BERLIN — German pay TV operator Premiere may be in shambles, but for Rupert Murdoch, the crisis could provide an opportunity he can’t pass up.
The feevee platform was rocked by a recent scandal that wiped out its share price and left its future in doubt.
Since January, when Murdoch started building his stake in Premiere, currently at 25%, shares have slid 85% to their current price of $3.16. They took a particularly steep nosedive earlier this month after Premiere issued a profit warning and admitted it had nearly 1 million fewer subscribers than it had previously touted — 2.4 million instead of the 3.5 million reported in June. Premiere is now expecting operating losses of between $56 million and $98 million this year.
The admission led to the resignation of Premiere’s chief financial officer, Alexander Teschner, just a month after the exit of former CEO Michael Boernicke, who was replaced by Mark Williams, News Corp.’s finance chief for Europe and Asia.
Premiere’s new management was quick to recalculate subscription accounts, and ended up striking 940,000 subscribers from its books. More than 600,000 of those were contracts that had never been activated, while 300,000 more were former customers who had cancelled their subscriptions but remained listed.
Critics have accused Premiere’s former management, including ex-chief exec Georg Kofler, who stepped down last year, of publishing misleading subscriber numbers. Some irate Premiere shareholders are even considering legal action, saying the feevee operator withheld information that would have had a direct impact on the company’s share price.
Kofler has emphatically denied any wrongdoing, and defended his management of the company, adding that every stated euro was properly earned under his watch at Premiere. He has described his strategy at Premiere as one of “high market penetration,” saying it was “better to have more subscriptions with lower revenue per customer than fewer subscriptions with higher revenue.”
Last week Williams called for Italian muscle to help with the cleanup, recruiting three top execs from News Corp.’s much more successful satcaster, Sky Italia: Giovanni Brunelli takes over as new senior VP of customer operations, Marcello Maggioni is new senior VP of sales and marketing and Gaetano Pannito has been appointed VP of sales.
“Our immediate focus is to improve both customer satisfaction and our rate of new customer acquisition,” Williams says.
With the all-important Christmas season approaching, the cleanup at Premiere is vital.
Despite the bad news, however, the share slump could be a good time for News Corp. to up its stake in Premiere at a bargain price. If Murdoch makes a grab for more than 30% of Premiere, he’ll be legally required to make an offer to minority shareholders based on the share’s average price of the past three months. So he may be hoping Premiere’s share price stays in the basement through January.
Meanwhile, News Corp. is expected to make an offer for top league Bundesliga soccer, Premiere’s biggest programming asset.
The Bundesliga rights remain in limbo after Germany’s antitrust watchdog nixed a $4 billion deal between the German Football League and media mogul Leo Kirch, Premiere’s one-time owner, to jointly market the rights.