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Sky Deutschland aims to cash in on premium rates

Sky Deutschland AG, the German pay TV provider majority owned by Rupert Murdoch’s News Corp, has decided to raise prices in an attempt to sustain its recent rise into profitability for the first time.

The move appears to be done in attempt to rake back some of the cash spent on acquiring premium content rights, particularly sport. The operator has already embarked on this calculated gamble by raising prices for its premium packages for new or renewed contracts by €1 ($1.30) per month, the first increase in nearly two years.

Chief Financial Officer Steven Tomsic has been quoted as saying he wants to lift subscribers’ average €32 monthly subscription by €5 to €10 to where “a normal pay-TV business should be” in Western Europe. The operator has been emboldened to start raising prices by healthy subscriber growth, currently running at around 300,000 or 10 percent per year, with the total now just over 3.2 million. This is on the back of sustained growth in German pay TV driven partly by the dearth of premium content on Free To Air channels.

The major factor, though, in Sky Deutschland’s decision that it can afford to raise prices was its success earlier in the year in acquiring exclusive rights to Germany’s Bundesliga soccer matches; a move that ousted phone company Deutsche Telekom from its license for Internet-based broadcasts. Sky is paying €485.7 million per year for the four seasons from 2013 through the end of the 2017 schedule.

This is a lot of money to recoup, even if it is dwarfed by the value of the world’s leading football league, the UK’s EPL (English Premier League). There, Sky Deutschland’s sister company, BSkyB, actually lost some ground, with Telco BT gaining rights to broadcast live Premier League games for 38 matches per season from 2013-14 through 2015-16.

BSkyB will continue to show the bulk of games (116 per season). The total package was worth £3.018 billion, an increase of £1.25 billion on the current package that shares rights between BSkyB and ESPN. This equates to just over £1 billion ($1.6 billion) a year, more than twice the German Bundesliga rate.