Premiere's chief looks beyond loss of soccer

Andreas Tzortzis
International Herald Tribune
01-23-2006
Less than a year ago, analysts could not get enough of Georg Kofler, the dynamic chief executive of the German pay television broadcaster Premiere. He was everybody's darling when Premiere made a triumphant debut on the Frankfurt Stock Exchange.But after a few months of basking in the limelight, Kofler lost soccer broadcasting rights, the crown jewels of European pay television, to an upstart cable company in December. Premiere's stock plunged 40 percent in one day, and the same analysts that once cheered him now are wondering how far he and Premiere will fall.Some analysts say that Kofler made a mistake by trying to squeeze more exclusivity out of his bid to renew Premiere's rights to the soccer games. The rights instead went to Arena, a subsidiary of the cable operator Unity Media, which plans to begin broadcasting live matches in August."I think it was a tremendous mistake, a management mistake," said Stefan Weiss of WestLB in London. "They really played a bit too high and had no backup plan, and now they're sitting there with almost nothing left." In Europe's changing television landscape, the rights to broadcast soccer are the one thing companies cannot afford not to afford. British Sky Broadcasting, the satellite operator, has the rights to broadcast Premiership matches to thank for its booming subscriber count. Looking ahead, telecommunications companies in Belgium and the Netherlands have scooped up domestic league rights in order to promote digital television offerings over fast Internet lines.Premiere had counted on the soccer rights to help increase its subscriber count beyond a stagnant 3.5 million, and analysts now wonder how the company's managers plan to steel themselves for the coming battles with cable and telecommunications companies for viewers' living rooms.Kofler insists that his company is still in good shape."There is absolutely no reason to panic," he told Frankfurter Allgemeine Zeitung after the announcement. "Nothing changes in the Premiere offering until September. I've never had so much time to prepare for possible changes at Premiere."Kofler was not available to comment for this article. Analysts say it is too early to tell how damaging the loss could be for Kofler and Premiere. The company immediately filed a lawsuit against Unity after the announcement, asserting that the cable company and Arena, the subsidiary, violated antitrust regulations by controlling a cable network and providing content for it. The same regulation doomed Liberty Media's attempt to enter the German cable market in 2002.This month, Premiere introduced a print and television ad campaign aimed at pacifying jittery subscribers and shareholders.Analysts have said that the lawsuit may be intended to further complicate Unity Media's effort to set up a compelling soccer offering in a very short time. Questions remain on how Unity, which now operates in only two German states, will gain enough reach to fully exploit the soccer rights."Cable has made this sort of play in other countries and then backed down," said Guy Bisson of Screen Digest in London. "They simply didn't have the customer base to market these rights." Analysts are not ruling out cooperation agreements. Premiere's most valuable asset continues to be the content and analysis that it offers in its current soccer package. Most analysts cannot imagine that this will simply disappear.Kofler said he was not averse to talking with Unity Media, and analysts foresee content swaps that could put Premiere soccer content on Arena.A possible cooperation with Deutsche Telekom has analysts salivating as well. Telekom became the first European operator to win exclusive live Internet broadcast rights to soccer games, something that Peter-Thilo Hasler of Hypovereinsbank considers the hidden jewel of the rights auction.With Telekom upgrading its cable networks to a quicker broadband standard in the coming months, the way is clear for digital television over broadband, part of the "triple play" services combining television, telephone and DSL that analysts consider the future of broadcasting. Hasler says he believes Telekom's soccer-rights package would allow it to pipe content through a digital set-top box into living rooms.Hasler said Telekom's soccer effort "offers a chance for Premiere, because they can offer their content, but it's also a threat."After plunging as low as 12 after the loss of the soccer rights, the stock has recovered only slightly, closing at 12.20 on Friday. Shareholders who bought at the initial public offering price of 28 in March have a long way to go before they break even.

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