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Sky Deutschland: Upbeat on Bundesliga rights

  • ThE MaStEr
    2012-03-22




  • Sky Deutschland: Upbeat on Bundesliga rights

    Investment banker Morgan Stanley says that CEO Brian Sullivan and his fellow senior managers at Sky Deutschland are in a “positive mood” about current subscriber trends. Moreover, Sullivan said Sky Deutschland is “quietly confident” of winning access to the all-important Bundesliga football matches.

    Bidding for the Bundesliga opens in two weeks’ time, on April 2nd, and the structure of the process means that it is almost inevitable that the bidding will go to a second round. Germany’s football league has already cleared the complete process with the German Cartel Office and does not expect a decision to be challenged.

    “A total of 16 entities have registered for the bidding process – this includes the entities that are interested in the free-to-air rights as well as those looking at the pay rights. To qualify, bidders have to show 1) that they have the financial means and necessary distribution capability, 2) that they pass any regulatory hurdles and 3) their view of what they bring to the process,” reports the bank.

    “In the pay section, separate packages of rights will be made available (cable/satellite, IPTV and mobile/internet) for the three distribution platforms. Unlike previously, the mobile and internet rights have been grouped together. There are then three grades of package (gold, silver, bronze) related to timing of the games. Bidders can place bids vertically (i.e. for all the broadcast/cable rights) or horizontally (all gold packages) across the grid or for any combination of the nine, but not for all nine sets of rights.”

    The process is complicated by the German football league (DFL) inviting bids on the basis that the free-to-air highlights will be aired at 6.30pm (the status quo) and on the basis that they will be pushed back to 6.45pm. The DFL is exploring the different aggregate returns from adjustments to the schedule – investigating what premium pay-TV providers attribute to a greater time lag between the broadcast of the live match and the subsequent broadcast of the highlights package on FTA. It is also testing the value to the FTA players of having the earlier TV highlights spot.

    Sky Deutschland’s management emphasised that it is absolutely vital to the future of the company to win at least some Bundesliga rights and, ideally, all the Bundesliga rights that it wants. Failure to win the rights in any form is not deemed to be an option, given the huge question marks this would put over the momentum of the business and its prospects for refinancing.

    “As a result,” says the bank’s report, “Sky Deutschland is likely to bid for all the types of rights in a variety of combinations to ensure that it is a winning bidder somewhere in the process. Fall-back strategies such as an outline OTT strategy and other options have been considered. Sky Deutschland emphasised that it is not going for cost optimisation in this process – the mistake it believes that Premiere made in 2005. It believes that shareholders will be better served by SkyD paying arguably ‘too much’ for the rights rather than by missing the rights.”

    Clearly Sky Deutschland’s preference would be to get all the broadcast/cable rights and all the mobile/internet rights, allowing it to maintain its existing offering and extend the scope of its SkyGo offering. To get the Wi-Fi rights for SkyGo, Sky Deutschland would need to win the netcast two rights – a package presently held by Deutsche Telekom. Sky Deutschland would accept partial achievement of these rights as a less favourable option, but clearly would prefer them all.

    “Sky Deutschland thinks it unlikely (but not impossible) that al Jazeera will bid for the Bundesliga rights. It does not expect a bid from cable for the live rights or from FTA TV. It is prepared in its thinking for a “surprise left-field bidder”.


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