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SBD Global/September 14, 2012/MediaPrint All
BT Vision, which signed a deal to broadcast Premiership rugby this week, saw its stock surge "to the highest price in four years" after int'l financial group Credit Suisse said that BT will benefit from "accelerating broadband demand," according to Jonathan Browning of BLOOMBERG. BT is adding sports rights to "expand its TV business and sell more broadband connections." The company accelerated its fiber broadband service by one year to fend off faster Internet offers from competitors such as Virgin Media and Sky Broadcasting. BT will pay £152M ($245M) to show major English Rugby matches, taking away the broadcasting rights from BSkyB and ESPN. BT CEO Marc Watson said, "BT is serious about sport and this deal means we will be offering the very best rugby action alongside some of the most thrilling football matches from the Premier League” (BLOOMBERG, 9/12).
HEINEKEN CUP THREAT: In London, Chris Hewett reported that the immediate reaction to BT's announcement was "focused less on what the influx of money might buy than on what it might cost." The future of the "wildly popular but commercially underpowered" Heineken Cup was "under serious threat even before the Premiership fraternity struck gold." Now, it is "difficult to imagine how it will survive in its present form." Officials at European Rugby Cup, which runs the Heineken and second-tier Amlin Challenge Cups, were "framing their fierce response." Meanwhile, the "talk in the corridors of Premiership power was of an unexpectedly lucrative deal" that will lead domestic league rugby into a more secure, short-term financial future (INDEPENDENT, 9/13). Also in London, Josh Halliday reported that the conflict over Europe's premier club rugby union competition "marks a significant escalation in BT's challenge to Sky's 20-year dominance of U.K. pay-TV sports rights." Both companies claimed exclusive U.K. TV rights to show flagship European games featuring English Aviva Premiership clubs beginning in '14. BSkyB announced it had "secured an extension" of its exclusive live-TV rights to the Heineken and Amlin Challenge Cups. The rival deals "exposed a rift at the heart of professional club rugby in Europe." The row centers on which body -- European Rugby Club or Premiership Rugby -- "has the mandate to sell live TV U.K. rights for European competition games" (GUARDIAN, 9/13). Also in London, Matt Scott wrote that just after BT and Premiership Rugby announced their media rights deal Wednesday, "Sky reacted decisively, extending its deal for the Heineken Cup with or without the English for another four years." The "swiftness of the satellite broadcaster’s response tells us all we need to know about the threat it faces with BT’s presence in a marketplace it has made its own over the past 20 years" (TELEGRAPH, 9/12).
LIVE SPORT CASHES IN: In London, Roger Blitz reported that the "clamour for sport’s live broadcast rights is increasing." Following a 70% rise in the value of the Premier League’s football rights in June, Premiership Rugby has "followed with its own substantial uplift." It did not "even have to launch a formal tender." Live sport is "attracting bigger TV audiences, and increasing advertising revenues" as a result. This is "enriching sports teams and players." In the case of England rugby, the revenue will "provide much-needed financial stability to clubs, and the chance to increase stadium capacity or build new venues" (FINANCIAL TIMES, 9/12).
ON THE ROCKS: In London, Mark Souster opines, "Has Mark McCafferty got a death wish? Has the chief executive of Premier Rugby (PRL) lost the plot entirely? It would seem so judging by his decision to adopt the nuclear option in his “negotiations” with ERC over the future of the Heineken Cup. If the owners or chairmen of the 12 Aviva Premiership clubs do not put him out of his misery, he threatens to drag them on to the rocks. At a stroke, he has alienated the entire world of rugby and that takes some doing" (LONDON TIMES, 9/14).
German pay-TV provider Sky Deutschland has been producing positive headlines with strong results during the second quarter of '12, high ratings and more than three million subscribers. Sky Deutschland Chief Officer Sports, Advertising Sales & Internet Carsten Schmidt took time to talk to SBD Global Staff Writer HJ Mai about Sky's long-term financial goals, the German TV market and what happened to its contract with the German Hockey League (DEL).
Q: Since its relaunch as Sky Deutschland in July '09, the company generated a positive result for the first time during the second quarter of ’12. What’s the reason for this positive trend, and what are the goals for the years to come?
