BSkyB makes first move into Europe

MATHEW HORSMAN

Media Editor

Rupert Murdoch's BSkyB yesterday plunged into the Continental pay-TV market, spending $270m for a 25 per cent stake in Premiere, the leading German channel that holds the rights to Bundesliga football, Germany's version of the Premiership.

The investment will be swiftly followed by a strategic alliance with three Continental media companies - Havas, Canal Plus and Bertelsmann - to develop digital television, in a move that heralds far closer co- operation among the big European pay-television players.

BSkyB, 40 per cent owned by Mr Murdoch's News Corporation, had been widely tipped to expand from its UK base, using its financial might to gain a foothold in the main European markets. Sky is Europe's largest pay-TV company, and controversially dominates the subscription market in the UK. Its growth has been powered by exclusive rights to broadcast films and sport, including matches of the Premiership.

Yesterday's developments finally give Mr Murdoch a foothold in the developing digital television market on the Continent. He is already a main partner of MCI in a planned US digital service.

The new alliance, presently called Newco, will be owned 30 per cent by BSkyB, 30 per cent by Canal Plus, the pioneering French pay-TV company, and 30 per cent by Bertelsmann, the German publishing and TV giant. Between them, the three have secured most of the slots available on the digital satellites being launched by Astra, the Luxembourg-based satellite company, over the next year.

Bertelsmann and Mr Murdoch's parent company, News Corp, already share a pay-TV channel, Vox, in Germany. Yesterday's announcement is unlikely to alter that arrangement.

Havas, the French media company, will hold a non-voting 10 per cent stake in the new alliance. It will also have an indirect stake via its 24 per cent stake in Canal Plus. Premiere, which has 1.1 million subscribers, is currently owned by the Kirch Group, Bertelesmann and Canal Plus. Following BSkyB's investment, the four companies will each hold 25 per cent of the channel.

Premiere's digital service is scheduled to be launched in Germany within a few months, and will give BSkyB its first opportunity to manage a new generation of satellite services. BSkyB is believed to be betting that the successful introduction of digital satellite TV in Germany, the biggest European market, will bring down the cost of developing similar services in the UK.

None the less, analysts expect the company to move slowly in its core British market, where it is already the dominant provider of pay-TV on analogue. "It is not in Sky's interest to move too early in the UK, given how much money it has managed to generate through its existing satellite services," said one leading City analyst.

BSkyB has been looking at Continental investments for several months, and seriously considered taking a stake in CLT, the Luxembourg-based media company that has extensive UK media interests.

A 60 per cent controlling stake in CLT has been put up for sale by Groupe Bruxelles Lambert, the financial services conglomerate, but BSkyB is believed to have been put off by the asking price.

Premiere, which serves German-language markets throughout Europe, has net assets of about DM6m, and had losses of DM71m in the year to June 1995. It is budgeted to break even in the fiscal year ending June 1997.

BSkyB is paying the equivalent of about $1,000 per Premiere subscriber, compared with a figure of $2,500 per subscriber used to price the BSkyB flotation two 18 months ago.

Sky currently has more than 5 million subscribers in the UK, including those served by cable.

Its hold on the UK pay-TV market has attracted the attention of the Office of Fair Trading, which is currently investigating the company's supply of programming to the cable industry.

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