This analysis was first published in SvD Näringsliv, in Swedish, on October 24th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Crisis-hit Viaplay is crashing on the stock market after failing to deliver its quarterly report on time. Fraught negotiations with the new owners have added more disorder to an already difficult situation. But there is one conceivable solution.

“The situation is complex and takes time because we have several stakeholders,” says Viaplay CEO Jørgen Madsen Lindemann.

The word “complex,” however, does not quite do justice to the situation. Streaming company Viaplay is under enormous pressure — from the outside world, from partners, and now from its own owners. And on the stock market, the share price is in freefall.

The company’s quarterly report was due to be released on Tuesday, but late on Monday evening the board decided to push it back by roughly a month. The stated reason is negotiations with some of the largest shareholders about how the business should be financed going forward. The fact that they have not reached a conclusion in time to meet the market says something about how difficult those negotiations are.

There are three primary problems to manage.

The first is a structural crisis in the streaming market. The growth of new customers is over — it is now about taking market share from competitors. That may sound unremarkable, not unlike many mature industries, but this is not a situation Viaplay has had to navigate before. The company does have conventional broadcast TV operations too, but it is streaming that the market is counting on for the future. If that stalls, Viaplay stalls too. With competitors like Netflix, Disney, and Warner Bros. Discovery, this challenge will not be easy. If Netflix — with its global reach and enormous resources — cannot solve it, Viaplay is unlikely to fare better.

The second problem is the existing commitments the company has made. What primarily drives subscription sales in the Nordics is sports rights. The service that offers Premier League or Champions League will attract a large influx of customers. Viewers are, however, more loyal to their favourite clubs than to the service broadcasting the matches. Long-term contracts with rights holders are therefore signed to retain those newly acquired customers over time. Viaplay has won several of these negotiations and secured very attractive sports rights.

Over the next three years, Viaplay must pay 38 billion kronor in costs for these rights. Last year the entire company turned over 15.6 billion kronor, and its market capitalisation at the time of writing is around 1.8 billion kronor. On top of that, there is a currency risk: the contracts are written in dollars and euros, and the Swedish krona has fallen since they were signed.

To be able to enter commitments of this size requires financing — and through that, bank guarantees. This is likely where things are getting uncomfortable for CEO Madsen Lindemann. If the banks become uncertain about whether Viaplay can honour these obligations under the terms of the agreements, it could trigger a restructuring. This is where strong, supportive owners are needed — which brings us to the third problem: the ownership structure.

Just over a month ago, Norwegian media owner Schibsted bought into Viaplay. They took what is known as a “corner” — just enough shares to make it impossible to sell the company without them at the table. Schibsted now owns 10.1 percent. French group Canal+ and the Czech fund PPF were already on the register. Getting this disparate group of owners — who may each have entirely different interests — to agree is, to say the least, a challenge. Not only is Viaplay under pressure and in a weak negotiating position; those sitting on the other side of the table may have completely different views on how to resolve it.

On the horizon, there is one conceivable — if very difficult to execute — solution for Viaplay. If Schibsted takes a more active role and finances the company, there is a consolidation to be done in the Nordics. Telia has been trying to sell TV4 for some time, but there are few buyers in this market. Merging Viaplay and TV4 would solve two problems at once: it would end the bidding war for sports rights, and allow for shared cost reductions. A new Nordic TV giant would be created, with Schibsted as the majority owner. Schibsted is rumoured to be on the verge of selling its stake in the marketplace company Adevinta, which would give it substantial capital to deploy.

There is still a long way to go before such a deal could take shape. Whether competition authorities in the various countries would approve it is also highly uncertain. But it may be worth attempting. Because Viaplay needs change.

Footnote: Svenska Dagbladet is owned by Schibsted.