Profits down, subscribers up at Premiere

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COLOGNE, Germany -- German pay TV group Premiere beat the street in the third quarter, managing a slim net profit despite a pricey deal to buy back rights to premier soccer division the Bundesliga.

Premiere booked 100,000 Euros ($145,000) in profits in Q3 compared with 5.4 million Euros a year earlier, but most analysts had predicted a loss of between  6 million Euros -7 million Euros ($8.7 million-$10.2 million) as a result of the Bundesliga deal.

Getting soccer back paid off handsomely for Premiere, which added some 800,000 new subscribers to bring its total base to 4.17 million -- a 24% jump.

The bulk of these (3.5 million) receive Premiere directly via a set-top box, while the remainder subscribe via third person cable or satellite operators.

Revenue at Premiere was up as a consequence, increasing 8.2% to 247.5 million Euros ($360 million).

But the Bundesliga deal, which Premiere signed with Unity Media subsidiary Arena earlier this year, cut into profits. At a cost of 220 million Euros ($320 million) per season, the Bundesliga rights were largely responsible for a drop in operating profits (EBITDA) in Q3 year-to-year by about a third to 22 million Euros ($32 million).

Though this was considerably better than had been predicted by most observers, Premiere shares took a hit Tuesday (Nov. 6), falling 4% to 13.41 Euros ($19.5) in early trading.

Premiere still faces a major battle concerning Bundesliga rights from the 2009 season on.

In a surprise deal last month, Bavarian mogul Leo Kirch secured marketing rights to the Bundesliga for 500 million Euros ($727 million) a season. To recoup that, Kirch will have to squeeze more cash out of licensees Premiere and public broadcaster ARD, which air Bundesliga highlights on their top-rated Sportschau magazine.

In a conference call with journalists Tuesday, Premiere CEO Michael Bornicke said Premiere is still willing to pay more for more exclusive Bundesliga rights. He repeated his call for Bundesliga highlights on free TV to be pushed back into a late-night slot. Currently, ARD's Sportschau airs early evening, not long after the final whistle of most matches.

"Our goal is total exclusivity, a Sportschau at 10 p.m.," Bornicke said. "But of course other models are possible."

Bornicke said he was "more certain than ever" that Premiere would secure Bundesliga rights for the upcoming seasons. He shied away, however, from making any long-term financial forecasts, citing uncertainty concerning the fiscal impact of a new soccer deal.

"By early next year we should have a better idea what sort of agreement (with Kirch) will be possible," Bornicke said.

For the full year, Premiere said it expects to book 1 billion Euros ($1.45 billion) in revenues, down slightly from the 1.04 billion Euros -1.05 billion Euros ($1.51 billion-$1.53 billion) originally forecast. The company is targeting a full year EBITDA of between 80 million Euros -100 million Euros ($116 million-$145 million).
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