50,000 hours this year, which will grow to over 100,000 hours in the coming years is unparalleled in our industry, and of course relies on delivery by a very robust and secure platform. This is what we have and we continue to invest to further enhance the robustness and stability. The uptime or level of service accessibility of Viaplay was 99.98% in Q3 with a total of 12.88 billion streamed minutes on Viaplay in the quarter. We posted a video this morning together with the results announcement that includes an interview that I did with Kaj af Kleen, our Chief Product and Tech Officer, where he and I discussed the flexibility and scalability of our platform. So please do take a look if you have not already. Now turning to our other subscriptions business. Organic sales were up 1% in the quarter, mainly reflected the revenues we get from Allente as the wholesale distributor of our channels. A third of Allente's subscribers now subscribe to the V channels. And as I have mentioned before, all of our channels will be basic or premium paid channels in the future with no channel being free-to-air or relying solely on advertising revenues. TV 6 in Sweden, TV3 in Norway will be our linear TV homes for sports, including parts of the upcoming Alpine and Nordic skiing coverage. And we are working with all of our distribution partners to ensure that their pricing levels reflect all of the new sports trials being made available on the V channels in Q4 and throughout next year. Then moving on to our advertising business. The recovery in demand and spending levels continued. Organic sales were up 10% as we capitalized on the resurgence with each of the TV and radio ad markets estimated to have grown in Q3. Our TV audience share was up in Norway, down slightly in Sweden and Denmark with our radio audiences share was up in Norway, slightly down in Sweden. The consumer goods, entertainment and leisure and travel sectors raised their spending with us, while betting and gambling ad spending continued to decline as a proportion of total revenues. Sold-out ratios were high, which combined with the annual contract and spot price increases to offset the ongoing decline in commercial put or the linear viewing levels. And looking forward, we do expect the market to grow again in Q4, less so than in Q3 as the comps are getting tougher. Q4 last year was almost back to 2019 levels. Our organic ad sales for the continuous studio businesses more than doubled on an organic basis as Paprika, in particular, benefited from the returning demand and higher production volumes. Paprika now has 9 production offices across Europe. Our in-house production capabilities are now focused on creating original scripted dramas for Viaplay and have therefore been rebranded as Viaplay Studios and integrate into our content function together with our minority interest in London-based FilmNation in U.K. and LA-based studio Picturestart. Our 50% participation in the Allente joint venture is a significant value generator for us. Not only are they driving the penetration of Viaplay in the subscriber base, which now stands at over 70%, but they also will have paid us SEK 500 million in dividends this year, up from the SEK 400 million we previously indicated. The earnings contribution is low because of the nonrecurring integration costs and the substantial non-cash charges in their P&L, but it is expected to rise to approximately SEK 350 million next year with further cash dividends of approximately SEK 400 million. This is a business doing approximately SEK 6.8 billion of revenues a year with a 20% margin and healthy cash flows. So creating quite an equity value for us. In conclusion then, we made considerable further progress in Q3. There are many lessons to be learned from the pandemic, and we are adapting to new realities. Our offices have all now been reopened and we will be adjusted to even more social and collaborative spaces with our teams adjusting to a more hybrid flexible working arrangement. We have proven how effective we can be in a virtual setup with the tools and the networks that we have. But it's also great of course to meet up physically again face-to-face. And it is all around to find the right balance with. It's also quite clear that the accelerated shift in consumer behavior that we have seen is here to stay and it affects everyone. The preference for multi-device streaming and demand for high-quality content in different language have never been higher and are rising every day. The change in how, where, and when we work and watch is a good thing for our health, for the society and for the environment. Our new 5-year sustainability strategy and road map will be launched early next year and we'll include the science-based targets commitment to net zero and even greater transparency moving forward. The publication of our first TCFD report before the end of the year would be as a further evidence of this agenda. We remain committed to being the most inclusive entertainment company and to ensuring that we create and deliver the best content in the most responsible and sustainable way. Finally, I would just like to reiterate that we are well on our track towards our financial goals. We still expect our 2021 Nordic organic revenue growth to be within the projected 13% to 15% CAGR range. And for there to be some Nordic margin upside when compared to the 7.7% like-for-like levels for last year. On the international front, we have raised our investment levels, and we expect approximately SEK 50 million to SEK 100 million worth of revenues and approximately SEK 500 million of investment and losses for the full year. That's it for my initial short comments. So I will now hand over to Gabriel for his comments on our financial performance and position. Gabriel, over to you.

