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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good afternoon, and welcome to MTG's interim report presentation for the second quarter. My name is Lars Torstensson. I'm responsible for communication and IR here at MTG. Joining me on this call is Jørgen Madsen Lindemann, our Group President and CEO; and Maria Redin, CFO of MTG as well. We will start with a formal presentation followed by a Q&A. Please keep in mind that questions are only enabled for those participating through our dial-in. Our webcast is listen-only. That concludes my introduction. Please, Jørgen, can you take us through the presentation of our quarter?
Yes. Thank you, Lars, and a warm welcome to our second quarter results conference call. I hope everyone on and off this call is doing okay despite continuing difficult circumstances. The corona pandemic is still heavily affecting the world and our industry. As expected, it also had a clear impact on MTG in the second quarter. I must say I continue to be very impressed with how our companies and our teams are performing under these uncertain and extraordinary circumstances. The safety of our employees, teams, fans and partners remains a priority as the pandemic remains very real.We have, during the quarter, made relevant long-term operational adjustments in both our esport and gaming verticals, invested to move the business forward taking a broad range of other proactive actions for the long term, which includes measures to preserve financial health and investing into new opportunities. We see clear positive results from our efforts, which will make us even stronger and our products even more relevant as we eventually move towards a more normalized business environment. So let's move to the highlights of the quarter. If you go to the next slide, we delivered a record high performance in the gaming vertical, both in respect to revenues and profitability. This, as we have seen more people enjoy our games and also spending more time and money on them, while playing during the lockdown. InnoGames was the key driver of growth. On the back of marketing, the company saw a strong inflow of users, combined with reactivations of old customers and also overall increased activity within the user base driving increased spending. It should be noted that the operational trends that peaked in April and May was more normalized as we entered into June, much because of societies opening up ahead of the summer. Our esport vertical continued to deliver on strategic objectives to professionalize the commercial part of esport by onboarding more partners to our tournaments and performed better than anticipating compared to the financial guidance for the first half of 2020 that we gave earlier this year and significantly improved losses compared to previous quarter and last year. We saw an increase of media partners in the quarter and ESL enjoyed close to 50% increase in media revenues, growth in ESS revenue and stronger performance from our online B2C product, supporting the operational development in the quarter. Moving from revenues to cost control. Equally important, both ESL and DreamHack delivered on our own expectations in the quarter reducing cost significantly, mostly related to events becoming online, but also reviewing the fixed cost base, taking the opportunity to review the -- our organizational setup and how we operate. Throughout the history of MTG, we have been prudent on our capital structure. So we are ready to capitalize and invest in changes in the landscape and in consumer behavior with -- which we see these days. Therefore, it is pleasing that we have been able to maintain a very strong cash position throughout the coronavirus pandemic. To move on to esport, you can see that the revenue for the esport vertical has been negatively impacted by the pandemic, and we have quickly adapted and changed to ensure business continuity and performance and delivering on our strategic agenda. This has been done primarily by successfully converting live and physical esport events to online, making sure that we show -- that the shows goes on in a way that is responsible towards all our stakeholders. Sales declined by 18% in the first half compared to our assumption of a decline between 25% and 35% with owned and operated seeing a decrease by close to 35% in the quarter. On the positive end was esport services that grew with 15%. Equally good when looking at the revenue mix was media rights that grew by almost 50% for ESL in the quarter, providing growing reach for the vertical. Also, our emerging B2C product showed good development. In the quarter, we made sure that esport as entertainment form continued and expanded its online presence, DreamHack was able to follow-through with their Master property, but not their summer festival, while ESL had a busy quarter with 4 Master properties. The fans have been very engaged, leading to all our 5 Master properties delivering very strong KPIs for the audience and audience engagement across the quarter. With this comes bigger reach and more commercial relevance. Overall, esport has proven in the second quarter that it is compelling and convincing media product. And not to forget one of the few sports, which continue to be live when many other sports, unfortunately, have to come to a pause. During