Germany’s Bundesliga football rights for the 2013-14 to 2016-17 seasons are coming up for grabs. Sky Deutschland currently holds most of the rights. While the Tender documents have yet to be published (they are due out in the next few days) there’s now considerable doubt as to whether Sky’s arch rival Deutsche Telekom (DT) will be allowed to bid.
Morgan Stanley, in a note to clients, reminds them that since the back end of 2011 the expectation has grown that DT will bid not just for the IPTV rights that it holds under the current deal, but also for the broadcast rights. “As a result the Sky Deutschland share price has plummeted, from circa €2.40 in September/October to around €1.65 today. The latest debate surrounds the status of DT, which is 27 per cent owned by the state, and the restrictions on state entities in Germany holding broadcast licences. In effect state entities in Germany are not allowed to own broadcast licences. They are allowed to transmit the channels of third parties through their infrastructure but not to devise channels of their own. DT, however, already has a channel operation in the shape of LIGA total!, the channel it created to employ the IPTV Bundesliga rights that it currently owns. The channel is run, however, by Constantin Medien, an independent sports business. As Constantin Medien says on its website profile, “in the field of IPTV, subsidiary Constantin Sport Medien operates the Bundesliga live channel LIGA total! as a self-contained live programme.”
The bank’s note says “This loophole allows DT to operate a channel in the emerging technology of IPTV (effectively ‘narrowcast’ rather than broadcast). The suggestion is that an attempt by DT to buy the core broadcast and cable rights, which would have far wider distribution, would be a clear breach of German law and one that would be challenged by other players, notably Sky Deutschland, if it tried to go ahead. Sky Deutschland is clearly happy to suggest that it would resist any attempt by DT to buy the broadcast rights.”
“This latest objection to DT buying the broadcast rights is in addition to the other obstacles that we see for DT: (i) that the broadcast rights would do nothing for DT in its battle against cable; (ii) the requirement it would face to offer Bundesliga to the cable companies if it offered the rights; (iii) the issue of getting adequate distribution to satisfy the Bundesliga and the Cartel Office; (iv) the existing strong relationship that the Bundesliga has with Sky Deutschland; and (v) the expense – DT would be committing circa €1.5 billion over four years to the rights but has had little success thus far with its LIGA total! product (circa 0.2 million subs).”
In summary, the bank says it does NOT see DT bidding for the football rights, and forecasts “a positive sequence of events” for Sky Deutschland, and “a recovery in its share price.”