Sky Deutschland Uses Microsoft’s Xbox to Keep Users Longer

Sky Deutschland Uses Microsoft’s Xbox to Slow Cancellation
The Sky Deutschland AG logo is displayed outside the company's headquarters in Unterfoehring near Munich, Germany. The German company is accelerating efforts to keep customers from cancelling their packages and spur growth. Photographer: Guenter Schiffmann/Bloomberg

Sky Deutschland AG, the German pay-television operator controlled by Rupert Murdoch’s News Corp., will offer programs through Microsoft Corp.’s Xbox Live service as it seeks to bind clients to their contracts longer.

Sky Deutschland subscribers will be able to watch programs via Xbox Live as early as this quarter, Chief Executive Officer Brian Sullivan said in an interview. Customers need a 12 euro ($16.50) “Sky Go” monthly add-on subscription and a 59.99 euro annual contract for Microsoft’s Xbox Live Gold platform.

The German company is accelerating efforts to keep customers from cancelling their packages and spur growth as providers including Kabel Deutschland Holding AG, Deutsche Telekom AG and Vodafone Group Plc are expanding TV offers. Churn rate, which measures the pace of contract cancellations, fell by almost half in the first six months to 9.7 percent on an annualized basis. For Microsoft, the pact is another step to convert the Xbox console into a family entertainment device by offering non-game content.

“First and foremost this is about increasing customer satisfaction,” Sullivan said by telephone yesterday. “If we can acquire some additional new customers to the platform because the experience is fun and cool, that’s great, but it’s not the primary reason.”

Sky Deutschland shares rose as much as 6.2 percent to 2.10 euros and traded 5.3 percent higher at 2.08 euros as of 10:18 a.m. in Frankfurt, valuing the TV operator at 1.47 billion euros. Microsoft gained 0.8 percent to $27.18 in New York yesterday.

Market Share

Microsoft has added 9 percentage points to its share of the German console market since introducing the Kinect motion-sensing device last year, said Oliver Kaltner, Microsoft Germany’s general manager for the consumer business. It aims to add another 9 percentage points to claim first place in that market ahead of Nintendo Co.’s Wii and Sony Corp.’s PlayStation 3, he said, declining to give actual market share estimates. The Xbox Live service has more than 35 million customers worldwide.

Sky, based near Munich, and Microsoft are also working on bundles of hardware, content and services that may be ready for the Christmas holidays, said Kaltner.

In April, Sky introduced Sky Go, an add-on package that lets users watch programs across multiple platforms such as personal computers and Apple Inc.’s iPhone and iPad. Sky Go will be free for customers of the provider’s high-definition television packages as of Oct. 18, Sullivan said. It also plans to bring the service to mobile phones running Google Inc.’s Android operating system.

Time Warner, BSkyB

The company may end the year with enough subscribers to start making a profit, Sullivan said in August. Sky had 2.76 million subscribers at the end of June and may add 200,000 customers in the second half, the CEO said at the time.

Sky’s TV packages cost between 16.90 euros and 65.90 euros a month, and customers on average paid 30.74 euros a month during the second quarter.

Microsoft has also agreed to show content of channels including Time Warner Inc.’s HBO Go and NBC Universal’s Bravo and Syfy in the U.S. as well as from British Sky Broadcasting Group Corp. and the British Broadcasting Corp. in the U.K.

The new offer also features a voice-command function for the Kinect controller, Sullivan said. The executives declined to give customer targets.

“The moment is ideal for Microsoft as both Playstation and Wii have in our view reached the end-of lifetime cycle while we’re seeing a revitalization and a new peak of our current console” because of Kinect, Kaltner said.

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