and following the end of the quarter, we have secured several new partnership deals. DreamHack also teamed up with Epic Games to launch a new Fortnite tournament series. This tournament would be performed as an open tournament for North American and European players with a monthly prize pool of $250,000 and an aggregated prize pool of $1.75 million. For esport services, several key deals have been closed. One big highlight is DreamHack's agreement with Psyonix to be the production partner for Rocket League Championship Series X. Owned and operated continues to be the biggest part of the revenue. However, our revenue pipeline is taking a hit due to many brand partners are holding back on their spendings due to the impact of the pandemic had on their business. On the positive end, we still have been able to secure new contracts, even though this growth has not been the same as under normal circumstances. Among them were contract with Mastercard and Barclays Bank for our U.K. National League of Legends championship tournaments, with BBC Sport as a broadcasting partner. Telia Company joined, as earlier mentioned, as sponsor for the Nordic League of Legends tournament, just to mention a few. As said, media revenues has really developed well in the quarter. On media partnerships, we have seen solid progress across the quarter with Twitch, Huya and BBC Sport deals as a highlight.Let's take a closer look at our B2C services that had a good development in the quarter and is an emerging revenue stream for us, if you go to the next slide. Our B2C part of the business have seen an increasing interest amongst fans to play online and participate in smaller amateur competition as a result of the pandemic. On the back of this increased momentum, we assume that the B2C will come close to SEK 100 million revenue in 2020, which makes us a relevant player also in this space. As a result, when looking at our B2C business, such as ESL Play and our Counter-Strike subscription services here, and our partnership with Sony PlayStation, they have all seen record-breaking engagement from users during the quarter. And during the pandemic, DreamHack has released a new series, Community Clash tournament in multiple titles such as League of Legends, Valorant and Counter-Strike. We will continue to develop and invest into our B2C experience and further online capabilities to make us even more relevant to fans also when not arranging large and world-leading esport events. ESL's broader B2C platforms, ESL Play and ESL Mobile, are being transformed into a new multiplatform hub system. The hub system will have 2 docks that allows for a more scalable B2C product, leveraging the unique ESL experience and transforming the ESL B2C product to a story and tech-focused community builder. The first stand-alone hub would be released for beta testing already in August.Today, we already offer advertisement, publisher-funded and subscription-based B2C products, being one of the global leaders in this segment. There is a clear opportunity and focus to further leverage our strong esport brand, ESL and DreamHack, through coordinated events and new storytelling through our new and soon-to-be-released multi-platform hub system. If we then move on to the gaming part, the gaming vertical delivered a record quarter with an organic revenue growth by 15% and adjusted EBITDA by -- growing by 13%, including significant investment into marketing. There's a coronavirus effect when it comes to the increased overall time spent on mobile games, downloads and use of browser games, when looking at the weeks for the lockdown in variation -- in various countries and following a more open society. InnoGames showed strong performance in the quarter, at the same time as investing heavily into marketing to support future growth. The positive development was driven in part by effects of the ongoing coronavirus pandemic, which led to increased gaming. This resulted in higher daily active users, DAU, average revenue per daily active users increased, ARPDAU, growing by 10% and 17%, respectively, compared to the same period last year. In June, the operational trends started to normalize as locks down globally were gradually rolled back. However, we expect that the DAU KPIs will remain on an elevated level also going forward. Kongregate was impacted by 2 third-party games no longer being part of the games portfolio in the quarter as part of the company's focus on long-term profitable partnership. The company introduced 3 new games to the market and 1 additional title, Teenage Mutant Ninja Turtles, will be released during the second half of the year. Different to InnoGames, Kongregate has been negatively affected by the pandemic due to lower ad spend and their games have more of a commuter character. In the gaming vertical, we have continued to develop existing and new gaming products pipeline. And even though home office, we have not experienced any productivity loss. Kongregate launched 3 reskins of Idle Frontier and preparing for the launch, as I mentioned, of Teenage Mutant Ninja Turtles in Q3. InnoGames launched 2 new games in the quarter with promising results and have another 2 coming up in the second half of the year and current plan is to go live with the first game in Q1 2021. So with that said, over to you, Maria, to walk us through the financials.
