Paybox cries foul over Internet soccer rights

Deutsche Telekom ready to fight for IPTV

BERLIN — A spat over Internet rights to Bundesliga soccer matches is threatening to engulf Germany’s digital rollout in convergence confusion.

German digital TV has for years lagged behind other major markets, but that appeared set to change with the upcoming launch of Arena, a digital pay TV sports channel that last year landed lucrative rights to major league soccer.

Yet a gargantuan rival has materialized in the form of Deutsche Telekom, which is leading a high-stakes push for Internet protocol TV (IPTV), and Bundesliga soccer is what it needs to broaden penetration of the burgeoning technology.

The German Football League (DFL) last year sold Bundesliga pay TV rights to cable operator Unity Media, Arena’s parent, for e220 million ($278 million) a year and Internet rights to Deutsche Telekom for $63 million a year.

It was the most lucrative deal ever for the DFL, but the league appears to have overlooked a slight problem: As part of its Internet rights purchase, Deutsche Telekom secured IPTV rights to live games.

Since the telco does not have a TV broadcasting license, it’s in talks with paybox platform Premiere to carry the live Internet feed — pitting the paybox against Unity Media and its new channel.

For Arena and Unity, that’s a disturbing prospect, especially considering the coin they dished out for live pay TV rights.

The DFL tried to declare that there could only be one pay TV offer for Bundesliga soccer — Arena. But Deutsche Telekom and its Internet subsid T-Online maintain they have the legal right to broadcast on IPTV. Since the issue has never before cropped up in Germany, there are no regulations regarding it.

In a letter to the DFL from Deutsche Telekom cited by German weekly Der Spiegel, telco execs Walter Raizner and Burkhard Grassmann make it clear they’re ready for a fight: “We cannot accept this public restriction of the rights we have acquired.”

A deal with Deutsche Telekom would be a godsend for Premiere, whose share price has slumped 40% since losing the Bundesliga rights that pump up its subscriber numbers in December.

Many of its 3.5 million customers had been expected to defect to Arena, but if the paybox swings an IPTV deal with Deutsche Telekom, it might end up with a win-win situation, with subscribers possibly getting live Bundesliga games at a discount price.

For Arena, it could mean they vastly overpaid for their pay TV rights, as T-Online and Premiere users won’t need to subscribe to a new sports channel.

Perhaps more strategically interesting for Deutsche Telekom are the opportunities IPTV would present.

While Germany’s TV ad market has not grown since 2000, online advertising has an annual growth rate of 12%, according to a study published by the Medienboard Berlin-Brandenburg.

Some 27% of German households have broadband access, a percentage that is expected to double by 2008.

IPTV usage is limited to video-on-demand services, but T-Online is ensuring a fast and far-reaching IPTV rollout, investing $4.4 billion in local broadband and IPTV infrastructure.

Key to selling the technology is content. And for Germans, there’s nothing that beats soccer.

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