Thank you Anders, and good morning, everyone. Q3 was another strong and very busy quarter for NENT, in which we made progress on a number of fronts. We delivered 10% organic revenue growth with relatively minor negative effects on sales of SEK 12 million this quarter. We also had a minimal negative FX impact on profits of SEK 6 million and do not expect any significant currency effects in Q4. Our operating profits before associated company income and items affecting comparability totaled SEK 80 million and included a negative impact of SEK 200 million related to the international expansion of Viaplay. Our underlying Nordic profits when excluding the international expansion were up 60% to SEK 280 million. We have reinvested the majority of last year's cost savings into the Nordic and international expansion with total OpEx up 11% in the quarter and Nordic OpEx up 4%. We do expect further increases in the Nordic cost base in Q4 given the new sports rights, the increased investments in our growth and without the cost savings that we had last year. So there will be some, but limited Nordic margin upside when we compare to the 7.7% like-for-like level last year. We also expect higher losses for the Viaplay International operations in Q4 compared to Q3 and approximately SEK 500 million of international losses for the full year. We had no IACs for our continuing operations this quarter. We had a small SEK 40 million negative IAC charge in discontinued operations, reflecting the capital loss including transaction costs on the sale of the 12 remaining production businesses in September. The sale had a positive cash flow effect of SEK 412 million in the quarter. This marks the successful conclusion of the sales process that we announced last year. We have sold all of the businesses, including NENT Studios U.K. and Splay One for close to the SEK 500 million that we indicated originally and despite the disruption caused by the pandemic. This enabled us to focus our resources on the expansion of our streaming business, and we're pleased to have found long-term owners for these great businesses. Moving forward, the few studios that we have retained are prioritized integration of high-quality originals for Viaplay. External sales for these Studios businesses are therefore expected to be between SEK 50 million and SEK 100 million per quarter, and we are looking to potentially stop reporting them separately in the future. Our Allente joint venture has continued to perform well with revenues of SEK 1.7 billion in Q3. The subscriber base declined by 21,000 quarter-on-quarter in Q3, which was in line with the trend in previous quarters and ended the period at 1,068,000 subscribers. Allente's EBITDA before IAC of SEK 348 million was stable quarter-on-quarter has the margin of just over 20%. The JSVs operating income of SEK 103 million included SEK 138 million of integration cost that were reported as items affecting comparability. Allente has now taken SEK 423 million of the SEK 700 million of estimated integration costs this year, which will yield the SEK 650 million of full annual run rate cost synergies next year. The SEK 107 million of depreciation and amortization included SEK 83 million of PPA amortization charges that are running at approximately SEK 330 million per year. The majority of these charges are adjusted for deferred tax in the reporting, so have less impact on Allente's net income, which amounted to SEK 67 million in Q3 and contributed SEK 33 million to our associated company income. Allente's net income is expected to be negative in Q4 as the company terminates one of its satellite distribution contracts, now that the migration is coming to an end. Allente's total net income is expected to be under SEK 100 million for the year in 2021. Allente's cash flow and their ability to pay dividends is the key factor. We have received SEK 375 million of dividends so far this year, and we expect another SEK 125 million in Q4 and then a total of another SEK 400 million next year. Allente had a net debt of SEK 1.65 billion at the end of Q3 and a total long-term bank funding of SEK 2.4 billion. Moving on to our net interest and other financial items, which totaled minus SEK 8 million this quarter. This included some positive impact of exchange rate effects on the revaluation of financial assets. This will otherwise trend at approximately minus SEK 25 million per quarter, and you should still expect that the total for this year to be in line with last year at approximately SEK 100 million. Our effective tax rate in Q3 before IACs and when excluding our share in the net income from associates amounted to approximately 21%, and we still expect it to be approximately 21% for the full year on the same basis. Moving on to our cash flow. Our cash flow from operations including discontinued operations amounted to SEK 265 million in Q3 and included the SEK 125 million dividend received from Allente. The negative net change in working capital of SEK 986 million reflected the usual seasonal scheduling of sports rights payments, as well as our ongoing investments in new sports rights and our Viaplay originals. We are maintaining our guidance for a negative working capital change of approximately SEK 1.3 billion for the full year, which implies a small change in Q4, given that the cumulative negative change of SEK 1.2 billion for the year-to-date. Our net operating cash flow for the quarter amounted to minus SEK 721 million. We did end the period in a SEK 1.4 billion net cash position. We have no changes to our funding levels and structures in the quarter. Our short-term debt of SEK 0.8 billion comprises of a bond that matures in May 2022 and our long-term debt remained at SEK 2.5 billion. Our financial net debt of minus SEK 1.75 billion includes SEK 5 billion of cash and cash equivalents and SEK 3.3 billion of total financial borrowings, excluding lease liabilities and sublease receivables of SEK 362 million. Our net debt to trailing 12 months adjusted EBITDA ratio was there for minus 1.1x at the end of the period. Given the funding of our international expansion through the SEK 4.35 billion equity raise earlier this year, we are operating with lower financial leverage, and we now have a balanced and flexible range of borrowing facilities in place, including long-term corporate bonds, a currently unutilized short-term commercial paper program and undrawn revolving credit and overdraft facilities. As we said at the CMD, we are putting the money that we have raised to work in financing the expansion of Viaplay as we ramp up the investments now in Poland, the launch in the U.S. now in Q4, and then in the Netherlands in Q1 next year. So in summary, we have made great progress on many fronts in and in the first 9 months of the year. We have seen a continued recovery from the pandemic and an acceleration in the shift to streaming, and we have successfully capitalized on both of these sustained trends. We have a clear strategy, plan and a set of deliverables and targets that will create substantial and sustainable value, and we are well on track to deliver on this. Our recent CMD further raised the bar when it comes to our plans, financial outlook for the coming years. And we continue to have a disciplined capital allocation approach when it comes to how and where we invest. So that's it for my comments.