Carsten Schmidt: One of our advantages is that we have been given the time to change a lot of things. Moreover, we have been able to invest in better customer service, leading innovations, exclusive programming, content for mobile devices and much more. Our shareholders are very patient, because they believe in the potential of our business model and know their investments will bring a return. Financially speaking, we’re expecting our full year '12 earnings before interest, taxes and amortization (EBITDA) to be significantly better than in '11, and the full year '13 EBITDA to be positive and to grow strongly thereafter. We are working hard toward this goal, as all Sky employees know where we stand and see themselves as challengers who are hungry for success.
Q: What is your opinion on the German TV market and its recent developments in areas such as HD, 3D and Internet TV? What are Sky’s plans in those areas?
Schmidt: Currently, the German TV market is not overly innovation friendly. Private TV channels are more reserved when it comes to high quality content and try to defend their profit margins in a very difficult advertising markets. At Sky, we are in a much more favorable position in that we do not depend on advertising revenues to build a viable business. Our mindset is very different, too: High-class content and innovation are at the heart of what we do every day, and we always focus on our customers’ needs. So, for us, the prime reason for driving innovation is to be able to offer our subscribers the best viewing experience possible -- anytime and anywhere. In terms of innovation, Sky has actually been a major driving force in many areas. We were the first to provide 3D programming in Germany and Austria, and we have been leading in high definition from the very beginning. We will have quite an impressive portfolio of 60 HD channels by the end of '12. In addition, we offer premium content on mobile devices and computers through Sky Go. Today, Sky is perceived as a first mover and innovative brand in Germany.
Q: Currently, Sky has more than 3 million subscribers, how much potential for growth do you see in this area?
Schmidt: In comparison to other European countries, Germany has a great potential for growth. Germans are increasingly willing to spend more for high quality content and good customer service. In our business everything revolves around premium quality and exclusive offers at the best value -- and when it comes to sports and entertainment we are the only ones offering exactly that.
Q: Sky Deutschland has the exclusive rights for the Bundesliga and 2nd Bundesliga, DFB-Pokal, UEFA Champions League, UEFA Europa League, etc. However, you lost the rights to the DEL to Servus TV. Is Sky focusing too much on football, and if so, why?
Schmidt: Very obviously. Sky has its focus set on football, simply because it is the most popular sport in Germany. Sky is proud to be able to offer a unique channel lineup to its subscribers via all its distribution channels. However, you always have to take a look at the channel lineup of Sky as a whole. With ESPN America, Sportdigital, Eurosport HD, Eurosport 2, Motorvision.TV and the newly added Sport1+ HD, we offer six additional sport channels to our subscribers. All combined, these channels broadcast more than 15,000 hours of live sports and about 100 different sporting events per year, including hockey. By the way, we did not lose the rights to the DEL, but let the contract expire deliberately. With Sky Sport News HD, which started airing on Dec. 1, our channel lineup also includes a 24-hour sports news channel, which provides comprehensive coverage on a broad range of other sports.
Q: The prices for sports broadcasting rights are in the billion dollar ranges. Is it worth investing such large amounts? Can a pay-TV channel even survive without these rights?
Schmidt: The price for the Bundesliga broadcasting rights is very fair in comparison to leagues in other countries. We have more exclusivity than ever because, starting next season, we will be the only provider that broadcasts the Bundesliga live. Without live football coverage, Sky would not be the company it is right now.
Q: What are, in your personal opinion, the three biggest developments in sports business?
Schmidt: Firstly, the growing problem of online piracy and the insufficient alliances to fight against it in a clear-cut, decisive manner. Furthermore, the challenges of attracting and retaining a young, mobile, independent target audience to TV and second screen entertainment. Lastly, the increasing importance of brands, which work as beacons in an ocean full of new digital offers.
Q: What is the biggest challenge for Sky Deutschland?
Schmidt: We have to communicate the complexity, program diversity and innovation of our business to our customers in Germany and Austria in a powerful, convincing and understandable way -- in order to guarantee customer growth that is driven by content rather than by price.
Q: In which area do you see the biggest growth potential for Sky?
Schmidt: We see tremendous growth potential in all areas. Our "roadmap" includes a number of really exciting innovations. Sky Go, for example, will only unlock its full potential with the young and mobile target group once we are able to show the Bundesliga on an unlimited scale from next summer. Sky+ and Sky Anytime have only recently become available to our customers. It is already today that we experience our high customer satisfaction levels as the basis for our above-average recommendation rates. Moreover, building an additional, new call center will secure the high quality in this particular field, resulting in further growth.
