Sky Deutschland Shares Fall After News Corp-Owned Network Drops Paramount Films

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Stock in Rupert Murdoch's German pay-TV operation fall after group cancels studio output deal.

COLOGNE, Germany – Shares in Sky Deutschland, the German pay-TV group controlled by Rupert Murdoch's News Corporation, continue to slide following news that Sky will not renew its film output deal with Paramount Pictures.

Sky Deutschland stock dipped more than 2 per cent in late trading Wednesday, after falling up to 2.6 per cent on Tuesday, the first trading day after Sky announced it would not renew the Paramount deal. Though Sky shares made up much of the day's loss in a late rally, the stock remains some 3 per cent down compared to last week and 30 per cent off its high three months ago.

Sky Deutschland's licensing agreement with Paramount expires in January. Unless the two sides can reach a deal sometime in the future, Paramount blockbusters such as Mission: Impossible - Ghost Protocol will not be available on Germany's leading pay-TV platform. The German pay-TV group has output deals with the remaining five Hollywood major studios and will still have rights to several Paramount titles such as Cowboys & Aliens and Kung Fu Panda 2, which are licenced by other rights holders outside the U.S. Sky said Paramount films make up only a small fraction of its total film offering and that all Paramount films will continue to be available on its on-demand service Sky Select.

Paramount and Sky were apparently unable to come to terms, with Sky unwilling to pay more for top-tier features.

The announcement comes as Sky is in the midst of far more important negotiations: for rights to Germany's Bundesliga soccer. Sky pays around $360 million annually for Bundesliga pay-TV rights but CEO Brian Sullivan wants more: namely soccer rights for all platforms, from TVs to tablets to the Internet and mobile phones.

His main competitor is telco giant Deutsche Telekom, which holds Internet rights to the Bundesliga and is looking to add satellite TV rights for the league. Sullivan is counting on soccer-mad Germans to pull Sky out of the red ink. The company, in which News Corp. holds a nearly 50 per cent stake, is expected to lose up to €175 million ($230 million) this year.

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