Great. Thank you very much indeed, Gabriel, and thank you, Anders, for your presentations. We are now ready to answer your questions, and we're hoping for as many of those as possible today as always. I will remind you again 2 ways of asking questions. [Operator Instructions] So I think for the first question today, that will come from Mikael Laseen at Carnegie.

A couple of questions. First of all, if you can talk about the ARPU for Viaplay Nordic and the revenue growth in Q3. So you had lower ARPU this quarter, but you have raised the prices on many products in Denmark, for example. So if you can sort of talk about the mix dynamics and reason for this?

Yes, Mikael, if I could start with that question. The ARPU is an effect of the mix in Q3. And we anticipated a slightly different balance going into the quarter. We have seen B2B being the dominant driver for Q3, which is all fine because it ramps up to increased ARPU over time. And we will be back to revenue growth ahead of subs growth in Q4. So it's a little bit of a timing matter of how these contracts play into the P&L. Direct-to-consumer has been more or less as expected, B2B a bit stronger, hence, the mix impact and the impact of ARPU. But again, expect that to go back to the reverse situation in Q4.

I think, Mikael, you had a second question as well.

Just a follow-up on that. You mentioned, I think, that Champions League, the effect of that is very small. So if you can explain that, please?

Yes. We have been very happy to have the Champions League on our platform for many, many years, as you know and still do in a number of our markets. What we have seen over the years is that it's more a driver for traffic to the linear channels and in distribution for the pay-TV channels rather than a subscription driver for the streaming platform. And it's on the basis of that, that we decided to not invest any further in it in Sweden and Norway because of the cost inflation. And this has proven to be exactly the case. It is a fantastic property, but there are linear TV obligations in it. And there is also a way of consuming that makes it less suitable for driving subscriber growth compared to, for example, Premier League, which we for this year show all the matches on. So that has more than well compensated for Champions League moving to rival platforms. And I think that was, in hindsight, a good judgment call on that particular sport right.

My final one is on Poland. If you can talk about sort of lessons after a couple of months. What you see in the market and maybe update on distribution possibilities that you have? And maybe also talk about the subscriber behavior in Poland now after a couple of months and also how many non-paying users you have or subscribers that you have not sort of listed or reported as actual subscribers?

