Exclusive Interview: Sky Deutschland’s Brian Sullivan

PREMIUM: Since News Corporation began investing in the German pay-TV company Premiere, and re-branded it Sky Deutschland, the service has been adding subscribers and improving its financial performance. CEO Brian Sullivan tells World Screen how German consumers had not been getting what they deserve and how Sky Deutschland is now meeting their underserved needs.

WS: Are you seeing demand on the part of German viewers for a good pay-TV product?
SULLIVAN: Absolutely, we are seeing substantial subscriber growth for the first time in years in this marketplace. There is increased viewership of the pay-TV channels and in particular the Sky channels. The place where we are seeing that most is in the area of high definition. And that comes through in our satisfaction figures. We track, as any proper pay-TV operator around the world does, all sorts of metrics from our customers to understand what we are doing right and what we could be doing better, and we’ve just seen the highest satisfaction levels in the 20-year history of the company, just in the last quarter.

WS: What has been driving that satisfaction?
SULLIVAN: We’ve substantially increased our HD channel offering. Over the last two years it’s gone from one to three to seven to 12 channels and it’s going to continue to grow this year. We have massively increased the innovation we offer subscribers with a fantastic HD PVR [personal video recorder]. We brought 3D into the marketplace last October. We’re starting to deliver some of our own programming to wrap around our sports and movies and general entertainment, as well as acquiring the best television [product] both local and from around the world. And the customer service we are providing is a critical part as well. If someone is paying you a monthly fee from their hard-earned paycheck, they want a few basic things: [they want] the best experience in terms of the content on the screen, they want the best picture quality and they want the best service underneath it to make sure that it’s always working. For whatever combination of reasons the pay-TV market here over the last 20 years has always had a particularly short-term focus and we’ve been able to take a more medium- to long-term focus and invest in services that are important to customers. It will take a while before these initiatives come through in our business. Fortunately, we have a very strong and patient set of shareholders. And we’re now starting to see the fruits of their investment.

WS: John Hendricks, the founder of Discovery Communications, said in a recent interview that consumers always gravitate toward a better, closer-to-real-life viewing experience. Innovation has always been part of the DNA at News Corporation. How do you gauge at what time to introduce something new?
SULLIVAN: I couldn’t agree more that consumers will always gravitate to the better experience. As a matter of fact, I think that we in the television industry sometimes overcomplicate what is quite a simple formula for success. When someone sits down in front of the television, or, increasingly, in front of another device in order to consume video or media, what they are looking for is just a great entertaining, engrossing experience. And that experience ranges from how good the program they are watching is, to how great the picture quality is, to how reliable the service is. If you go through the history of pay-TV it started with analogue; it got better with digital, in terms of choice as well as picture quality; and it got even better with HD in terms of picture quality, particularly when you get to films and live sports. Then the PVR was introduced into the mix, which allowed people to take the programs that they loved and match them to their own lifestyles. The biggest change in the last 20 years is that people still watch as much if not more television, but they watch it on their own time. The more you can focus on ultimately what that customer wants, the more success you are going to have as a pay-TV operator.

We did a number of things in the last year that have just barely started us on that path. When we saw that the iPad was coming to market, we gauged it was probably going to be the first true second-screen device [beyond the TV screen] that was going to reach some kind of mass appeal. We decided to introduce our Sky Sports service on the iPad on a live basis, as soon as the iPad launched here in Germany and right around the World Cup. We had the rights to the World Cup and we showed the matches, as well as all of our other great sports content, directly on the iPad. That was a great way of getting people to pay attention to Sky as a service and a product, as opposed to the history of the company, which has had its peaks and valleys. We want people to talk about what they will potentially be buying from us because they think the service we have is fantastic.

We then went a couple of steps further. We increased that service on our iPad to bring in our HD sports channels. We made it available on 3G as well as Wi-Fi and we introduced our service onto the iPhone as well. We’ve been doing a lot of things that have been setting the stage for the next three to five years, where we think that consumption of media, while still primarily being on the TV set, will start to get augmented by other devices as well. We want to make sure customers can get our great services wherever they want to.

[Last year] was a lot about setting the stage and turning the attention away from [our] history and more about [our] future. [This year] is going to start to deliver that future in a more concrete and exciting fashion. We think we are on a really good path with a good wind behind us to finally unlock the potential of what is the last untapped major market in Europe. Launching Sky Sports News HD next winter, will add significant value to our customers and gives us another daily opportunity to [prove] our leadership in providing unique content. The channel will be the first and only 24/7 live sport news channel, and will be hiring over a 100 new staff, among them more than 50 sports journalists.

WS: Are you finding that when viewers go to their iPad or PC or iPhone, it ultimately drives people back to the linear channels?
SULLIVAN: Absolutely. We’ve also found that to be true of HD and the PVR. The fact of the matter is, the better the experience you can deliver, the more people will end up consuming your service. It’s a cliché, but it’s incredibly true; TV and video consumption in Germany and in many parts of Europe have continued to grow as the web and other video delivery infrastructures have developed alongside them.
We have a very simple role to play here in this marketplace. German and Austrian consumers haven’t been getting what they deserve in the last 1ten to 15 years. Other markets have gone ahead of them, yet this is one of the strongest and most technologically adept markets you will ever find. The consumer here is incredibly bright. All we have to do is get ourselves to the point where we are not following, but we are leading and providing the best experience possible. We were certain that the consumers would tap into that and would come to us and that is exactly what has started to happen.

WS: What do you consider must-have programming?
SULLIVAN: It’s about as broad as you can expect it to be. Here in Germany and Austria, we start first and foremost with football and obviously the Bundesliga. It’s the cornerstone of our business and will remain so for years and years to come. The subtlety about our business that people don’t necessarily understand yet is that our customer base comes from a much wider spectrum than just football. We had a very strong fourth quarter and during that time we sold really well across all of our packages, but the package that actually sold best was our film package. Some people think subscription pay-TV film services are a bit passé because of DVDs and online video services, but the fact of the matter is that they are spectacular value. Particularly when you deliver film packages in HD, they are spectacular value with great convenience and picture quality as well. They are as much a part of our growth story as sport is.

Increasingly—and this is a market that has struggled with this in the past—our growth now spreads across to basic services, what we call our Sky Welt. There is a bit of a reputation here in Germany that because there are so many free-to-air channels, basic pay-TV channels really don’t stand much of a chance. And that is just a myth. There is just as much free-to-air choice, if not more, in many other European markets as there is here in Germany, the only difference is there’s been a lot of free-to-air choice for a long time here. But consumers are responding incredibly well to high-quality highly differentiated channels of programs. We have value-for-money scores increasing across all of our packages, but the package that has had the most significant increase in value for money over the course of the last six months has been our basic package. And that for me bodes very well for the future of our business. We don’t want to be just about one particular component or product, we want to be about the full entertainment spectrum: quality, quantity and convenient access.