Comcast′s takeover of Sky — what does it mean for viewers? | News | DW | 25.09.2018
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Comcast's takeover of Sky — what does it mean for viewers?

Analysts say Comcast overpaid for Europe's leading pay TV operator which could mean higher subscription fees. But if shareholders approve the takeover, viewers could also get to choose from more original shows.

Viewers can expect more original programming, expansion into new European markets, and higher subscription prices as a result of Comcast's $40 billion (€34 billion) takeover of Sky, industry analysts have predicted.

Sky's new owner — if the deal is approved by shareholders — is eager to grow the pay TV sector in Europe as Comcast's home market, the United States, is so saturated that its own market share has declined for the past three years.

Comcast, the world's second largest broadcaster and cable TV platform, beat off competition from Rupert Murdoch's Twenty-First Century Fox in a blind auction for Europe's leading pay TV operator this weekend.

Media industry analysts believe the deal will allow Sky to continue to thrive, despite the likes of Netflix and Amazon Prime taking huge bites out of the market.

"Sky will remain as powerful and potent a competitor as ever, with the additional benefits of Comcast's content and distribution skills behind it," predicted Russ Mould, Investment Director at the London-based investment platform AJ Bell.

First launched in Britain and Ireland in 1989, Sky has 27 million subscribers across Europe, after replicating its satellite TV business model in Germany (along with Austria and Switzerland), Italy and Spain — where it is purely an online player.

Read more: EU Parliament bans geoblocking, exempts Netflix and other streaming services

Watch video 04:21

Streaming versus cinema

Plenty of room for growth in European pay TV

IHS Markit's Research and Analysis Director, Tim Westcott, thinks Sky can still expand its core satellite TV business in Italy and Germany as "pay TV penetration is still relatively low."

Germany is Sky's second largest market with nearly 5.2 million subscribers out of a population of almost 83 million.

"There is more scope for growth via its online subscription platform, branded as NOW TV in the UK and Italy, and Sky Ticket in Germany," Westcott told DW.

NOW TV and Sky Ticket are the broadcaster's answers to Netflix and Amazon Prime. They stream many of Sky's linear TV channels and on demand programming, without consumers needing to sign up to long-term subscriptions.

Still from Das Boot (picture-alliance/Bavaria Fiction GmbH/Sky/N.M.Konietzny)

Sky Deutschland's original series, Das Boot, set during World War II, focuses on a German U-boat crew and the French resistance trying to disrupt their activities

Netflix catching up

Netflix, which already had 20 million subscribers across Europe at the end of 2017, has been helped by its massive investment in original programming, including smash hits like House of Cards, Unbreakable Kimmy Schmidt, and Orange is the New Black.

Read more: 'Dark': First German Netflix series reinvents an old theme

Sky, which is still often perceived as a mostly sports and movies player, still struggles to finance much big budget programming, but has boosted its reputation with the likes of Jamestown and Strikeback.

Westcott predicts that Comcast, through its subsidiary, NBC Universal — which runs one of the 'big three' terrestrial US television networks, could help Sky to step up a gear.

"Sky does a lot of co-productions, including Babylon Berlin and Das Boot, but does not always keep key rights; but NBC Universal could deficit finance more of its original productions in the future," he told DW.

Although Sky has deals with several Hollywood libraries, the platform could benefit from access to additional archives of US film and TV programming, which NBC Universal offers.

Read more: Amazon to produce 'Lord of the Rings' TV series

Pay TV is still lucrative

Westcott cautions, however, that while Sky and the likes of Netflix can co-exist while pay TV continues to grow, "there is a question mark about how many separate subscriptions consumers are going to maintain."

In the UK, the full HD Sky package, including movies, entertainment, sports, kids, box sets and the Sky Q set-top box can cost up to 91 pounds (€102 euros) per month. In Germany, the full package costs €69.99 after the first 12 months. A Netflix subscription, meanwhile, on four screens is 10 pounds in Britain, while a new "Ultra" subscription in Germany costs €17.

Sky also faces increased competition for rights to English Premier League soccer matches. From next year, these rights will be shared between three TV platforms, after Amazon Prime won permission to show some matches, mostly around the Christmas holiday.

Sky Deutschland, for the time being, holds the rights to most Bundesliga matches, although some are shared with public broadcaster ZDF and Eurosport.

Comcast's deep pockets could help Sky ward off further attacks from the new streaming platforms. After all, soccer rights are still the cornerstone of its business model.

Read more: Europe's public broadcasters struggle to compete in the digital world

Watch video 03:37

Swiss to decide whether to keep public broadcasting fee

Price rises possible for Sky subscribers

Consumers in all of Sky's European markets could face price rises as a result of Comcast's takeover. After all, the US media giant spent $2 billion more for Sky than Fox were prepared to pay. AJ Bell's Mould warned that it will take Comcast 37 years to get its money back, even with Sky's near-1 billion pound annual operation profit.

"As well as acquiring new customers, it will want to upsell to existing ones, in terms of content, technology and quality of service," he said.

Mould sees the arrival of 5G mobile technologies allowing yet another means of distributing high quality video content, which he believes consumers will pay a premium for.

The media industry's big thinkers point to Sky's advanced set-top box technology as being particularly valuable to its new owner. As well as featuring ultra HD technology, the latest Sky Q boxes feed back vital data about users' interests and viewing habits, something that advertisers increasingly demand.

Westcott said Comcast's plans for its expanded footprint into Europe would "certainly include smart advertising."

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