Thank you, Jørgen. We ended the quarter with higher sales than previously anticipated on esports side, driving overall group sales to SEK 1.1 billion. Sales were flat year-over-year also on an organic basis, as there was only minor impact this quarter from foreign exchange rates. As was seen on the Q1 call, gaming had a very strong quarter and increased its proportion of revenue contribution in the second quarter and accounted for nearly 70% of the turnover, which is also in line with the outlook for the remainder of 2020. Adjusted EBITDA almost doubled year-over-year with improved performance in both verticals, combined also with lower operational and central costs. And if we then look further into the reduced losses in esports, we delivered on the communicated SEK 150 million savings target, this primarily through cost savings as we moved all segments online, while also incurring limited cost -- sunk cost in this quarter compared to Q1. We also ensured that we had some limited one-off fixed cost savings in the quarter. The financial performance in the quarter was further positively impacted by the growth in media rights, providing a more favorable revenue mix, combined with the positive ESS development in the quarter. As I just mentioned, esport did benefit from temporary savings in Q2, and we do expect the cost savings will continue also in H2 as long as we run events online only. And we are at the same time working on identifying more permanent savings that we are reviewing our way of working within ESL and DreamHack, and we will come back to you with more details as we concluded our work. The EBITDA adjustments in the quarter amounted to negative SEK 63 million to be compared with negative SEK 27 million last year. And as you might have noticed, that the cost for LTIPs was again elevated this quarter, and this follows the strong result that we see in the gaming vertical on back of the coronavirus pandemic. Depreciation and amortization was slightly higher in the quarter compared to last year. That is reflecting higher depreciation within the gaming segment as we both launched and acquired new games, which we are depreciating the backup, partly offset by lower depreciation in esports and the amortization on the purchase price allocation was flat in the quarter. Net financial items were adverse in the quarter. This is predominantly driven by exchange rate changes, and they are mostly unrealized. One should remember that we have our cash balance predominantly held in euros, which means that the recent strengthening of the SEK, we do see a negative impact in this quarter. This is, therefore, reversing the positive effect that we saw in Q1. If you then turn the slide to the cash flow statement. On back on the strong financial performance, the group reported improved net cash flow from operations of SEK 121 million. This is driven by InnoGames, but also the much improved performance within the esports vertical. CapEx was lower in the quarter compared to last year, which was mainly driven by Kongregate's acquisition of Bit Heroes last year. There are currently 6 games in development within both InnoGames and Kongregate, and we also did invest in studio buildup, the B2C platform development within ESL. The 2019 dividend to the InnoGames minorities was paid in the quarter and subsequently reduced the group cash position. If we exclude this dividend, the group did have a total net positive change in cash in the quarter. The group remains well funded with a net cash position of SEK 1.6 billion as of Q2 2020. The gaming continues to be the cash flow contributing entity, and we are working very focused with esport to optimize the current cost structure and also to minimize the cash outflow. So that concludes the financial review. Hand back to you, Jørgen.
Yes. Thank you, Maria. And if we take the next slide and we look a bit ahead, we expect that the ongoing coronavirus pandemic will continue to impact our 2 verticals, but again in different ways. Esport will see further commercialization during the remainder of the year, with media rights continuing high double-digit growth rates. Even though brand sponsorship as a contributor is impacted in the current environment, the interest around esport remains, and we do expect further strategic partnerships to be secured for the long term. Most esport events will remain predominantly online for the remainder of the year, and our expectation is that we will be able to host physical live events as of 2021, if and when this can be done under safe condition for fans, teams and partners and employees. It should be noted that the third quarter only has 1 Master property, something that, of course, will impact the short-term revenue development, while the fourth quarter will be very intense with as many as 6 Master properties, with 1 being the CS:GO major. We have moved as many events as we could into Q4 or beginning of 2021 to cater for a prolonged pandemic environment. As a result, the seasonality in the second half of the year will be significant. Looking at the revenue composition, our view is that owned and operated will sequentially improve versus Q2 in the second half, fueled by media rights, offsetting some of the decline we are experiencing in brand partnership. Further, contrary to the highest growth experienced in first half in ESS revenue, we do expect a higher decline of that revenue stream in the second half. Gaming, on the other hand, would largely operate at an elevated performance level, thanks to the strong inflow of customers that occurred in the second quarter. That said, we expect a more normal growth pattern for the remainder of the year with marketing investment being more balanced versus last year. If we then move on to the guidance on the back of this, we are providing new guidance for the second half of the year. This new guidance reflects esports remaining online, as I said, for the rest of the year without any physical live events. It also takes into account maintained or even increased run rate savings that we saw in the second quarter. Last but not least, guidance for the second half also reflects the strong performance of gaming, providing support for the overall group's operational results. So to sum up things for the quarter, despite the pandemic, record delivery by gaming and relatively strong performance by our esport vertical. Looking forward, we expect esport to remain online for 2020 and physical events to come back in '21. We continue to push on our strategic -- on our strategy, and we see we have an opportunity to move our position forward in both our verticals, that's despite the challenging circumstances we are in, a strong position that allow us to plan ahead. We continue focus on business continuity, operational efficiency and sizing of new business opportunities. So that concludes our formal presentation.So now over to you, Lars, for Q&A.
Thanks, Jørgen. That ends our formal presentation for the second quarter of 2020. And we are now ready to take any questions that you might have. So operator, could we have the first question, please.
[Operator Instructions]
So operator, do we have any questions? I can see that we have one from Tom at Citi.
Yes, sir. Your first question comes of the line of Tom Singlehurst.
It's Tom here from Citigroup. I had a couple of questions on esports. Firstly, sort of looking backwards, you mentioned there had been a little bit of weakness in sort of sponsorship revenue. And I suppose that makes sense on one level because, I guess, a big part of the experience is the live environment. But I'm just interested why it wasn't necessarily able -- you weren't able to transfer that revenue line to sort of virtual environment? That was the first part of it. And then the second question was the third quarter makes perfect sense. Markets haven't opened up and large-scale events unlikely to happen anytime soon. But is there a chance that any of those Master properties scheduled for the fourth quarter will end up happening in person? Let me start with those 2 and I'll follow-up.
