Market Insight

Sky Deutschland to buy sports producer Plazamedia

December 06, 2013

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit

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Sky Deutschland is buying Bundesliga production company Plazamedia from Constantin Medien and stakes of 25.1% in the German company's Sport 1 division and rights company Constantin Sport Marketing for €57.5 million ($78.6 million).

The transaction is expected to be completed in the first half of 2014, subject to approval by competition regulators and the agreement of a new multi-year contract between Plazamedia and Sport1.

Plazamedia’s current contract with Sky Deutschland runs until mid-2017 and covers outside broadcast production and in-house production for the Bundesliga, the Champions League, Europa League and Formula 1 motor racing. The company, based north of Munich not far from Sky, also broadcasts HD and 3D sports channels for the pay TV platform. Its client roster includes public broadcaster ZDF and the Walt Disney Company Germany.

Sport1 (formerly Deutscher Sport Fernsehen or DSF) is a free-to-air channel offering a mixed schedule of sports including a live weekly match from the second division of the Bundesliga, German basketball, handball and ice hockey, and football leagues including the Italian Serie A and French Ligue 1. In 2010 the company launched a premium pay channel, Sport 1 Plus, and operates the online platform Sport1.de.

Constantin Medien’s main business is film production and distribution. In 2012, its sports segment generated €169.9 million in revenues, just under a third of total sales of €520.5 million. Revenues for the sports marketing segment were €57.6 million.

For a company which states its strategic objective to be ‘a leading media group in German-speaking countries, which generates stable, positive financial results’, the partnership with Sky Deutschland makes sense. Last year’s operating profit from Constantin’s sports segment was a modest €4.9 million on sales of €169.9 million. This year, its performance has been lacklustre, with sales for the first nine months down 6% at €104.6 million.

After years of struggling to establish premium pay TV in a market where low cost multichannel is prevalent, Sky Deutschland is powering ahead, with 3.5 million direct subscribers reported in the third quarter of the year and revenues of €1.1bn in the first nine months of 2013. The platform has also been profitable since Q3 last year and is now consolidated into its parent company 21st Century Fox alongside Sky Italia.

While Constantin is keen to develop the Sport 1 brand across multiple platforms, it remains to be seen how the hybrid free to air/pay TV/online brand will fit with the Sky Deutschland portfolio of services. A free-to-air sports network is somewhat unusual in the European media landscape – although Germany’s high multichannel penetration makes Sport 1 somewhat similar to a basic cable channel like Eurosport (though without carriage fees). In addition, Germany’s leading broadcasters RTL and ProSiebenSat1 are increasingly active in multichannel, threatening to lure away some of the channel’s male-skewing audience.

The launch of premium pay and online channels has made sense in a market where both premium pay TV and broadband are on the increase. Sport 1 has been able to exploit its rights across a number of different business models. However, it seems unlikely that Sky would retain the Sport 1 brand if it was securing full ownership rather than a minority stake.

The deal is perhaps most interesting in the context of the sports rights market and 21st Century Fox’s global play with the Fox Sports networks. With ownership of a company specialising in live sports production, Fox could move from simply acquiring rights to premium events to producing coverage itself as well as broadcasting and even marketing them internationally.

Last year, Fox acquired a stake in Eredivisie Media Marketing (EMM), the company owned by the senior Dutch football clubs, and has also struck deals with the Deutsche Fussball Liga (DFL) to acquire Bundesliga rights in multiple European and Asian territories. The DFL wants to increase revenues from international sales of the league and may be open to the idea of a partnership along EMM lines with a company which not only provides a domestic outlet for its properties but offers guarantees of increased revenues worldwide.

The DFL has been open to doing a deal of this kind before, agreeing to sell all rights to Leo Kirch’s Sirius in 2007. That deal was blocked by German regulators who wanted to secure highlights on free TV, but the now-deceased Kirch’s sports rights interests are now part of the Constantin Medien empire.

One of the attractions of such an arrangement from the Sky Deutschland/21st Century Fox point of view would be to exclude agencies from the equation and allow them to negotiate directly with rights holders, thereby avoiding the possibility of rights auctions which has led to continuing cost inflation. The Lega Calcio in Italy is reportedly considering a proposal from Infront Sports for a multi-year deal for media rights which it is thought would involve the agency acquiring Italian and international rights to Serie A.

Geography
Austria Germany
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