Premiere Strikes CAM Deal

By | October 23, 2002 | Feature

Premiere, the German satellite pay-TV operator, has signed a deal with SCM Microsystems, under which SCM will provide secure broadcast decryption technology to Premiere. Premiere will offer SCM conditional access modules (CAMs) to its new subscribers later this year.

According to SCM, this is the first time a major European operator will deliver decryption technology through the common interface slot. Operators have previously borne the brunt of costs by producing, deploying and supporting set-top boxes. This new solution enables Premiere to offer new subscribers a removable CAM, which contains Premiere’s decryption software and can be plugged in to any digital set-top box with a common interface slot.

The deal is a key one for SCM Microsystems, despite Premiere’s financial concerns. Robert Schneider, CEO of SCM Microsystems, told Interspace: “The deal is worth a lot as the technology that was developed and introduced by SCM now is not just shipped into niche markets, but to one of the big European players. With regard to the financial situation of Premiere or the Kirch Group, we do not have any concerns, as we are convinced that pay TV in Germany will survive. In fact, SCM’s technology can help make this possible by dramatically lowering the cost of deploying decryption hardware to subscribers.”

Cutting costs is the key to the deal. Pay-TV operators have traditionally subsidised an embedded set-top boxes to customers. This is an expensive process. Schneider said that SCM’s solution offers a much more viable alternative. “With SCM’s technology, it is just a little module plus a smart card to authorise services that is given to the subscriber for the usual monthly subscription fee. The module then slots into a standard common interface in a set-top box, which many households either already have bought in the past or will buy due to the analogue switch-off, which is happening over the next few years.”

Schneider hopes this deal will pave the way for others in Europe. “We are talking to all major European operators about this technology. Our leading-edge technology, our expertise in DTV and conditional access modules as well as our many years experience in that field will help us to strike our next deals with pay TV operators.”

Closer To Breakeven

The deal comes at a time when Premiere is getting closer to the breakeven point, having acquired 100,000 more subscribers in August and September. This strong performance comes at a time when Premiere’s long-term future is in doubt. While there has been interest from banks and media companies in investing in Premiere, no deal has been yet forthcoming, although Premiere CEO Georg Kofler remains optimistic that a deal can be done.

The latest subscriber figures are a boost and perhaps an indication that Premiere could yet become a force in Germany. Bertold Heil, head of broadcast media and online entertainment at Detecon International, said: “From what we hear from Premiere, business is actually better than what it expected to be this year … My current view is that Kofler has done a good job of reducing costs and [acquiring] content. He has also done a good job in terms of infrastructure. They have cut down part of their own CRM infrastructure and are outsourcing parts of it. They have made the overall organisation of Premiere leaner.”

Premiere needs around 2.9 million subscribers to breakeven. It now has around 2.44 million subscribers, so it is possible it could reach breakeven in 2003. Despite improved performance, better deals with Hollywood studios such as MGM, Warner Brothers, Universal, 20th Century Fox and DreamWorks, and cost cutting, Premiere still desperately needs new investors.

Heil observed: “I think Premiere is able to support itself up to a certain point. I think they are able to make content deals without any additional outside money right now. The question is what they will do when there needs to be a major exchange of client infrastructure. I think this will definitely pose additional pressures in the future. This will be a situation where Kofler will need more money.”

–Mark Holmes

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