Yes. Thanks, Tom. Good questions. I'm going to be the boring guy here and step in and repeat the questions, just to make sure that everyone hears them. As you said, sponsorship weakness to be expected when we move from live to online, but explain why that is, that's a question for you, Jørgen, for sure, on the sponsorship side. And when we will get back to large-scale events, if that's going to happen in Q4 is the other question, I guess, that's both for Maria and Jørgen to reason around. But if you can start Jørgen on those 2.
Yes. No. It's -- of course, it's different factors, particularly when you come to the sponsorship part as well. Just the fact that we didn't have any festivals, we couldn't host any festivals, obviously, that is a big part of sponsorship revenue disappearing. And then, obviously, as we said as well that some of the pipeline as well, some of the money that we had expected to come in didn't materialize. Also the way when you have a brand partner or sponsor, they also normally would like to see activation at the event. Obviously, we couldn't give them that either. At the same time, though, as you can see as well that we were live, and we had our events taking place and with extremely high ratings. And then, of course, have some of the sponsors that we managed to keep despite that they didn't get the activation that they eventually needed. At the same time, as we also discussed, we have seen very strong interest now for the media partners side. And that is important because the more media partner you get on board, the bigger reach you will have. The bigger reach, you should obviously have a more commercial long-term interesting product. So when things hopefully will normalize again and brand partners will come back, then obviously, you will have a very strong revenue when it comes to the media partner, and you also then see the brand partners coming in. So in all fairness, it isn't pretty, just to be very clear. At the same time, we are very happy to see that this online opportunity has created such a bigger reach for us. So it has created so much more interest for the media product you saw also that we announced this morning. And when it comes to the last question, Lars, sorry, what did you -- you didn't repeat that?
No, I did, actually. But it was regarding the possibility of having live physical events in Q4.
Yes. And that, to be fair, we should call around to the presidents in Europe and understand when that is possible. We don't know, Tom. We simply don't know. I think what we have said to you is that we are planning for online events for the second half full. We don't plan for any physical events in the second half on the -- as it looks right now. We might have studio events, but not big events with regards to [indiscernible].
I think it's -- from our perspective, it's always good to have a more prudent approach to this. Tom, as you know, it's very hard to predict when these sites will open up fully, as you -- I'm sure you can understand. So that's why we keep it as it is for now until we have more certainty around physical events or not. And you might move on to follow-up. Yes, please. Please, Tom.
Actually, a couple of follow-ups, if it's okay. I mean the first one, just -- I mean, I suppose the point I was trying to get to with the fourth quarter was more about -- should we -- I mean the cost saves, and therefore, the EBITDA guidance, I assume it's vaguely conditional on them not taking place in a physical setting. So I was trying to gauge whether actually, even if there was the opportunity to run them physically, you might still choose to run them virtually because of the planning that you put in place? So that was one clarification there. And then the second sort of follow-up question was just more on the sort of strategic sort of development of the group. I mean, obviously, Jørgen, sad to read that you're deciding to step -- sort of step down. But I guess there's still quite a lot sort of unfinished in terms of the portfolio structure and the strategic direction of the group. And I'm just wondering whether we should expect a resumption of some of the, sort of, strategic initiatives now that maybe the, sort of, COVID-related crisis is slightly less acute.
Tom, good question. I think on the guidance side, that's for Maria, when it comes to what we have assumed in our guidance when it comes to the second half in esport on physical, non-physical events. And then, of course, the flowers sent to you, Jørgen, I guess you would like to answer yourself.
Yes. I'll take the guidance. And a fair question. So what we have assumed, to Jørgen's point, is that we will continue to run our schedule online with a selective, we're going to have 3 studio events the way we are forecasting it right now. And I think that the question will be for us, whether we can actually hold those studio events because that will require teams traveling as well, even though we will have no audience there. So with the studios, we can do more active agents, and that's why we would like to be able to do the studios if possible. And why we have said that already now is because we want to provide clarity to both partners and teams and our team internally as well. And on back of that, we have then set the guidance. So that's the way you should look at it. And I think that if you ask me what the risk is, it's rather that we won't be able to hold the studio events, I don't expect us to have any physical events this year whatsoever, even if the regulation change.
