Losses mount at Premiere

Piracy, tax bill hit pay TV platform

BERLIN — Continuing piracy problems put the squeeze on pay TV platform Premiere’s bottom line in the second quarter of the year as its net loss grew 15.8% to Euros 37.8 million ($58.4 million).

The News Corp.-controlled paybox nevertheless saw revenue climb nearly 19% to $421.2 million.

Piracy has bedeviled the feevee operator since last winter and continues to wreak havoc, affecting its second-quarter performance.

“In view of the piracy problems, our second-quarter performance met our expectations,” said Premiere CEO Michael Boernicke. “We are aiming for high growth in the second half of the year, with many new customers and a higher ARPU [average revenue per user].”

Premiere is in the process of introducing new encryption security systems from News Corp.-owned NDS and Nagravision, part of Switzerland’s Kudelski Group.

“The conversion is going according to schedule and the security gap will be closed soon,” said Boernicke. “Anyone who has purchased a hacked receiver will soon realize that Premiere is only available to Premiere subscribers.”

At the same time, Premiere is looking to turn hundreds of thousands of pirate viewers into subscribers.

“We are confident that we can convince many pirate viewers of the benefits of a legal Premiere package,” Boernicke said. “When the gap in the system has been closed, all pirate viewers will sit in front of a blank screen. That gives us a big marketing opportunity, especially in the fourth quarter.”

It wasn’t just pirates plaguing the paybox, however. Premiere was also sucker-punched by the taxman. Due to a significant increase in deferred taxes, tax expenses soared from $8.5 million in the same period last year to $26.3 million.

Company currently has a total of 4.5 million customers, with 3.5 million direct subscribers and an additional 603,114 indirect customers who receive Premiere via pay TV outlet Arena. The paybox saw a 2.3% increase in direct subscribers compared to the second quarter of 2007.

In the wake of the federal antitrust watchdog’s rejection of plans by the German Football League (DFL) and media mogul Leo Kirch to produce and sell pre-packaged Bundesliga programming, Premiere is optimistic that it will again acquire the lucrative soccer rights.

“We have always underlined that Premiere is prepared for all scenarios,” Boernicke said, adding that Premiere would make an offer as soon as bidding commences. “The latest developments have not changed our position. Above all, we want to, and we will, make sure that we can continue presenting the Bundesliga to our customers. No decision has yet been made about the structure of the award of the rights and we still believe that our chances of acquiring the rights to the Bundesliga football with higher exclusivity overall are good.”

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