| FRANKFURT/LONDON, April 5
FRANKFURT/LONDON, April 5 Incumbent Sky
Deutschland is tipped to fend off a heavyweight
challenge from Deutsche Telekom and retain the main
live rights to top-flight German soccer, but the competition
will drive up the cost.
The German Football League (DFL) will discuss bids at a
meeting on April 17 when it is hoping to announce the contract
award for the four seasons from 2013-14.
Loss-making Sky Deutschland, 49.9 percent-owned
by Rupert Murdoch's News Corp, has been paying around
250 million euros ($328 million) a season for cable and
satellite rights to Bundesliga action, and analysts see that sum
rising by 10-25 percent for the next four seasons.
Deutsche Telekom, which has the internet and mobile rights,
this week submitted a bid to rival Sky Deutschland. The two
companies and the DFL all said they could not comment before the
results of the auction were announced.
About a dozen bidders have reportedly pitched for various
packages in an auction seen raising a record sum of at least 450
million euros a season, up from 412 million at present.
The DFL can accept any bidder offering within 20 percent of
the highest offer and may opt to stick with what it knows best
for cable and satellite.
"We believe that it is very likely that Sky will receive
again the license to broadcast live Bundesliga," Silvia Quandt
analyst Klaus Kraenzle said.
Unlike rivals elsewhere in Europe, such as Spain's Real
Madrid or English champions Manchester United, German soccer
clubs derive the biggest share of revenue from sponsorship deals
rather than broadcast rights.
That puts a premium on audience: the more people watch the
matches, the more sponsors are willing to pay.
"By maximising the eyeballs viewing shirt logos and stadium
banners, we see this maximising commercial revenues for many
clubs," JP Morgan said.
Bayern Munich are Germany's richest club, but ranked behind
Madrid, European champions Barcelona and Manchester United in
terms of revenue in 2010/11, according to a study by Deloitte.
Schalke 04 were the only other German club in the top 10.
The Bundesliga has a strong German audience but lacks the
international appeal of the English Premier League, which can do
highly lucrative overseas TV deals.
Aside from Sky Deutschland and Deutsche Telekom, media
reports said Unitymedia and Liberty Global's Kabel
Deutschland were also vying for rights.
Deutsche Telekom has drawn public criticism for its bid,
both because it is one third state-owned and because its move
could put Sky Deutschland out of business entirely.
Sky Deutschland's business relies heavily on the rights
because soccer is a big draw for its 3 million subscribers.
That model has been most successful in England where BSkyB,
in which News Corp is the largest shareholder, has built
its business in partnership with the English Premier League.
To shore up cash for the rights, Sky Deutschland sold new
shares for more than 150 million euros earlier this year and has
plans to raise about another 150 million by the end of the year.
Sky's predecessor Premiere lost the cable and satellite
rights once before, when DFL awarded the rights to a new player
called Arena in a shock move in 2005. But lacking infrastructure
and reach, Arena ended up throwing in the towel and
sub-licensing the rights back.
Deutsche Telekom, which generates more than 50 times as much
annual revenue as Sky Deutschland, has been pushing its way into
TV to offset sluggish growth in the telephone business.
If it wins the bid for the Bundesliga rights, it plans to
sub-license them to third parties with no exclusivity. Under
that model, matches could be shown on several platforms.
In addition, Deutsche Telekom has its own pay-TV soccer
channel, "Liga Total", which has about 160,000 subscribers.
"Assuming a cost of 400 million euros per year, with 50
percent wholesaled back to cable operators, and that the
Bundesliga package is sold at the same price as on IPTV today,
Deutsche Telekom would need to sign up over 1.3 million
subscribers to break even. This is likely to prove challenging,"
Nomura analyst Frederic Boulan said.
Sports rights are also drawing lively interest in other
parts of Europe.
Al Jazeera, best known for its Middle Eastern news coverage,
is taking aim at Europe's pay-TV market, using sport to build a
global media brand, just as owner Qatar is raising its profile
by hosting the 2022 World Cup.
($1 = 0.7518 euros)
(Reporting by Maria Sheahan; Additional reporting by Christian
Kraemer; Editing by Helen Massy-Beresford)