Sky Soccer Might at Stake as Rivals Eye German Rightsby , , and
Murdoch's company has relied on live soccer for customer gains
Bundesliga set to get record proceeds from auction this spring
Rupert Murdoch’s grip on European soccer is being challenged again.
Sky Plc, which lost its exclusive hold on English soccer broadcasts in 2007, now risks the same fate in Germany as rivals such as Deutsche Telekom AG and Discovery Communications Inc. prepare to bid against it in a TV rights auction. Sky, 39-percent owned by Murdoch’s 21st Century Fox Inc., has relied on Germans’ passion for teams such as Bayern Munich and Borussia Dortmund to win customers and a setback in the auction could derail its momentum.
Sky’s early bet on soccer broadcasts’ rising popularity -- it has held the rights for almost a decade now -- has paid off by making it Germany’s dominant pay-TV provider. Even as the auction price is forecast to reach 1 billion euros ($1.1 billion) a season, rivals are now set to challenge Sky for the games to attract subscribers and advertisers as movies and TV shows move to online services.
“Live domestic football is the best of the rights available,” said Dan Jones, head of Deloitte’s Sports Business Group. “They have that year around quality to attract and retain a subscriber base.”
Sky’s hold on German soccer dates back to the early 1990s, when its predecessor Premiere showed the first games live. The last time it lost the rights was in 2005, when cable operator Unitymedia GmbH beat Premiere, causing the company’s shares to collapse as much as 43 percent in one day.
The company bought them back for the 2007-2008 season and has held onto them since. Sky’s subscriber base in Germany and Austria has grown from about 2.6 million in 2010 to about 4.5 million today.
In a potential blow to Sky, German regulators may ask that the live rights go to more than one TV outlet for the first time. That would make the market similar to that of countries including the U.K. and Spain, where leagues have boosted revenue by selling rights to multiple pay-TV companies.
In that scenario, Sky could end up paying more than its winning bid in the previous auction for a smaller number of games, said Guy Peddy, an analyst at Macquarie Group who rates the stock outperform. Still, a broadcaster can be successful even with just a portion of the rights, said Deloitte’s Jones.
“As long as you still got a significant portion of the rights, the people who are big fans of that competition want to maintain their subscription,” Jones said.
Sky and BT last year agreed to pay a record 5.14 billion pounds ($7.3 billion) for the U.K. rights to broadcast live English Premier League soccer for three seasons, a 70 percent increase from the previous auction. In Spain, Telefonica SA, Orange SA and Vodafone Group Plc have acquired rights to broadcast Spanish first division and European soccer.
In Germany, analysts project the price to rise by more than a third to above 1 billion euros a season. The Bundesliga, which seeks to raise more cash to stay competitive with the Premier League and Spain’s La Liga, on March 21 invited companies to register for the auction. The league aims to complete the sale before the European championship tournament begins in France on June 10.
Shares of Sky declined 1.4 percent to 1,020 pence at 2:36 p.m. in London.
The list of potential bidders in the auction is long. It includes Bertelsmann SE’s RTL Group, which owns the rights to show the German national team’s qualifying matches for the 2016 European Championship and the 2018 World Cup, and Deutsche Telekom, which operates a popular online-TV service and was outbid by Sky in the previous auction.
Discovery, which owns rights to show the next four Olympic Games, and Perform Group, the company backed by billionaire Len Blavatnik that runs sports websites including Spox.com and snatched from Sky the contract to show the Premier League in Germany, both plan to bid, Manager Magazin reported on March 23.
Vodafone may also bid, according to Erhan Gurses, an analyst with Bloomberg Intelligence, and Haitong Research analysts led by John Karidis, who say premium soccer TV is worth more to companies that can also cross-sell fixed-line and mobile services.
Officials for Sky and the Bundesliga declined to comment. Discovery, Deutsche Telekom and Perform Group didn’t return calls and e-mails seeking comment. Vodafone is “monitoring” the process, said a spokeswoman for the company’s German unit, declining to comment further.
Live soccer has helped the German unit to become Sky’s fastest-growing business, and the market has more room to grow. The German division’s 4.5 million subscribers is far less than the 12 million Sky has in the U.K. and Ireland and Chief Executive Officer Jeremy Darroch said in November that Germany has the potential to top the U.K. as a pay-TV market because of consumers’ spending power.
“Premium sports rights are key to become a dominant player in a pay-TV market,” said Gurses. “For Sky, it’s very important to get as many games as possible, so I expect them to bid aggressively.”
(An earlier version of this story was corrected to remove reference to billionaire’s nationality in 14th paragraph.)