Michael Börnicke

Börnicke spoke to World Screen before his resignation in September 2008.

After its launch, in 1991, Premiere experienced some difficult times establishing its presence in the extremely crowded German TV landscape, one with more than 30 free-TV channels plus two very strong public-service broadcasters. But today the future is looking very bright for the leading pay-TV service in Germany and Austria. With a strong offering of some 300 first-run movies, exclusive programming and more than 4,000 hours of top sports events and tournaments each year, Premiere’s message to consumers is simple: it provides experiences that traditional free-to-air television cannot. It has some 11 million subscribers in more than 4 million households, and those numbers are expected to grow as digital pickup increases in the German-speaking market. And with News Corporation as a shareholder (it’s already a powerhouse in European pay TV with a stake in BSkyB in the U.K. and ownership of SKY Italia), Premiere gains clout and financial prowess in negotiating for programming, events and other acquisitions. CEO Michael Börnicke talks about his priorities for making Premiere an even more compelling proposition for consumers.

TV EUROPE: Germany has more free-TV channels than any other country in Europe. In addition, it has a very strong public-broadcasting system, which collects a significant amount in license fees. What challenges has Premiere had to face in this kind of television environment?

BÖRNICKE: We are convinced that with our programming offer we clearly differentiate ourselves from free-to-air broadcasters in the market. Currently, only 16 million households out of 40 million TV households in Germany are digital. Premiere is the leading brand of choice for consumers in digital television. In a market that is characterized by a high number of channels it is important to differentiate, and we are doing it in two ways: One is by high-definition television and the other by exclusive content. So we feel that Premiere will do quite well and has a lot of growth potential, even in this competitive market.

TV EUROPE: So Premiere is on a road toward more growth?

BÖRNICKE: Yes, absolutely, to more growth based on our exclusive sports, fiction and family content. Especially with live sports, we are a clear number one in the German market—football day and night, all matches in best quality. You can see that the number of channels in the market is not so decisive. Even if there are 50 competing commercial channels but all 50 have more or less the same product, and the same movie is being broadcast 20 times, it does not affect the position of Premiere, because we have the first runs of movies, we have live sports. We see huge growth potential for Premiere.

TV EUROPE: So movies and sports are among the main drivers of your business?

BÖRNICKE: Yes. If you have a lot of channels in a market—and this is true for all media overall—consumers need 
orientation. And Premiere is the point of reference in digital television. So if you are frustrated by having 500 channels and do not find what you really like, Premiere is the choice. And if people think of good and exclusive content, they immediately think of the Premiere brand.

TV EUROPE: Earlier this year, you implemented a new pricing and packaging plan. How is this key to Premiere’s growth strategy?

BÖRNICKE: It is key for our revenue growth and also for ARPU [average revenue per subscriber] growth simply because in our old structure, there was not enough incentive for a consumer to take all of the Premiere packages. Instead, they simply picked out whatever they liked. Now we have redesigned the structure in a way that just one package costs 20 euros, two packages cost 35 euros. And if you take all four packages—the whole Premiere offering, from sports to movies, with thematic channels, Disney Channel, everything—it is 45 euros. So people are saying, OK, if one package is 20 euros, and two packages of just the sports are 35 euros, then for just another 10 euros, I can take everything. And this is key; if a subscriber takes the full lineup of channels, of course this is the most profitable subscriber for Premiere. This new structure will help us to drive ARPU and revenues simply by creating more incentive for a customer to take all the packages and not just pick out one or two.

TV EUROPE: Besides feature films and sports, what other kind of exclusive programming do you look for?

BÖRNICKE: Our key core competences are live sports, movies and family entertainment. As an example, we have Disney Channel fully exclusive and we feel it is extremely important to have it fully exclusive because 80 percent of our customers are in households consisting of more than two persons. The average number of people in a Premiere home is 2.7, compared to 2.1 in Germany overall. That clearly shows that most of our customers are families, and therefore it is important to have product for the whole family, for different tastes and needs. Premiere is the home of a family.

Some other examples of exclusivity are football matches from the Champions League—each and every game, plus a great conference channel and the fastest highlights roundup in Germany. We have all the Bundesliga matches, also fully exclusive. We have exclusive contracts with the major studios, allowing us to show TV premieres of about 300 movies each year. We have the Discovery Channel fully exclusive. Exclusivity is absolutely key for us.

TV EUROPE: What benefits can a company like Premiere derive from having News Corporation as a shareholder?

