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.
