Cloudy Sky

With the German Bundesliga starting its soccer season in just over a week, media reports indicate a growing wariness among sporting officials as the pay-television operator Sky Deutschland, which has exclusive live-television broadcasting rights to the games, sinks further into substantial debt.

The German Football League (DFL), parent organization of the Bundesliga, will earn 1.65 billion euros through television rights from 2009 until 2013. Some 60 percent of that income comes from Sky, and if it is jeopardized, individual clubs may struggle financially.

DFL President Reinhard Rauball recently dismissed concerns, saying: "We're informed about this and are following the numbers with appropriate interest. Based on what we know as of now, everything is still within reason."

Nevertheless, Rauball said the organization had distributed financial information about Sky Deutschland to each of its 36 professional clubs.

Media mogul Rupert Murdoch's NewsCorp owns 45.4 percent of the Sky Deutschland and has invested at least 750 million euros ($1 billion) into German pay-TV. Faced this year with losses greater than the 130-170 million euros anticipated, Sky Deutschland has announced plans to raise an additional 340 million euros ($448 million) in capital.

Similarities to 2002 crisis

In 2002, the Bundesliga was faced with a crisis when the Kirch Group collapsed under debt, leaving the company unable to pay more than 100 million euros for contracted television rights. Politicians floated the idea of bailing out the Bundesliga, which did recover, and rights to broadcast the 2002 and 2006 World Cup games were eventually transferred to an unaffected Kirch subsidiary in Switzerland.

One industry analyst familiar with Sky Deutschland's operations told Deutsche Welle a similar crisis is unlikely. even if the broadcaster were to be shuttered, as NewsCorp would almost certainly do so in an orderly manner. Also, telecommunications giant Deutsche Telekom would likely be eager to acquire live-broadcasting rights as it is seeks to raise its profile as a content provider.

Deutsche Telekom currently owns the rights to broadcast Bundesliga games over subscriber-based internet-TV bundled with a high-speed internet connection. They have nearly half the number of Sky Deutschland's 2.4 million pay-TV subscribers.

Pay-TV small piece of the pie

Thomas Netzer of McKinsey & Company, which published a study of the economic impact of the Bundesliga in March, said he doesn't believe the Bundesliga has much to fear. The study found the league produces an economic added-value of 5.1 billion each year, of which Netzer said media commercialization represents 40 percent.

On its own, however, Sky represents significantly less than 10 percent of the Bundesliga's overall added value. Also, a significant number of Germans watch football in pubs rather than at home.

"On the one hand the percentage of this (media) commercialization of the 5 billion euros is fairly high… more than a third," Netzer told Deutsche Welle. "On the other hand, the percentage of Sky specifically is very manageable. It's not as though everything depends on pay-TV. It's actually the opposite case – the numbers are quite minimal."

Author: Gerhard Schneibel
Editor: Sam Edmonds