Why RTL Group is acquiring Sky Deutschland in transformational deal
Analysis
Bertelsmann-owned RTL Group, whose German operation (RTL Deutschland) includes 15 TV channels, has agreed to acquire Sky Deutschland, the Comcast-owned pay-TV operator serving Germany, Austria and Switzerland.
The plan is for RTL Deutschland and Sky Deutschland to combine into a single company after closing, which is expected next year subject to regulatory approvals.
But what is the rationale for the deal?
1) A more compelling content offer for DACH
The combined business will offer a broader and more compelling German-language content portfolio for consumers across the DACH (Germany, Austria Switzerland) region.
According to RTL Group, viewers will enjoy expanded access to premium live sports, entertainment and news across RTL+, Sky, WOW and RTL’s free-to-air channels.
Matt Trickett, head of media at Ampere Analysis, said the deal thus provides a way for RTL Group to further solidify its position in the German-speaking market in both traditional and streaming TV.
2) More competitive vs global streamers
The combined strengths of RTL and Sky will mean RTL Group can compete harder against global streaming platforms.
The deal unites the fastest growing streaming offers in the German market, RTL+ and Sky’s streaming-only, easy-cancel Pay TV Lite offer WOW.
RTL+ is already Germany’s largest streaming service with over 6 million subscribers.
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The acquisition is expected to make RTL Group even more attractive for creative talent, rights holders and business partners.
According to Trickett, “A combined entity will give RTL much greater negotiating strength for acquiring sports and entertainment content. It will also provide more options for using content across ad-supported and subscription environments.”
3) Boosting the streaming subscription business
This deal boosts RTL Group’s streaming subscriptions business, and so further diversifies revenue sources.
Trickett notes that the deal is a “comparatively efficient” way for RTL to increase its scale in the paid part of the TV market, with the combined business counting subscribers across RTL+, WOW and Sky.
In 2024, approximately 45% of the total revenue across the two companies (if combined) came from subscriptions. The combination of RTL Group and Sky Deutschland counts roughly 11.5 million paying subscribers today.
4) A more powerful sports rights portfolio
The transaction combines Sky’s premium sports rights — including Bundesliga, DFB-Pokal, the English Premier League and Formula 1 — with RTL’s leading entertainment and news brands across RTL+, free-to-air and pay-TV.
According to Ampere Analysis, a key part of RTL Group’s rationale is the chance to strengthen its position in live sports.
The analyst firm points out that the media rights market is particularly fragmented in Germany, though RTL currently holds the rights to the UEFA Europa and Conference Leagues via its free TV channels in Germany.
“RTL gains a significant lock on sports rights in the region,” according to Ampere. “It gains the ability to diversify its live sports portfolio across free, pay-TV and subscription OTT. The acquisition would provide a huge advantage for RTL Group, with live sports a known, reliable driver of subscriber acquisition and retention.”
5) Generating €250m in annual synergies
According to RTL Group, the transaction is expected to generate €250 million in annual synergies within three years, mainly from cost reductions.
RTL Group will be better placed to invest in people, content and technology, it argues.
A transformational combination
Thomas Rabe, CEO of RTL Group, says the combination of RTL and Sky is transformational for RTL Group. “It will bring together two of the most powerful entertainment and sports brands in Europe and create a unique video proposition across free TV, pay-TV and streaming.”
RTL Group is paying €150m in cash for Sky Deutschland plus a variable consideration linked to RTL Group’s share price performance, which is capped at €377m (in any combination of cash and/or RTL Group shares). RTL Group will fully acquire Sky’s businesses in Germany, Austria and Switzerland on a cash-free and debt-free basis.
RTL Group is enjoying solid growth in streaming revenues and paying subscribers and CEO Rabe has said the company is firmly on track for streaming profitability next year.
Analyst firm Madison and Wall has given a muted reaction to the deal, noting that it “probably makes RTL more powerful within Germany than it was before” and acknowledging that investment is better than cost cutting or disinvestments.
However, it reckons the plan, “doesn’t help them compete by building out content scale across multiple markets.”
Munich-based Sky Deutschland is part of Comcast Group (and Sky Group), one of Europe’s leading media and entertainment companies.
Dana Strong, Group CEO at Sky, commented: “Sky Deutschland has made significant progress over the past three years, delivering strong operational performance and reaching a record number of customers.
“The business is on track to achieve Ebitda [the company’s measure of profit] break-even, reflecting the success of our turnaround plan. Combining the strength of our brand with RTL builds on that momentum.
“This agreement opens even greater opportunities. This deal provides a strong platform for long-term success.”
Sky can focus on core regions
An analyst note from media research service Enders Analysis suggests that, “Having turned Sky Deutschland around, this divestment allows Sky to be much more focused on core regions with more diversified businesses.”
Ampere Analysis suggests that if Germany (and the wider DACH region) is no longer core to Comcast’s planning, it will cast some uncertainty over Sky’s Italian operations, too.
Barny Mills, Sky Deutschland CEO, will continue to lead the Sky Deutschland business until the transaction is completed. Stephan Schmitter will stay in his current role as CEO of RTL Deutschland until closing, then lead the combined company. RTL Deutschland will remain headquartered in Cologne and Sky Deutschland stays in Munich.
The acquisition of Sky Deutschland is the largest transaction for RTL Group since its inception in 2000.
This deal is a rare instance of a traditionally content-focused group acquiring a classic Pay TV platform, although it has echoes of another ground-breaking deal earlier this year when DAZN (the global streamer and sports rights holder) completed its acquisition of Foxtel (the Australian Pay TV provider).
Another landmark announcement this year was the decision to split Warner Bros Discovery into two units, one focusing on studios and streaming and the other primarily operating linear channel networks. Comcast is expected to complete the spin-out of cable linear networks from other NBCUniversal assets this year.
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