Comcast is writing down Sky’s value and seeking a buyer for its German business in a $1 billion deal

  • Comcast bought Sky for $39 billion in 2019
  • Peacock now has more than 15 million paying subscribers in the US
  • DAZN is making “double digit” layoffs but hiring engineers elsewhere

US media giant Comcast is considering a sale of Sky’s pay-TV business in Germany, according to Bloomberg, as it believes the underperforming unit is dragging growth in the UK.

According to the report, the German entity, which also includes operations in Austria and Switzerland, is valued at around $1 billion, reflecting its status within Sky’s European operations.

Sky’s revenue fell 14.7 percent to $4.3 billion in the third quarter, with lower revenue in Italy and Germany offsetting rising revenue in the UK, by far the company’s largest market. Across the group, the number of Sky subscribers even increased slightly by 1.4 percent to 22,986 compared to the second quarter.

Comcast acquired Sky for $39 billion in 2018 after a protracted bidding war, but has now written down the company’s value by $8.6 billion to reflect inflation and other changing macroeconomic conditions affecting the near-term will affect earnings potential.

However, the company says that excluding the impact of currency changes, revenue is at last year’s levels and is being boosted by the acquisition of 320,000 new subscribers across the business, bringing the total to 23 million. Comcast will also be pleased that the number of paid subscribers to NBC’s Peacock streaming service has surpassed 15 million for the first time.

“At Sky, our team continues to be carefully led through a difficult and rapidly changing macroeconomic and geopolitical period in the UK and Europe,” said Brian Roberts, Comcast Chief Executive. “Together, our company is a leader in very large and profitable markets. Despite the challenges that may lie ahead, we are in an enviable strategic and financial position and our future remains bright.”

One of the reasons for Sky’s success in Germany and Italy is the presence of DAZN. In Germany, DAZN has carved a prominent place in the Bundesliga rights picture, while in Italy Sky has been usurped by its rising rival as the leading Serie A broadcaster – the two domestic football leagues being by far the most important properties in any market.

However, DAZN has had its own challenges of late and is now refocusing on becoming an all-in-one sports platform, offering not only live streaming but also e-commerce, digital content and betting under the leadership of Chief Executive Shay Segev offers.

Deadline reports that more staff are to be laid off at the company’s London headquarters as it seeks to decentralize towards a “hub” model. The “double-digit” cuts are expected to primarily affect the company’s engineering and data analytics teams, with the company hiring in India, Poland and the Netherlands.

DAZN is set to double the size of its engineering team over the next 12 months to expand its global footprint. The company’s executive vice chairman, John Gleasure, is also moving into a non-executive role.

Comcast has been contacted for comment.

SportsPro says…

Sky revolutionized the pay-TV market in Europe when it launched its satellite service in the UK and used the embryonic Premier League to boost uptake in the early 1990s. The model has been replicated by many others around the world, with the former BSkyB taking full control of Sky Italia and Sky Deutschland in the mid-2010s.

This European presence offered many economies of scale when it came to technology, content and centralized resources, but continental companies have always lagged behind the UK, whose sports media market is second only to the US in terms of size.

Crucially, Sky also has significant mobile and broadband operations in the UK, allowing it to sell packages of multiple communications services. This increases sales and reduces churn.

Quite different Germany, which until recently was traditionally a weak pay-TV market. Former state monopoly Deutsche Telekom is a major player in both mobile and fixed-line connectivity, while Vodafone has expanded its footprint through acquisitions and full fiber joint ventures. It could be that Sky Deutschland is far more valuable as part of a larger communications company than a pure TV provider.

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