Yes. And when it comes to the strategy, that is quite clear as also we are laying out in the reports on, to be fair, that we are saying that management and the MTG Board believes that long term, there is a lot of merits in having 2 pure-play companies, a pure-play gaming company and pure-play esport company. At the same time, what we are saying as well is we only want to have that, obviously, when you can present 2 strong equity stories. So right now, what we are doing is that we are delivering on the strategy for each of the verticals and the verticals -- the strategy for the esport part is to commercialize the sport, is to develop the revenue streams. So that is not changing. That is a thing which we -- all the team works on and works very hard on. And as you can see, in some of the revenue streams, it's actually going very well, and particularly in the media part right now. So that has not changed and will not change. So we would like to professionalize the commercial power of esport.And then when it comes to the gaming part, that is the same as well, that we expect the studios to, over time, of course, to deliver and produce new exciting games. That is why we are buying a game studio. Now we are fortunate, of course, that we have such a strong performance in InnoGames as well. On top of this, we had very strong organic growth in the quarter and also looking, as we said, that the DAU will continue to be fairly strong throughout the second half. So nothing has changed when it comes to the direction of the company. Nothing has changed when it comes to the strategy. We know exactly what we would like to achieve. Yes, COVID has given some bumps on the road, of course, it goes without saying. At the same time, it looks very healthy on the gaming part, to be fair, and it has helped a lot on the game vertical and then also has helped a lot on the esport and get that broader out due to much more increased viewing. I hope that's very clear. So there's no change.
It's very clear. And just one final follow-up. Once again, the strategic review of games. Is that still, sort of, technically paused whilst the disruption works through?
We have -- there is nothing that's paused, you can argue, we are continuing to explore different opportunities. Then interesting, of course, now, is that the gaming business is doing so much better. So that is, of course, very fortunate for us. We still believe, long term, that there's a merit in having 2 strong equity stories, one being esport and one being gaming. But for the time being now, we do not execute on that until we have 2 strong equity stores.
Yes, your next question comes from the line of Erik Lindholm from Nordea.
I'm not sure if that's me. But can you hear me, guys?
Yes. We now it's you, Erik. So no problem there.
This is Erik Lindholm from Nordea. So a question on the B2C in esports. Can you elaborate a bit on how you expect to increase monetization here? And how do you expect to sort of differentiate your platforms from the matchmaking ranked systems that most publishers already have in their games?
Yes. There is...
No problem at all, Jørgen. I'd like it when you're taking those questions as fast as you do, but just for the benefit of the others listening in, our B2C platform, how to make that competitive, especially against the in-game features that is provided by the publishers already. Over to you, Jørgen.
Yes. I think looking as -- as you can see as well from -- also when we look at the revenue that we are generating there already, we are actually extremely competitive already. And we do also, as you can see from the slide, are having matchmaking functionalities. And also now we're enhancing with a more story-driven and tech toolbox in order to create these different B2C hubs, which, of course, should serve the communities. ESL brand, DreamHack brand, what they stand for, the opportunities that we are having with our tournament to integrate the B2C part into that as well is quite unique in all fans. So we will have an opportunity to create a very strong ecosystem, much stronger than we have today. Today, we have the subscription business, which is ESEA. When you are playing well in our Counter-Strike ESEA product, you can actually qualify to come into our tournaments today. So that is, of course, a synergy, and an interesting opportunity, which we can elaborate or can work more around. The ESL Play product is already now very strong and features more than 100 games and range of tournaments every day. So there is the storytelling due to the brand like -- there is a lot of opportunities to enhance that more and then experiment a bit more with the storytelling as well. What you don't know exists, you don't look for. And therefore, there's a lot of stuff that we need to do in order to understand how to enhance the viewer experience, how to -- what to -- what put behind the paywall, what you want to do with advertisement, what kind of publisher deals can we make in order to support our pitches to them as well. So there are so many things we can do around the B2C, which we don't do today. I think the Sony PlayStation partnership integration is a prime example that when you have your Sony PlayStation, you go into the ESL infrastructure and you play tournaments through that. And that is a very strong partnership where we can both can monetize on the customers coming in. So there's a range of things which we haven't explored today, which we, of course, will explore and where we have, in all fairness, quite a dedicated department working on right now.
Okay. That's very clear. Just a follow-up on another question on esports then. I think you said that you're seeing some weakness in esports services into H2. What is driving this versus H1? Because I guess you were operating this online in H1 as well.
Yes. Thanks, Erik, for that one. It's -- when it comes to the esport guidance, why we see some slight weakness in second half versus first half when it comes to esport development. For you, Maria, to you.
Esport services, specifically.
Esport services, sorry about that. Thank you, Erik.
All right. No, I think it's fair to comment also on the esports in general because I think if you look at the esports in general, I mean, you should remember that Q1 was, I mean, the corona pandemic impacted first in March, which meant that even though Q1 was a quiet quarter this year, we actually could execute our events in line with expectation for January and February. And that means that if you look in the second half versus Q2, you're actually seeing improved trajection and especially in our owned and operated performance. If you then look isolated on the esport services, as you do know, some of these contracts that we do are for an extended period of time and some are for, more so, one-off projects. And what we've done and secured now in both Q1 and Q2 is a very strong growth on back of some interesting partnership deals that we've done with both Supercell and Epic. And also, we did a very interesting charity work game as well for us in Q2. So taking that together, I mean, we saw a very strong growth in the ESS side in H1. And that is currently not what we see in the pipeline for the second half of the year. On the positive note, however, we do see an improved trajection on our owned and operated revenues that should show an improved performance, especially then in Q4, because if you see its schedule, it is heavily skewed to Q4 where we're going to have 6 properties, whilst only having 1 in Q3. So that's the way to think about it. Hopefully, that clarified your question.
