German satellite pay-TV operator Premiere will make a decision next year whether to hold an initial public offering (IPO) of stock. The operator, which expects to break through the 3 million subscriber mark in January, could go to the financial markets in early 2005.

Premiere CEO Georg Kofler told SATELLITE NEWS’ sister publication Inside Digital TV in an exclusive interview: “Our main challenge is, in a nutshell, to reach sustained profitability. If our business continues to develop that well, Premiere would certainly be an attractive candidate for an IPO. In early 2005, we will see whether it makes sense to go public.”

Dramatic Turnaround

The operator has seen a dramatic turnaround recently. “In the last 15 months our net subscriber base has grown by 405,000. When you recall the situation Premiere was in 18 months ago, I would say this is quite an achievement. Now we are well on our way to reaching our aim for the end of this year: the 2.9 million mark. The Christmas business and the change of our CA [conditional access] system will give additional strong impetus.”

He continued: “Our business performance this year has by far exceeded our expectations. For 2004, we’re anticipating positive EBITDA [earnings before interest, taxes, depreciation and amortization] figures running into the tens of millions, as well as reaching 3 million subscribers during the first quarter.”

One area where the operator has made significant progress is in terms of contracts with Hollywood studios. Previously, Premiere had been locked into expensive content deals that were hampering its potential growth. The renegotiating of these contracts represents one of Kofler’s main achievements in his time at Premiere. “Today, we’ve got deals with all major Hollywood studios. And we have certainly achieved a lot in renegotiating all the contracts: an average saving of 50 to 70 percent! Now we have an excellent basis for the best program offering in the history of Premiere, with which we’re able to outclass conventional television even more noticeably than before. There is a real blockbuster guarantee for our viewers. Anyone missing a film on the cinema circuit will have a 95 percent chance of seeing it on Premiere.”

The German pay-TV market, however, has some tough dynamics. Free-to-air (FTA) television is very strong in Germany, with consumers able to access numerous channels, providing less incentives for pay-TV alternatives such as Premiere.

“With over 30 free-TV channels in Germany, we certainly face much tougher competition than other pay-TV channels in Europe. Most notably, we have to cope with the most comprehensive and multifaceted public television offer in the world — 22 TV and 64 radio stations. This is excessive and, surely, doesn’t comply with the public broadcasting task of supplying basic service,” Kofler said.

He continued: “The consequences of this situation are a slow-down in innovation and a drastic restriction in opportunities for private operators. In addition, the media budget available to households is burdened by unnecessarily high compulsory fees. These add up to over 6.5 billion euros ($8 billion) a year. On top of that, public broadcasting makes money from advertising. Nevertheless, we have succeeded in establishing Premiere as a third pillar in the private TV sector – by offering Germany’s finest television and real added value.”

Programming Promotion

Despite the market dynamics, Premier has had success due to its PREMIERE START package, which enables viewers to gain a taster of Premiere at a low cost. “The starter package was introduced in May 2002 as a door-opener not only to Premiere, but to the world of digital television as a whole. Marketing new digital receivers in a bundle with PREMIERE START has made digital television much more appealing for a broad market. It has proved a very successful concept and has had a significant impact on our development. And what’s more: well over a third of PREMIERE START subscribers have already upgraded to a premium package,” Kofler said.

In term of challenges for the operator in 2004, it could launch a personal video recorder (PVR) product in the near future. “We’re anticipating PVR receivers suitable for Premiere in the first six months of 2004 and are currently discussing the necessary specifications with various manufacturers. In a first step, these receivers mean more convenience for our viewers. At a later stage, hard drive receivers will contribute to our pay-per-view offer on PREMIERE DIREKT becoming even more multifaceted, i.e. practically on demand,” Kofler said.

–Mark Holmes

(Julia Buchmaier, Premiere, e- mail: [email protected])