Yes. Thanks, Mikael. With the 313,000 paying that we report for the full third quarter and what we see in sign-ups and conversion of those sign-ups to paying, we are well on our way to the SEK 500 million, at least SEK 500 million that we've guided for. So sales and sort of the pull effect in the market continues to be strong. It is a market with lower penetration, and therefore the distribution agreement with the likes of play UPC and Vectra are very important for us. And they are working very actively to get subscribers activated, and we see high activation rates. It is a sports-driven market, so the usage share is very much linked to the sports events. But it's also a market where the interest is super high. And we can see sign-ups ahead of one example, the Legia Warszawa, Napoli game earlier in last week where we saw a fantastic ramp up just before the game in direct-to-consumer sign-ups in a way that we don't normally see in more mature markets. So the market is warming up to the fact and the convenience of streaming. So very, very exciting. Despite some of the sports dominance in Poland, I would like to mention that we managed to get Nordic-original content on the top 10 list of most-watched non-sports content as well. So that is very, very strong. I've been quite bullish around the opportunity in Poland since the beginning, and I've seen no reason to change that approach and view.

Then we're going to take the next question from the message board. Actually, it's one for you, again Anders. It's from Tom with Citi.

Can you talk about the composition of the international net adds? What proportion of B2B versus D2C? This is quite a few questions in here. It is obviously early days in terms of monetization. But is there anything you can tell us about how customers are reacting once they come off the free trial periods?

As I mentioned in the previous question, it is a B2B driven market. And the mix, while not sort of being able to give you the exact mix, it favors B2B for sure. Direct-to-consumer has been in line with our expectations. And from time to time, as again, just mentioned, it actually sort of quite encouraging to see how fast people can ramp up and sign up, but still early days. It is B2B driven. And there is a mix effect in that, that we will see in the coming quarters. But for us, coming as a new brand to new markets, with a new way of broadcasting and streaming content that most households in those markets are not so used to, penetration is everything. We need to get into those households. And we have made deals with the distributors that allows sort of them to work in a cost-efficient way to get people excited in the beginning and then revenues ramp up over time. So the funnel supports our revenue growth and the more penetration we get, the higher growth we will get in the coming quarters and years. So therefore, we are confident that we will hit SEK 50 million to SEK 100 million worth of revenues for the full year and then see considerable additional growth next year. Remember that in Poland, on direct-to-consumer, we opted for a full month of free trial to drive a lot of excitement in the market. We may do things different in other markets. So it is a little bit of the way of guiding ourselves through the best way to get penetration and market share.

One for you now, Gabriel, actually, which has to do with the Allente dividend. Now given that's higher than previously indicated, should we now be expecting SEK 500 million for next year? Is that the new normal? How should we think about that?

No, I think you should expect more than the SEK 400 million that we have guided for. Allente also has to do some repayments of some of the debt next year. But with the SEK 650 million of cost synergies that we expect them to deliver, they should be well under on their capacity to pay the SEK 400 million.

We're going to go back to telephone lines now. So the next question comes from Omar Sheikh with Morgan Stanley.

I've got 3 questions if I could. So first of all on Poland, Anders, if you could just give us a sense of, if we look into Q4, what are your expectations for Poland net additions? What's the mix likely to be between D2C and wholesale. Some comments on that would be helpful. And then thinking about the U.S. and maybe even on the Netherlands, could you maybe just flesh out a little bit or talk a little bit about your distribution plans in both of those countries, how you progress? You've talked about Comcast, for example, in the U.S., but are there any other options that you may be looking at ahead of the launch in December? And kind of certainly on the U.S., can you give us maybe some commentary on what you think about initial sort of subscriber expectations? Obviously, not for this quarter because the launch is quite late in Q4, but sort of in the first sort of couple of quarters, how are you thinking about that. So that's on the international. And then just finally on the Nordics. We've all seen the news about HBO Max launching in the Nordics and the price points that they've announced. Could you maybe just talk a little bit about what impact you might expect if any on sort of the competitive landscape in the Nordics?

