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Sky Deutschland Eyes 2015 Profit as It Braces for Netflix Entry

Feb. 6 (Bloomberg) -- Rupert Murdoch’s Sky Deutschland AG pay-TV operator forecast profit within the next two years and said it’s prepared for the entry of video service Netflix Inc. in Germany.

Sky has added “tens of thousands” of paying users for its Snap streaming service, which started in December, Chief Executive Officer Brian Sullivan said on a conference call. The Munich-based company is ready for Netflix, which won’t hurt Sky’s core subscription business as it doesn’t have comparable content rights, such as for German Bundesliga soccer, he said.

Sky, controlled by Murdoch’s 21st Century Fox Inc., today predicted it will add 400,000 to 450,000 subscribers in 2014 after reaching 3.67 million last year. The company offers Snap to non-subscribers as well to broaden its reach. Snap will have a “strongly positive” effect on earnings from 2016 after curbing profitability in the short run, Sullivan said.

U.S. video-on-demand provider Netflix is in talks to license movies in France and Germany and may start operating in France before the end of the year, the Wall Street Journal reported last week. Other media companies in Europe have also started their own on-demand services, such as Mediaset SpA’s Infinity offering in Italy.

Sky stock rose as much as 8.2 percent to 7.58 euros in Frankfurt today, the biggest intraday jump since June. The shares were up 4.5 percent at 7.32 euros as of 12:16 p.m.

The broadcaster said that it may report positive net income in 15 to 21 months. Net income will follow the pattern of improving operating profit, with some delay, depending on the level of investment to attract new customers, Sullivan said.

The company today reported 2013 earnings before interest, taxes, depreciation and amortization of 35 million euros ($47 million), the first operating profit in six years.

To contact the reporter on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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