BSkyB's plan to buy Rupert Murdoch's pay-TV assets in Italy and Germany for perhaps as much as €10 billion is a bold bet on long-term growth at the expense of short-term profit, but the pioneering British media firm has pulled off such gambles before.
Facing the toughest market conditions in its 25-year history, BSkyB has opened talks with Murdoch's 21st Century Fox to acquire Sky Deutschland and Sky Italia to create a European powerhouse with 20 million subscribers.
BSkyB, also 39 per cent-owned by the Australian-born media mogul, is in more than 10 million homes in Britain and Ireland, and is now betting that the time is right to enter two European markets where pay-TV is not yet as popular or profitable.Analysts have put the likely price at between €7 billion and €10 billion.
BSkyB, which is facing a new challenge at home from telecoms group BT, would expand its potential market to 95 million households by moving into Italy and Germany.
However, it could take a while for the benefits of creating a so-called Sky Europe to pay off, as the risks of entering Germany and Italy are not inconsequential.
Sky Italia, 100 per cent owned by Fox, is Italy’s biggest pay-TV operator in a market where those willing to pay for TV has slumped during the downturn, to 34 per cent of households in 2013 from almost 40 per cent in 2009, according to Bernstein Research.
In Germany, the market is constrained by long-established habit. According to industry research, less than 20 per cent of German households pay for television, well below the 54 per cent in Britain, due in part to the strong position of German free-to-air TV.
While the Sky Deutschland business is growing strongly in terms of customer additions and revenue, due to the appeal of its soccer programming, it has not made an operating profit in recent years. – Reuters