Hopefully, I managed to get through them correctly, but we'll revert back if I miss something. If I start with your first question on Poland and what we expect for Q4, as you know we don't give exact numbers for the various markets. But the remaining growth this year up to the at least 500,000 that we expect will come to the greater extent from Poland. The mix will shift slightly to be more direct-to-consumer driven than B2B. B2B plays an important role. And we know now we have good line of sight to the kind of volumes that we get, but we have seen increased engagement on D2C. And then there is some variables in that depending on how the various sports leagues play out. And as an example, how well the Polish teams are doing in the UEFA leagues. But a slightly different mix that favors the ARPU lift up, some money flow in from the distribution agreements gives us sort of a good ramp-up on ARPU and revenue growth in Q4. And again, it will be driven by Poland. Baltics are trading well, but on a very stable basis and fairly small markets, as you know. When it comes to our distribution approach to the U.S. and Netherlands, starting with the U.S., you mentioned Comcast. We will be available at launch, which will be mid-to-late December, so not much volume to be expected for this year. We will be available on the Xfinity platform and the Flex platform, and that's a 15 million household penetration that we get from day one. And then we of course have to work with them to get a decent penetration. I have modest expectations in the beginning because we are coming with a very specialized offering that will then grow over time. And we do have plans for additional partnerships. And then we are ramping up towards the direct-to-consumer launch as well in the U.S. So U.S., as you know, of our total sort of venture into new markets, U.S. big as it is, and it's a very, very attractive opportunity, we'll grow safely, but surely as people's appetite for new content growth. So that would be a small part by all things considered of the contribution next year. Netherlands is maybe our most forward-leaning market when it comes to the proposition, the ambitions, and we are in good talks with local potential distribution partners. And you should expect us to announce distribution partner agreements before we launch. And we'll come back probably before Christmas with the price in Poland and with the launch date and hopefully then also with some distribution agreements. So it's building up very, very, very nicely. In the Nordics, competition is fierce. HBO Max is coming, like you mentioned. So that's HBO Nordic becoming HBO Max with all the Valiant Tales. And I'm a big fan personally of HBO's content. I think they're doing fantastic things. But I also think that we're different. And I think the fact that they come to market with something that is slightly different and slightly stronger is a bigger problem for some of the other U.S. platforms. Where it does impact us is of course that the ability to create top of mind with the consumers and the space available to do marketing is getting more and more narrow because there's so much going on out there. And that is something that we just have to deal with in terms of clarity. How are we different? And this is where our sports and our originals, of course, play an absolutely crucial parts. A number of the new originals coming on on-stream in Q4, some of them pretty big ones and second season on some successful ones. So I'm pretty confident that we will be able to stand out. But HBO Max, I'm sure they will do well. They have great content, but they are different than we are.

A question for you, Gabriel, from the Message Board. The working capital profile next year. Obviously, we see these big seasonal swings that go throughout the year. Would you expect a similar sort of pattern as we head through 2022? Or will the kind of acquisition rights and the sort of profile of the organization mean that it could change moving forward? What would you expect?

Well, we have guided for the big change next year on the back of the investments that we're making in international, then we have the big ramp-up also of the new rights, especially when it comes to the Premier League, the new contract. So the impact next year will be higher. And as we also discussed at the Capital Markets Day, we are continuing to increase our ambition when it comes to originals. So we still expect the peak change next year that we guided at CMD. And the profile will continue to be primarily driven by the sports and the second element is the originals, which is driving the change, both driven by -- and when it comes to the sports, Nordics, but also international, as we also get the new rights, the Premier League rights for the new markets.

And the phasing during the year, which I suppose is the, especially the analysis?

Yes, the seasonality will probably -- if you have seen the profile in the Nordics, you should expect that the seasonality will continue to be the same. Obviously, when we move into the new season in Q3 next year is going to be the big impact as we move into the new contracts and we add more markets when it comes to the rights.

[Operator Instructions] And also the tab at the top right-hand corner of the webcast window, we're keen to take as many of your questions as possible today. So next up on the phone line is Jamie Bass from Berenberg.

I've just got a few quick ones. So on the international expansion, considering the growth you've had in Q3, are you expecting a slowdown in international subs growth in Q4? Or is that 500,000 international guide looking quite conservative at this point? Then on the Nordic growth in Q4, are you expecting a material impact in terms of the mix between B2B and B2C from the winter sports rate? And finally, just on the Netherlands, we've talked a lot recently about the rumors of ridiculously high pricing for Viaplay who just watched the Formula 1. Are you considering to address that or if you're expecting to announce the price point before Christmas? Are you just expecting that to deal with the issue when you do announce the price point then?

