Sky Deutschland Getting Out of Race for Formula One Rights?

Brian Sullivan - P 2011

Sky Deutschland boss Brian Sullivan is considering dropping the pricey racing circuit when Sky’s F1 contract expires at year’s end.

COLOGNE, Germany – Sky Deutschland, the German pay TV group controlled by Rupert Murdochs’s News Corp., is pondering a radical shift in strategy that could see it stop bidding for rights to the popular Formula One racing circuit.

In an interview published Monday (Nov. 14) in the Financial Times Deutschland, Sky Deutschland CEO Brian Sullivan said he was reviewing Sky’s F1 contracts, which come up for renewal at year’s end.

“We are going to concentrate on intelligent investments,” said Sullivan, suggesting Sky could drop costly Formula One rights in favor of more lucrative opportunities. Formula One racing is among the most popular televised sports in Germany but Sky does not have exclusive rights to the circuit since free-to-air network RTL also airs F1 races.

“The Formula 1 is a great product, but it also has a very strong presence in free TV,” said Sullivan.

In an even more radical move, Sullivan said he would not fight Germany’s public broadcasters for more exclusivity when it comes to soccer rights. Sky currently pays $378 million (€275 million) a year for pay rights to Germany’s premium soccer league, the Bundesliga. It, however, has to share rights with pubweb ARD, which carries highlights of the day’s matches on its top-rated Sportschau program. Sky has always fought ARD on this point. But no longer.

“We can live with Sportschau,” Sullivan told the FTD. “I think our business will continue to grow, independent of it.”

Sky Deutschland’s business has been growing, albeit slowly, since Sullivan took over the reigns of the company in early 2010. Revenues so far this year are up 16 percent to $1.1 billion and net losses down 30 percent at $257 million.

Sullivan has boosted subscribers 13 percent to just below 2.9 million, increased monthly revenue per subscriber and reduced churn (the number of customers than cancel their subscriptions every month) to 11 percent from 19 percent last year.

The company is still a ways from break even, however. Sky Deutschland will remain dependant on the largesse of News Corp (which holds a 49 percent stake in the company) for some time to come.