Would you like to follow-up, Erik?
Yes, sure. On gaming then, can you talk a bit about the release slates for InnoGames and Kongregate? What is the timing here? And when do you expect this to have results? Is there any particular game that stands out and so on?
Yes. When it comes to gaming portfolio, definitely, Maria sitting on the Board of InnoGames, who can elaborate on that one. So Maria, when it comes to the portfolio of games to be released.
Yes. No, as you may saw it, I think Jørgen mentioned as well, we launched 3, you can argue, reskins of one of our Idle games in Kongregate in Q2. And I think that the bigger release that we have coming up is Teenage Mutant Ninja Turtles, which is coming up now in the second half of the year, which we look forward to in Kongregate. And then we have yet another bigger release coming up in early 2021 for Kongregate. I think there's InnoGames that has a bigger sort of development agenda. They have actually had 4 games in development. They have now put 2 testing, into what we call retention testing, in Q2 with very successful results. And we're having yet 2 other ones that's getting into retention test in the second half of the year. And for the 2 first one, if all goes ahead according to plan, we will put at least 1 of them in full live mode in Q1 next year. That's the plan.
All right. And just a final question then. On the strategic review of gaming. You are sort of exploring 2 different thoughts there with the listing and the divestment. Could you -- if you were to do a listing, could you perhaps do some -- look to do some M&A within gaming before this? Or would you list the gaming as it is right now.
Thanks, Erik. So when it comes to potential listing of the gaming asset, would that then include potential additional -- acquisitions ahead of that? Or if we had elected, could that be done as is, I should say. Jørgen, would you like to elaborate more?
Yes. No, definitely. And it has always been the case, you can argue, that we wanted to be acquisitive when it comes to the gaming part. So we have, also as you can see, the cash to go out and become acquisitive when we find what we called companies, the quality company. So nothing prevents us from being that. We are in the market, and we are looking at different opportunities, that also goes for esport. We have always looked at areas which can accelerate our relevance in either gaming or esport. So that can easily happen ahead of a potential listing when we are ready to do so.
Your next question comes from the line of Martin Arnell.
This is Martin Arnell with DNB. My question is on gaming in the second half. And thanks for providing the outlook here in these strange times. But what kind of gaming revenue do you pencil into that EBITDA guidance for the second half?
So Martin, thanks for that question. Reference to assumptions made in the -- on the cost of gaming when it -- in our guidance for the second half. Maria, that's straight up your alley, so to speak.
We did, as you could probably reason, give the direct reference to guidance on revenues per game. And what we said was that you should expect a more normalized growth trend going forward. We come in on elevated levels, of course, on the DAU levels. I mean, you will always see the seasonality effect that you see in the summer. So of course, it will drop until it starts to come back again after summer holidays. What we -- we put a lot of marketing efforts now in Q2, and we should see that benefit in the second half of the year. But what we're not expecting to see is that hike that we had in the increased activity levels that people spend significantly more time in front of the computer, therefore, also spend more. So the ARPDAU increased quite significantly in the quarter and that we don't expect going forward. What we also said and Jørgen, I think, mentioned in the script was that, I mean, we increased marketing investment quite significantly in Q2, which will benefit us in the second half of the year and also, of course, the years come afterwards would, of course, stay. But you should not see the same elevated marketing effect also in the second half, but it should be more balanced versus last year. So I hope we can help you a little bit.
Any follow-up Martin?
Yes. Just -- it sounds like it's fair to assume that it has normalized a bit in July, and it makes a lot of sense, of course. And then on the revenue outlook for next year, given that the base is sort of more lowered now in 2020 and if we're back to more normal times in the first half -- in next year, what kind of growth rates should we expect, if you can just elaborate on the drivers?
Yes. Thanks, Martin. It's, of course, a very interesting and also relevant question. But we will refrain from placing any guidance or outlook statements with reference to 2021. I think we are living in uncertain times, as you know, and we would like to just keep the guidance for the second half, and then we'll see how things develop, and we will keep you informed if -- how things look also when the year evolves. So unfortunately, no elaboration or guidance for 2021 today.
Okay. Fair enough. And then a question on the cost savings. I guess that some of that is temporary, and you mentioned new ways of working. Can you give some more color on the savings?
Yes. So cost savings, once again, Maria, that's your area of expertise.