On International and Poland we've had a great start. And as much as I would like to see the same pace going to Q4, it's fair to assume that some of the early push has been sort of captured and it will be a slightly slower in Q4. But then again, it depends on how some of these sports leagues play out, and we have seen considerable interest when things are going sort of the right way. Now what is very positive with that is that we have also seen now from the early stages when Bundesliga started that people stay. So the commitment to stay and to continue to consume is high, which is very good. So churn is on low levels, conversion is good. With a little bit of good fortune and push into Q4, we could potentially sort of beat the 500,000, but I wouldn't be too bullish on that number. We're still building and making that market. When it comes to the Nordics and the opportunity on winter sports, it is considerable, and we're making a significant investment in the viewing experience, utilizing Viaplay's full suite of capability to create something completely new for the fans of winter sports. But it's also a new segment that we're targeting in the market, and we're starting to use our linear channels, TV6 in Sweden and TV3 in Norway, quite a lot to drive the interest from those who are used to consume 99% of winter sports linear over to Viaplay by embedding a lot of the benefits of the winter sports. And then we are looking at our package structure. So we do have a couple of cards up our sleeve related to winter sports when it launches in November. That will drive some growth and will be accretive to especially the D2C growth in Q4, hence, the mix change that I mentioned earlier. But really, really excited to see how the winter sports packaging and the new services will be also received by the consumers. It's looking absolutely smashing. In Netherlands, we're looking to announce a launch date, so we'll start sign-ups well ahead of the F1 season next year, and we will announce the price. And the concerns that we know are there when it comes to high prices in the Dutch. In the Dutch market, I think we will ease those concerns with a very attractive proposition, both at start and then over time, up to we add more sports rights later in the year. It's going to be a very, very competitive and attractive proposition. And we will tell the market hopefully before Christmas.

We've had 2 questions, Anders, from [ Mel Olson ] at Media Watch. One relates to whether there will be any more distribution deals done in the U.S., which I think we've already addressed. The second one is about the distribution deals in the Nordic countries and how important a role they will play in Viaplay's subscriber growth moving forward and what the status of those is?

Yes, it's a good question. I mean we are strong believers in working with the distributors and the established ecosystems to both further drive penetration and relevance for the linear channels and then combine that with working together with Viaplay, because we both see where things are going. We get more from the streaming market and the distributors need to start to move over to a more streaming-led proposition rather than a multi-channel proposition. Those discussions are doing very well. And as I mentioned during my remarks, we just signed a new multi-year agreement with UC in Denmark that includes a significant Viaplay component. And that allows them to slow down the decline in traditional TV packages and then favoring streaming instead. We'll do more of that in the coming years. So we have a number of such discussions going on with the distributors.

And then one for you, Gabriel, from the Message Board, which relates to the short-term debt. We see that there's a bond maturing in 2022. What are the plans regarding the refinancing of that and how the debt profile will look beyond that point?

Yes. We are looking into the funding for next year, considering that we have raised -- that we did a capital raise earlier this year and have plans to potentially renew that bond, but it's still under evaluation, dependent on the level of investments that we need for next year. But the hypothesis is that we will renew it.

And then the next question is from Martin Arnell at DNB Markets. This again is in the massage board, so I'll read it out for you, Martin. And for you, Anders, I think. What will be the magnitude of the price hikes for the Nordic sports packages? Will they be similar to changes seen in the past when you've added incremental sports content? And then there's a second half of the question, but let me leave you to answer that first.

The short answer is no because we are thinking about our future slightly different. Back in the day when you had new -- you just add sort of the incremental cost. And then at some point, you hit a sort of a ceiling for how much people will actually tolerate in terms of price increases. I don't think we are there yet. But we need to start to think about how we package our content. We have so much of it. So you can think about sort of both price increases to get everything, but also potentially new packages on how to access parts of the content that will then drive ARPU growth in the mix as a whole because it is ultimately about moving people from traditional ways of consuming the content over to streaming and to give a reasonable amount of freedom of choice in that. So it's not just going to be bolt-on incremental price increases. We're aiming to be a bit more sophisticated than that.

And then the second half of the question, which is in a similar sort of vein in different countries. Could you elaborate on the Viaplay initial pricing level for the Dutch market? And here, Martin's making assumption, how long do you need to stay with a low entry price before you can raise it?

Well, there's been some concerns in the Netherlands that we will come with our Nordic pricing to a country where prices are significantly lower. So of course, we can't do that. But we're also mindful about building something that is sustainable. So while we are favoring penetration ahead of ARPU in the beginning, Netherlands is slightly different markets than Poland, it's higher penetrated, slightly more mature when it comes to streaming. So we will adopt a slightly different approach in the sense that we will establish a very attractive price for the service, but it will also be a price that we can live with for some time. So we don't have to go in too low early and then increase a lot along the way and create assessment in the consumer base. But as I said, I think it's important that we're in a controlled way, talk about both sort of that this is the launch date, this is the way you can access the content with some distribution agreements announced and a price point and all of that hopefully before Christmas.

