Murdoch pay TV fails to meet subscriber goals

BERLIN — Speculation continues to surround Sky Deutschland and the future of topper Mark Williams as News Corp.’s money-losing German satcaster struggles to woo subscribers.

The rumor mill has Guillaume de Posch, former CEO of TV group ProSiebenSat.1 and a current member of Sky’s supervisory board, in line to replace Williams.

Sky denied a report by German weekly Spiegel that Williams might be on his way out as early as this year. Citing company insiders, the magazine said the “call was growing louder” at Sky for a manager with more experience in the subscription business.

Sky, which has 2.4 million subscribers, has been forced to lower its subscriber target for 2010. Williams had originally hoped to attract between 3 million and 3.4 million customers by the end of next year, but is now aiming for 2.8 million to 3 million and a break-even point in 2011.

The satcaster saw third-quarter losses grow by more than 30% to E116.7 million ($176 million) as revenue dropped 6% to $314 million.

Teutonic TV viewers have more than 30 free TV channels at their disposal and are already saddled with pubcaster license fees of nearly $30 a month, making them averse to forking over any more coin.

Premiere has been a money-losing enterprise since its launch nearly two decades ago. Hemorrhaging red ink, it caused the 2002 collapse of its former parent, the Kirch Group, in Germany’s biggest corporate meltdown since World War II.

That debacle also cost Rupert Murdoch, who had a stake in Kirch’s pay TV operation, £1 billion ($1.65 billion) — a loss Murdoch described at the time as a “black eye.”

More recently, Sky has faced competition from telco giant Deutsche Telekom and regional cable companies that have joined the game with feevee IPTV and cable services. And the faltering economy and jittery consumers haven’t helped.

News Corp. has invested about $1 billion in its German pay TV operation since taking a stake in January 2008, and losses have continued to mount.

Yet James Murdoch, News Corp.’s head of Europe and Asia, remains confident. He recently told Spiegel: “It was clear to us from the beginning that this would be difficult and that we would need time. But we will meet our goals. Our business has always been a challenge. … Sky Deutschland is potentially going to be one of the next large milestones.”

He has dismissed the difficulties of the German market, saying News Corp. faced the same concerns when building up Sky Italia in Italy and BSkyB in the U.K.

“People said that the BBC was wonderful and that the British were too stingy to pay extra for television,” Murdoch says. “We are now making Sky Deutschland a product that people will really want to pay for.”

Industry watchers have speculated that News Corp. might eventually seek to create a pan-European pay TV broadcaster, which would increase its buying power and reduce costs.

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