News Corp.'s Sky Deutschland Halves Quarterly Loss

Scott Roxborough
News Corp.'s Sky Deutschland Halves Quarterly Loss

COLOGNE, Germany – Slowly, slowly, Rupert Murdoch's Germany's pay-TV group Sky Deutschland is improving.

Preliminary first quarter figures posted today show another double digit revenue boost, with sales up 14 percent to $478 million (€364 million) and a slim operating (EBIDTA) profit of $7.6 million (€5.8 million) for the first three months of this year, compared to a $53 million (€40.6 million) loss over Q1 2012.

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Sky is still a ways from making real profits but quarterly losses were trimmed considerably, with a net loss of $49.4 million (€37.6 million) for the quarter, just over half the €73 million loss over the same period last year.

The news should further boost Sky shares, coming as it does after a strong year for the group, in which Murdoch's News Corp holds a 54.8 percent stake.  Under CEO Brian Sullivan, Sky Deutschland last year increased sales in 2012 17.1 percent to $1.75 billion (€1.33 billion) while net losses were cut by a third to $256 million (€195.2 million).

Sky ended the first quarter of this year with 3.4 million direct customers, a slim net increase compared to Q1 2012 of 42,000. Sky Deutschland still lags far behind News Corp.'s other European pay channels. In Italy, though subscriber figures have slipped as a result of the recession there, they still hover around 4.5 million. In Britain, BSkyB with its 10.7 million subscribers, is more than three times the size of Sky Deutschland despite serving a smaller market.

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While lagging behind its European neighbors, German (and Austrian) pay-TV penetration has shot up in recent years, growing from 10.3 percent in 2008 to 17.1 percent at the end of 2011. That's still middling compared to the 59.2 percent of French viewers who subscribe to a pay-TV package, the 56.8 percent of Brits or Italy's 35 percent, indicating there is still plenty of room for growth.

News Corp. is betting big on that growth. Murdoch's group recently extended Sky Deutschland a new, five-year $394 million (€300 million) loan and is a  guarantor for up to 50 percent of the cost of the group's $2.5 billion (€1.94 billion) deal to buy pay-TV rights to Germany's Bundesliga soccer through to 2016/2017.