Sky Deutschland CEO Confident Amid Financial Strength
October 14 2010 - 3:11PM
Dow Jones News
Sky Deutschland AG (SKYD.XE) can use its strengthened financial
position to hold on to valuable football broadcast rights for years
to come, making them a platform for growth and eventual
profitability, Chief Executive Brian Sullivan said.
"I'm not joking when I say we want to be the partner of German
soccer league not only for the next years but for the next
decades," Sullivan told Dow Jones Newswires in an interview
Thursday.
"Sky Deutschland is now in a stronger financial position than
ever in the past half-decade and the News Corp. commitment is
valuable for any rights partner," including the top-flight German
soccer league, the Bundesliga, the jewel in its crown.
Sky Deutschland holds the rights to broadcast live Bundesliga
soccer until the end of the 2012/13 season. However, the German
soccer league, or DFL, could start an auction for the rights to
seasons beyond 2012/13 as soon as next year.
It is unlikely that the German pay-TV company will be profitable
by then, but Sullivan, previously a long-serving manager at British
Sky Broadcasting Group PLC (BSY.LN), is confident about the future
due to the financial backing of News Corp. (NWS), its biggest
shareholder with a 49.9% stake.
News Corp. also has a roughly 39% stake in BSkyB, where Sullivan
worked for 10 years. In June it offered 700 pence a share to buy
the 60.9% stake in BSkyB it doesn't already own, valuing the stake
at about GBP7.8 billion. BSkyB's independent directors rebuffed the
proposal, but have said they would support an offer of more than
800 pence a share.
News Corp. owns Dow Jones & Co., publisher of this newswire
and The Wall Street Journal.
BSkyB is the U.K.'s largest pay-TV operator with just under 10
million subscribers, building its dominance by paying huge sums for
the broadcast rights to Premier League soccer. News Corp. has also
used a similar strategy to drive subcriber growth at wholly-owned
Sky Italia, where it holds satellite and Internet-TV rights for
every Seria A football club.
Since News Corp. took an initial stake in Sky Deutschland in
January 2008, it has injected around EUR1 billion into the
business.
Still, it remains unclear when it can expect a return.
In the U.K. it took 20 years to turn around BSkyB, Sullivan
noted, but he is confident it won't take that long to make Sky
Deutschland profitable. At a media briefing last month, he said he
expected the company to be "sustainable" in two to three years.
Sullivan acknowledges that the challenges in Germany are bigger
than in the U.K. and Italy due to the strong position of public TV,
which broadcasts Bundesliga highlights shortly after the final
whistle each Saturday.
One reason why pay-TV in Germany isn't yet a success, despite
huge investment, is the position of public TV in the country, said
Axel Springer AG's Chief Executive Mathias Doepfner Wednesday in a
keynote speech at the Medientage industry event in Munich.
Germans pay a monthly fee to fund public TV broadcasters, while
access to cable means an additional monthly fee on top just to get
free-to-air broadcasts, limiting the money available to spend on
paid content.
After Sullivan took the helm, he started to team up with cable
network providers, a strategy that is now bearing fruit.
This summer, Sky Deutschland teamed up with Kabel BW, Germany's
third biggest cable network provider. In the first three months of
that deal "we have seen a measurable, incremental lift in sales" on
both the bundle with Kabel BW and standalone sign-ups to Sky
Deutschland, from which both partners are benefiting, Sullivan
said.
Similar collaborations with Germany's biggest cable network
companies, Kabel Deutschland Holding AG (KD8.XE) and Liberty Global
Inc.'s (LBTYA) Unitymedia are still the subject of
negotiations.
-By Archibald Preuschat and Matthias Karpstein, Dow Jones
Newswires; +49 211 13872 18; archibald.preuschat@dowjones.com