Another one for you, Gabriel. On the studio side, so we successfully disposed or found new homes for a number of the studio's operations, now that what we have is so focused on Viaplay and the creation of the scripted content. Can you see with your other hat on as Head of M&A, a scenario where we might be adding additional studios over time is adding complementary content creation business as a possibility for NENT?

Yes, we have deliberately reduced our exposure to the studio businesses because of the profile and because they didn't really fit our streaming strategy. So it is not a priority for us to look at M&A in that area now that we have just been disposing off these assets. We will though continue to invest in this studio businesses and more on organically, so scaling up the operations as we continue to scale up the production. But we don't expect any significant M&A unless there's an opportunity linked to a specific IP, but otherwise you shouldn't expect us to go on a shopping spree for new studios, no.

Just to remind you all, again. [Operator Instructions] I think we have another one for you, Anders here, which is, the Dutch opportunity is clearly massive. I mean, we've seen with the success of the Staffan again this weekend just a sort of count following that he is developing. When you think about the subscriber targets that we have now over the next few years, how big a role is Holland going to play in that? And how quickly is that going to happen? Because it seems like it gets a very good start with so many strong sports straight out of the gate.

Even if we go long back in our history, we have never been this strong at the start of any race, so to say. So I'm fairly confident that Netherlands will ramp up to be one of our largest markets quite quickly. That's the best way to describe it. The content proposition, the very creative market where we can work with the creative community, the partnership discussions that we see now that are very encouraging. So while it's, of course, painful for many to experience that we're coming into the market with something new, they also recognize the benefit of driving change in the markets. So I'm very excited about Netherlands. -- as I am about Poland, but they are different. And we're making a market in Netherlands. We're changing a market -- sorry, in Poland, and we're changing a market in Netherlands, and they're both very attractive but different.

Okay. And just switching lane a little bit here, sports documentaries, I mean we've seen how successful those have been in a number of different environments. Is that something which we should expect to see more of from NENT moving forward?

Yes, absolutely and some pretty big ones. We do have some discussions ongoing with some of the really large rights and IP owners to do multi-market shows. And this is really about footprint and multi-markets. And we are one of the most significant partners now for the likes of F1 and Premier League, Bundesliga, NHL. We're producing content that is linked to some of these sports. So both sports scripted and unscripted such content. So sports will play a role in various ways in our proposition, and that is really, really exciting to do. And it's also necessary to create sort of new followings and to revitalize some of these rights. The documentary drive to survival around Formula 1 is of course fantastic because it created a new fan base that wasn't there before, and it builds all directly to the F1 value and the interest in the race. So yes, very, very exciting opportunity.

And then we've got some COP26 coming up this week. So when we think about the broader world and the commitment that we have to sustainable development as a company. When you think about climate change and when you think about Nordic Entertainment Group's footprint, growing international expansion and sustainability agenda more broadly, what do you see as the priorities and the impact that NENT Group can make in that area?

Well, I think we start with environmental impact, it is something that is growing a lot. And I think the learnings that we've all drawn from the pandemic is playing a big part in that. We see now firsthand that we can change how we do things. 2 years ago, there was very few discussions around green productions. Now it's a theme in the industry that is really being driven. How can you reduce sort of the impact of producing high-quality content, whether it's by using tech differently, traveling less, working with new ways of deploying sort of the service in multi markets. That is something that I think is both a great opportunity and a responsibility where we can start to really drive the agenda. So it is definitely growing for us, and it is something that I'm excited about the opportunity. We've been excited about the opportunity when it comes to introducing more diversity and inclusion in the productions. The environment will play a bigger part going forward as well.

Thank you very much. I think that does actually close the Q&A session now. So thank you very much indeed for all of your questions today. As usual, if you have any follow-ups, you want to ask, please do you come to me and Joel or any of the team for that. We thank you for your time. We thank you for your questions. We will be hosting digital roadshow meetings today and tomorrow and look forward to speaking and seeing as many of you as possible at those. Do come to us with any call and requests, I hope you've enjoyed this new type of Viaplay original today, the key report from the studio. And that is it for today. Goodbye for now, and hope to see you very soon.