Sky Deutschland bets on big German TV expansion

At a time when many European pay-TV markets are either flat or declining, Germany’s is set for rapid expansion from a low historical base. As the country’s biggest pay-TV operator, Sky Deutschland has been investing heavily to boost the pay-TV market overall, and increase its share, by enhancing both its service quality and content range.
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At a time when many European pay-TV markets are either flat or declining, Germany’s is set for rapid expansion from a low historical base. As the country’s biggest pay-TV operator, Sky Deutschland has been investing heavily to boost the pay-TV market overall, and increase its share, by enhancing both its service quality and content range. The company edged out rival Deutsche Telekom from any share of rights for Germany’s Bundesliga premier league football, which has been gaining in popularity and strength. It now has total rights to show live Bundesliga matches for the four seasons 2013-2014 to 2016/2017, at a cost of around € 250 million per season.

At the same time Sky Deutschland, like its sister company BSkyB in the UK, has made content available to non-satellite subscribers on multi-screen devices OTT and has just announced development of a new set-top box with ultraHD capabilities. This is all part of a strategy to boost German pay TV as a whole and stake out Sky’s position, especially among the younger demographic, according to the operator’s CEO Brian Sullivan.

Speaking on the CEO panel at the CTAM (Cable and Telecommunications Association for Marketing) Europe summit in Barcelona, Sullivan said that embracing OTT as a distribution mechanism had increased the service’s appeal to younger people to the extent that its average viewer was more than seven years younger than it was a few years ago.

Deutsche Telekom has decided that now is the time to go for broke in the German pay-TV market, given the anticipated rapid growth, which will reward operators handsomely even if they merely hold onto market share, while amplifying the benefits of any gain. Speaking at a press lunch held by Sky Deutschland’s key infrastructure and User Interface (UI) software supplier Cisco at IBC 2013, the operator’s senior VP of technology Gerard Duffy agreed that Germany had lagged well behind other leading European economies in expansion of Pay TV, with penetration still only 18 percent out of 42 million homes. This compared with well over 50 percent in both France and the UK, even though those countries are considerably behind Germany in wealth per capita. This presents a huge opportunity for all operators, said Duffy.

Sullivan suggested at that CTAM panel that Germany’s long-standing aversion to paying for TV was partly explained by a reluctance in the country to make impulse purchases and partly the existence of well-funded public broadcasters, along with two commercial broadcasters that had sustained the free-to-air model better than peers in other countries.

One major fairly recent change though is that pay-TV operators, especially Sky Deutschland, now hold the keys to the most popular premium content. That is driving rapid growth in pay TV that is likely to be sustained for several years, rising by around 13 percent over 2012 to reach 6.1 million subs.