Q:What are your favorite websites and apps?
Schmidt: I’m an avid user of Twitter, sky.de/mediathek, Sky Go and comunio.de (fantasy football manager).
Q: The development of which company do you follow very closely and with great interest?
Schmidt: Out of personal interest, I’m paying as much attention as possible to the Turkish media landscape, and, of course, I follow the news of all companies belonging to our largest shareholder, News Corp.
Spanish broadcasters Telecinco, Antena 3 and TVE disappointed FIFA and UEFA with their "modest" offers for the TV rights for the 2014 World Cup and Euro 2016, according to ELCONFIDENCIALDIGITAL.com. The sum offered by the broadcasters to exclusively air the 2014 World Cup in Brazil and the proposals for Euro 2016 "were not up to the standards" of FIFA and UEFA. The offers "were so low" that the owners of the rights decided "to pull the rights from the market." When making their offers, Telecinco, Antena 3 and TVE took into account the current economic situation, the drop in advertising revenue (at historical lows in Spain) and the "possibility of a drop off in the Spanish national team's performance" (ELCONFIDENCIALDIGITAL, 9/12).
The Australian federal government has "stalled a crucial vote on laws" to decide the way major sports are shown live on TV amid warnings the reforms had become a "dog's breakfast" that would not work, according to David Crowe of THE AUSTRALIAN. In the face of confusion over how it could enforce a plan to take Australian Football League and National Rugby League games from free-to-air networks, the government "has delayed a decision on the sports broadcasting laws." The "rancorous debate" has raised questions as to how the government could possibly guarantee that viewers get the best football games on free-to-air TV each week rather than having to switch to pay-TV. Communications Minister Stephen Conroy "sought to gain more time to complete the reform" as the Coalition and the Greens called for more clarity over how his proposed regime would function. Conroy has guaranteed voters that they "will not be forced to pay to see the best football games or other live sport under a revised anti-siphoning list of events that must be shown on free-to-air TV networks" (THE AUSTRALIAN, 9/14).
When the 2012 Twenty20 cricket tournament begins Tuesday in Sri Lanka, ESPN STAR Sports will broadcast the event to a record 226 territories, the largest ICC broadcast to date. The event, to be played across four venues in Sri Lanka, will reach an audience of more than 1.5 billion, a record for any cricket event. This includes a partnership with ESPN in the U.S., Caribbean, Central and Latin America and in Europe via Eurosport, which will broadcast in 18 languages. ESPN STAR Sports will produce HD broadcast coverage using 29 cameras and 16 commentators. These include Sourav Ganguly, Sanjay Manjrekar, Wasim Akram, Ramiz Raja, Ian Chappell, Tony Greig, Mark Waugh, Damien Fleming, David Lloyd, Nasser Hussain, Ian Bishop, Simon Doull, Pommie Mbangwa, Russel Arnold, Harsha Bhogle and Alan Wilkins. There will also be radio coverage (ICC).
Full list of broadcasters
The competition regulator "has withheld its decision" on whether to allow Kerry Stoke’s Seven Group to acquire the shares in Consolidated Media Holdings that it currently does not own, according to Colin Kruger of the SYDNEY MORNING HERALD. The decision comes "over concerns such a move would result in pay-TV's Foxtel favouring the Seven network over rival networks when it comes to acquiring sporting rights." The Australian Competition and Consumer Commission said that it "will finalise its view on this matter after it considers market responses to a statement of issues" it released Wednesday morning. By acquiring CMH, Seven would acquire a 25% stake in pay-TV provider Foxtel, and 50% of FOX Sports Australia, which "owns much of the content broadcast on Foxtel." The commission said in a statement: "The ACCC is concerned that Seven’s acquisition of a 50% interest in FSA as well as the representation on the board of FSA that it would gain as a result of the proposed acquisition, would enable Seven to exercise significant influence over FSA." Seven flagged that it "has not given up on its bid for CMH, despite the ACCC concerns." A Seven spokesperson said, "We will continue working through the issues with ACCC in an effort to resolve their concerns."If Stokes goes ahead with a bid it "will pit him directly against Rupert Murdoch’s News Corp.," which has already received backing for its $2B bid from CMH’s largest shareholder, James Packer, in the absence of a higher bid (SMH, 9/13).