Yes. No, you saw we incurred SEK 150 million in line with our expectation for the second half -- sorry, second quarter. And I'd say the vast majority comes from the COGS side of actually moving physical events to online only, no travels whatsoever, not even studio's production. There was a small part of fixed cost savings in that as well, but that was more a one-off initiative characters, which meant that they are not savings. And what we're working on is to see how can we work differently and be more efficient and lean structured at the esports group and find savings there. So that's what we would like to come back to when we conclude that. And as I also said, I mean, as long as we keep the format online, we have found a new way of working there, we will be able to see that run rate savings on the COGS side as well going forward into Q3 and Q4.
Great. Excellent. And just finally, Jørgen, can you sort of comment your decision to leave the company, if you may -- if I may ask you.
Yes. Definitely, as I write in the release, it is straightforward. I think 26 years in the same company, you can argue, is a period, to be fair. And what is important for me, of course, is since I've spent half of my life in this company, is that we put in place a management team also, which is long-term for the company. So succession planning here is very important for me to make sure that we do that right. And I think that is a great moment right now. You see the companies are doing good. They are planning ahead. And also for me, personally, I think it's also a time for me to think about something else, in all fairness, and one day open a new chapter. But again, I'm the CEO of the company until that succession is in place. I have a long notice period. So there's no yes or no thing here, to be fair. It is your 26 years, is, in all fairness, a time spent in the company.
Yes. We're just taking the names for you. And by the way, we have one question, it's coming from the line of Oscar Erixon.
This is Oscar from Carnegie. A few questions for me. Could you elaborate a little bit on the dynamics on the different revenue streams in esports from actually holding events online. You discussed it earlier a bit, but some more input on the dynamic there? What is most severely impacted and what is going the other way?
So as we move from physical to online events, the characteristics of the revenue stream has also changed a little bit, I guess, in -- especially now in the coronavirus pandemic, it's very clear. Maria, I know you have to talk a lot about this, so maybe you can start with the question.
Yes. No, absolutely. And I would say, I mean, even though those revenue stream may not be the biggest one, but the few ones that are the most severely hit are, of course, ticketing and merchandising because they go down to very low levels. And then the 2 other buckets is media rights and the sponsorship revenues. And I think that you've seen, we have actually signed quite some few media rights deals, which have showed the relevance of esports in this, also, particular difficult time. So that has actually performed quite well. And we've also, on back of the content that we delivered, I mean, ESL has actually had an extremely busy quarter, having 5 events -- 4 events this quarter, and with a record view rate. So that has actually performed better than our expectations, and hence, also the better revenues that we saw in the quarter. And the big impact we've seen in sponsorship and it's partially due to, as Jørgen has mentioned, with the pipeline drying up, we were sort of concluding on the EBT sort of at the same time as the corona pandemic broke out, which, of course, became difficult time to onboard new sponsors. At the same time also not being able to hold any festivals is, of course, a significant impact and that is what the concert sponsorship is a big part of the revenue contribution. So that is also one of the reasons why sponsorship is getting a bigger hit proportion than what media rights is getting.
Would you like to follow-up there, Oscar?
Yes. That was very clear, actually. And a follow-up on that. What is the impact of the Twitch deal in Q2? You mentioned it in the report. So what is the impact in Q2? How do you expect it to develop in 2020? And perhaps if you could also shed some light on if that deal scales up gradually in '21, '22, given that it's exclusive in those years?
Thank you, Oscar. The Twitch deal. It should be said, though, that we have not disclosed the value of that quite significant media deal. But anyhow, whatever we can then share, Maria, when it comes to how that deal -- how the deal looks like.
Yes. No, but I think what it gives us is reach, which is great. And that would all the time, to Jørgen's point, when I think he talked earlier on one of the questions, give us more sponsorship because want the sponsors want is, of course, reach. So they will have had time go hand-in-hand. We've signed quite a few sponsors and media rights deals in Q1 and Q2. Many of those are -- you can argue, reach over value, which, again, over time, would give us better sponsorship revenues as well. And I would say Twitch is both reach and value. And I think that is what you're seeing also in the revenue numbers for Q2. And then going into next year, to your point, it's going to go exclusive, which is when we're going to see a ramp-up in value in 2021 and onwards.
There we go, Oscar. Any follow up?
Yes. Actually, a few more, if I may. Stop me. But the first one, just Q4 here, ESL One in Rio, the Dota 2 tournament, will that still be major? Would it still have a $2 million prize pool? Or does that change in any way?
So looking at the event schedule then for Q4. And then, Road to Rio or Major in Rio when it comes to CS:GO. If it's going to keep that status or not?