BÖRNICKE: First of all, it is clear that if we look at the operation of SKY Italia and BSkyB in the U.K., just to mention the two biggest pay-TV platforms in Europe, owned by News Corporation, we see that most of the things that we feel are drivers for our business, like high-definition television, are the same in those countries. The U.K. market is more mature, so we can learn a lot. We can create synergies. We can use the same technology over time. We all have Formula 1—we have it on Premiere, so does SKY Italia. Mid-term, there are a lot of areas where we can see creating value by simply using these synergies and also by learning from each other what kind of marketing initiatives work in what markets. And, of course, News Corporation is one of the largest media groups worldwide and therefore it gives Premiere more stability, which is important. Premiere has had a very, let’s say, interesting history, sometimes volatile, so having a strategic shareholder is important not just for financial stability but also in terms of making the right strategic moves; it helps us move forward. I would say the benefits of having News Corporation as a shareholder are synergies as well as stability and financial support. This is good for Premiere in all respects, also in negotiating important rights.

TV EUROPE: With that financial support, are you looking to expand? There has been a lot of discussion about the possibility of acquiring Sat.1. What can you tell us about that?

BÖRNICKE: That’s too early. Personally, I feel that midterm it would be a great combination because Sat.1 is well positioned in the free-to-air market, and combining Premiere and Sat.1 would create a lot of value. But first of all, in the next 12 months, it is key for the management to concentrate on our operations. We have the piracy issue, which we will have solved in the third quarter of this year. That is key for everything, because if you have a system that is hacked and not fully secure it hurts the business substantially. So the key priority first of all is establishing and implementing a secure system, which we will have fully completed in Q3 by having the NDS system from News Corporation in place. This is top priority.

Then we have to secure the rights of the German football league for the next three years, from 2009 to 2012—this is also management priority. And then, if the piracy issue is solved, we want to see a strong Christmas business so that Premiere is back on a growth path in its core business.

If in the next six to 12 months we see that everything has worked out successfully, then midterm we could consider M&A [mergers and acquisitions] activities by strengthening the market position of Premiere. But this is too early. First we have to exploit the great potential of the German pay-TV market. We have two core areas of substantial growth. One is high-definition television—we currently have two high-definition channels, and over time we want to bring it to ten. This is where we can differentiate ourselves best from free-to-air television in Germany because there are no free-to-air broadcasters with high-definition programming in Germany. And second, with digitization there will be 5 to 6 million homes switching from analogue to digital television per year. This automatically creates a huge potential for further growth for Premiere.

TV EUROPE: Are there many other companies looking at Sat.1 at this point?

BÖRNICKE: This is speculation, but I would expect it will always remain an issue for strategic buyers, simply because it could make sense for some of them.

TV EUROPE: Besides HD, are VOD and PVRs also important offerings for Premiere?

BÖRNICKE: Yes. We currently have roughly 250,000 VOD users. It’s an area of growth, but HD here is much more important and has a positive impact on our core business, because it is driving top-tier subscriptions. Our transactional business with pay per view and VOD is a 5-percent business; it will never be at 20 percent of our revenue. Therefore, I think HD is a much more important innovation compared to VOD, even if Premiere is the clear number one in VOD and PPV revenues. VOD is an area of growth; it might become more important over time like in the U.S. market, where PVRs have a much greater penetration (and the U.S. market is always five years, even ten years ahead). For the German market I do not see a real impact in revenue in the next three to five years. HD will for sure be more important for Premiere.

TV EUROPE: Premiere’s sports portal seems like a sports fan’s dream. Is that a very popular offering?

B�RNICKE: Yes, and up to now no other operator has offered it. It is really a great idea, because nonsubscribers can use it as well. If you are just a digital household without Premiere, you can watch the sports portal. The idea is that on a Saturday afternoon there are up to 16 different live events that take place on one screen, which of course creates appetite—there is golf on and all the live matches of the German football league, as well as the best football matches from the U.K., and so on. It is a great idea because you have everything on one page and you can see how many live sports events there are on Premiere. And then you call us and one minute later you are enabled to watch via a one-day ticket. You can subscribe for 24 hours for €15, and then you have access to all sports. It is a good way of presenting the product because viewers see that they are not missing anything and it creates appetite for the service and even for a subscription.

TV EUROPE: Do you have a good chance of securing the Bundesliga for 2009 to 2012?

BÖRNICKE: Absolutely. Just this year we have extended the contract for Formula 1. We also have the Champions League until 2012. We secured the German football cup rights for four years (till 2012) for the first time. There was no relevant competitor bidding against us, because we are the premium pay-TV service. I am optimistic that we will secure the rights. It also helps that we are perceived as being even stronger, with News Corporation as our largest shareholder. We also have all relevant rights, whether in sports or in movies, until 2012-2013, and in some cases, 2014. I think that Premiere is perfectly positioned to exploit the huge potential of the market. We have secured distribution in 95 percent of German homes via satellite, cable and IPTV. I think we have in the next two or three years a lot of growth in front of us. In the mid and long term, Premiere can reach 20- to 30-percent penetration of the market, up from the current 10 to 11 percent.

TV EUROPE: What do you enjoy most about your work?

BÖRNICKE: I love sports, from football to tennis and all sports. And I’m absolutely lucky that I can combine my love of sports with Premiere’s business, which is based at least to a certain degree on sports. It’s great if you can make your interest in sports your profession.