German Pay-TV Analysis: Football Rights Prove Difficult To Monetize.(Unity Media reports huge viewwrship for its Bundesliga football broadcasting)

Unity Media, Germany's second-largest cable operator, announced its latest results that have given indicators of the operator's early performance since it won the Bundesliga football rights around a year ago. Unity Media says that, after three months of broadcasting that began in August, Arena -- its new broadcast and satellite platform -- has close to 950,000 subscribers.

However, one analyst believes these early signs have not been encouraging for Unity Media. Ian Whittaker, a media equity analyst at UBS, wrote in a research note, "Unity has reported that it had 942,000 subscribers at the end of Q3 and that it reported an EBITDA loss of 45 million euros and Arena cash costs of c90 million euros over the first two months of the contract. Of these 942,000 subscribers, 246,000 are via satellite and 696,000 are via cable. 430,000 of these cable subscribers are via Premiere in KDG areas, with a further 80-100,000 in Kabel BW areas, implying less than 200,000 direct cable subscribers in Unity areas."

Whittaker adds, "The number of subscribers increased by just over 100,000 in October but, with the start of the football season now behind it and with 75 percent of Premiere's sport customers having churned or signed a new 12- or 24- month contract with Premiere, we would expect Arena's growth to now slow. Indeed, Unity expects just 1 million Arena subscribers by year-end, implying a sharp slowdown in net adds in Q4, with the total number of subscribers still well below the c2.5 million that it needs to break even on the rights."

In terms of attracting satellite customers, Whittaker writes, "In recent weeks, Arena has been offering a free box and a free subscription for three months with the option to churn after 60 days in an attempt to attract satellite customers. Premiere suggests it has seen no discernible impact from this offer - due to the fact that the set-top boxes being marketed by Arena are combined boxes through which customers can receive both Premiere and Unity. This should help reduce Premiere's satellite churn and its SAC costs, and represents an admission that the Arena channel on a standalone basis is not strong enough to cause Premiere customers to churn. It may even help to increase Premiere's subscriber base. The Q3 loss and probable difficulties in driving further subscriber growth are likely to put pressure on Unity to re-open satellite distribution talks with Premiere."

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