Yes. That's what we currently plan for. And that's why, as I think I said is, while there are 3 of our events, even though everything can be held online, it's going to be studio productions and the Rio event is one of those that we plan to hold as a studio production. So hopefully, we will be able to do that. That will, however, be teams then flying into a studio production hub. But there is still not going to be any audience there. So that's the plan, and the prize money remains as well. And as you may see now in the quarter, we also had the Road to Rio, so that we have a warm up going into the CS:GO major.
Great. And also, we've seen in this quarter, I mean, a lot of companies actually reporting positive earnings effects from government support and furlough schemes. Could you comment if you have had any impact? And if that's possible to quantify as well, would be really helpful.
Yes. A lot of questions for you, Maria. So now to [indiscernible] and furlough then.
Yes, I learned this new word that's called as [indiscernible]. So we've had furlough in our different esport companies. Not in gaming. So in gaming, we've had production up and running 100%. And we have approximately SEK 10 million benefit in the quarter from furlough.
Very clear. Oscar?
And one final question on gaming then. Question on ad revenue and corresponding also user acquisition costs. Has that normalized now? Or should we expect a normalized performance from Kongregate in the second half?
So when it comes to ad spend, not in app purchases, I guess, then Oscar. So it's a bit reference to Kongregate versus normalized? Or what does it look like?
Yes. No, you're absolutely right. That has started to normalize now in June, July. So we should not see any significant negative effect from that. But what you should expect is an impact for Kongregate for the full year is the third-party partnership with the Hyper Hippo Games that in its totality expired as per year-end 2019. So you're going to have tough comparisons for Q3 and Q4 also for Kongregate due to that release. But otherwise, from a corona pandemic impact, that should be normalized.
Your next question comes from the line of Stefan Billing.
Stefan Billing from Kepler Cheuvreux here. I have a couple of questions. One is if you could say something about the audience measurement development. I think when you struck the deal with Nielsen, a year ago, you said that you probably could start sharing some like-for-like numbers at this point. So that's one question. The other question is if you could share some things about how media rights have been growing? And what share of revenues within owned and operated media rights represent right now?
Okay. I guess it's for you, Jørgen, when it comes to audience measurement and Nielsen, how that is developing. And when it comes to media rights as part of owned and operated, it's more for you, Maria. So we'll start with you, Jørgen.
Yes, the average minute audience, or the AMA, is -- the partnership with Nielsen is up running. And that is something that we are now getting into our presentations preparing for the upfront here coming into 2021. So we are on -- we would be on the market now here in August already with key figures from the partners that we are measuring right now. And of course, as we onboard more and more partners, we will then, of course, have a much stronger set of data. So that is not to say that everything is flawless. It takes some time for some partners to make sure that we get the right data and so forth. But that is in development, and that is developing in the right way. It's quite important for us and, luckily, as you can see as well, we have increased the viewing. So the AMA figures are better. And then when it comes to the media rights as such, we have seen strong traction. Obviously, it is a simple word, but meaning that when you have a TV channel having its best year ever, the best year -- best day in 20 years, of course, there are rumors because that shows that the product can move the needle. And then, of course, it's helping the media rights sales as we're having right now. So we are growing. And as I said also in just Q2, I saw -- we saw that ESL very close to growing 50% of the media rights. And I've also said that we will see that in Q3 and Q4, we will see very high double-digit revenue growth in the media part. It's good news. It's been also for many reasons. First of all, we are happy that we are making bigger deals, also that we announced just one with Riot, but also the fact that we get a bigger reach and we get more on board, so we can have even stronger AMA figures or stronger Nielsen figures. So everything in that direction goes actually according to plan.
And Stefan, just -- I think your -- maybe should mute if you -- you have some background noise there, but thank you. And Maria then when it comes to media rights as part of the owned and operated related revenues.
Yes. No, we don't break that out, unfortunately. But what we have said is that partnership is the biggest contributor into the owned and operated revenue bucket and then media rights comes thereafter. And as Jørgen mentioned, I mean, ESL grew very strong in media rights in the quarter. It is safe that we just need to bear in mind that DreamHack did not have any real events, which, of course, that meant to say that very few media rights in the quarter. But overall, the trend looks very good on media rights, which is very encouraging.
So Stefan, that is maybe not the exact stats that you were looking for, but some indication at least how things are developing, and let's continue to discuss. Do you have any more questions, Stefan?
No. Sorry for the noise.
Operator, we do not have time for more than one more question if there is. Is there any other questions?
There are no further questions at this time. Please continue.
Okay. Thank you very much. In that case, that concludes the presentation for MTG's second quarter 2020. We look forward, as always, to stay in touch, and we will release the next quarterly report on 4th of November. So until then, have a great day and stay healthy. That concludes the conference call for MTG. Thank you, and have a great day.
That does conclude our conference today. Thank you all for participating. You may all disconnect.