Q2 2008: Premiere increases revenues to EUR 272.4 million

• Revenues increase 18.9 percent year-on-year
• EBITDA at EUR 11.2 million slightly above previous year’s figure
• 4,157,810 subscribers as of June 30, 2008:
3.555 million direct customers: net growth of 2.3 percent

• Encryption: Smartcard swap for satellite customers in progress
• Further program enhancement: DFB Pokal / UEFA Champions League / Series channel Fox starting on Premiere early October
• Major marketing campaign in H2 2008
• Börnicke: “Premiere expects strong growth in H2 2008”

Munich, August 7, 2008. In Q2 2008 Premiere’s revenues increased 18.9 percent to EUR 272.4 million (Q2 2007: EUR 229.1 million). Operating expenses rose to EUR 261.2 million (EUR 218.9 million), mainly due to payments for the sublicense for the broadcasting of Bundesliga football. EBITDA (earnings before interest, taxes, depreciation and amortization) stood at EUR 11.2 million, slightly above the Q2 2007 figure (EUR 10.2 million). EBIT (earnings after depreciation and amortization) was negative EUR 14.1 million (negative EUR 12.9 million). Tax expenses were up quarter-on-quarter to EUR 17 million (EUR 5.5 million) because of a significant increase in deferred taxes, a non-cash item. The net result thus dropped to negative EUR 37.8 million (negative EUR 32.6 million).

As in the Christmas season 2007 and the first three months of 2008, piracy continued to affect performance in Q2. As of June 30, 2008, Premiere had a total of 4,157,810 customers: 3,554,696 direct subscribers (June 30, 2007: 3,473,174) and 603,114 indirect arena customers. Compared to Q2 of the previous year, the number of direct subscribers rose by 2.3 percent. Compared with Q1 2008, Premiere registered a decrease of 84,657 customers (Q1 2008: 4,242,467).   

Michael Börnicke, CEO of Premiere AG: “In view of the piracy problems, our Q2 performance met our expectations. We are now looking ahead. Premiere will soon have closed the security gap. We are aiming for high growth in the second half of the year, with many new customers and a higher ARPU.” 
 
Encryption system: Smartcard swap for satellite customers in progress
In the last few months Premiere has developed and successfully tested an extensive security package together with its encryption partners NDS Videoguard and Nagravision. The second phase of this project, during which the smartcards of satellite customers will be swapped, started a few days ago and will be completed by the end of the third quarter. All receivers that can be updated to NDS Videoguard® will now be configured with a new software. Börnicke: “The conversion is going according to schedule and the security gap will be closed soon. Anyone who has purchased a hacked receiver will soon realize that Premiere is only be available to Premiere subscribers.”

Program enhancement: 
• Premiere acquires pay-TV rights for DFB Pokal and UEFA Champions League
• Series channel Fox starting on Premiere early October


In May Premiere secured extensive broadcasting rights to the DFB Pokal and will be showing all 63 games live and in the live highlights format from the first round through to the final in Berlin’s Olympiastadion. The contract with the DFB (German Football Association) runs until the end of the 2011/2012 season. In June, Premiere acquired the exclusive pay-TV rights for the UEFA Champions League for the seasons 2009/2010 to 2011/2012. The agreement with the UEFA grants the pay-TV operator the exclusive platform neutral pay-TV rights (cable, satellite, IPTV, Internet and mobile).

With numerous program highlights and first-time broadcasts including the cult series “Lost”, hilarious comedy with “Entourage”, the brand-new crime series “The Wire” and the award-winning spy series “Spooks”, the globally successful channel Fox will be starting on Premiere this fall. All series will be broadcast without commercial breaks and will be available in both the German language and the original English version. Fox will be available to all Premiere Film subscribers. 

Major marketing campaign in H2 
• New pricing and packaging introduced successfully
• The Premiere experience: clear positioning with new branding strategy 
• Campaign for the “football triple”: Bundesliga, DFB Pokal, UEFA Champions League
• Turning pirates into customers
• Targeted marketing of TV innovations

In the second half of the year, Premiere will be starting its biggest marketing and sales campaign in years. The advertising budget with a gross volume of EUR 40 million is around 50 percent above the average of the last few years.
 
New pricing and packaging introduced successfully 
With the introduction of the new pricing and packaging in July, Premiere has created the basis for future growth. The new structure has made Premiere simpler and more straightforward, leading to increased transparency and customer-friendliness. Börnicke: “The first results have been encouraging. The new packages are well accepted both among new and existing customers, and have a positive effect on ARPU. We are confident that the new structure will help us sell more high-end packages in the long term and increase the ARPU.”

The Premiere experience: clear positioning with new branding strategy
The new branding strategy which focuses on positioning Premiere a TV adventure is also a core component. The company is focusing on the Premiere experience and presents itself with much more emotion than before. Like no other television broadcaster, Premiere stands for extraordinary experiences and great emotions. By pooling these strengths in a new branding strategy and new, stringent brand identity, the pay-TV broadcaster is aiming to differentiate itself from the competition even more clearly and to emphasize the added value which Premiere represents.

Campaign for the “football triple”: Bundesliga, DFB Pokal, UEFA Champions League
Kicking off the marketing campaign is Premiere’s advertising of the “football triple” comprising the Bundesliga, the DFB Pokal and the UEFA Champions League. The advertising campaign has been running since early August with the new brand identity. Börnicke: “High-quality and exclusive sports rights are a central element of our marketing strategy. For the first time ever, starting with the new season, Premiere will be showing the football triple. All the games, all the goals, live, in the live highlights format and in the round up. Never before has there been such extensive coverage of the three biggest football competitions.”

Turning pirates into customers
In parallel to the marketing campaign, Premiere will seek to turn hundreds of thousands of pirate viewers into Premiere subscribers using special distribution channels. Börnicke: “We are confident that we can convince many pirate viewers of the benefits of a legal Premiere package. When the gap in the system has been closed, all pirate viewers will sit in front of a blank screen. That gives us a big marketing opportunity, especially in the 4th quarter.”
 
Targeted marketing of TV innovations
Premiere believes that the targeted marketing of TV innovations such as HDTV, high-definition television, harbors great potential. Börnicke: “Premiere is the pioneer in digital television and innovative TV technologies such as HDTV and hard-disk receivers featuring an integrated video-on-demand service. These innovations are ideal for Premiere to increase customer loyalty among existing customers and to attract new customers.” Starting in the 4th quarter Premiere will be intensifying the marketing of attractive  bundled packages for both target groups. In future, Premiere will place greater weight on cooperating with entertainment electronics manufacturers and marketing partners. Börnicke: “Millions of modern flat-screens are sold every year. The only television broadcaster currently showing programming suited to these high-quality screens is Premiere. Our objective is thus to make Premiere an integral part of the sale of as many HD flat-screens as possible.”

Premiere optimistic about award of Bundesliga rights
Premiere continues to be optimistic about the award of the Bundesliga rights. Börnicke: “We have always underlined that Premiere is prepared for all scenarios. Once we have received the bidding documents we will examine the models and packages it contains and submit corresponding bids. The latest developments have not changed our position. Above all, we want to, and we will, make sure that we can continue presenting the Bundesliga to our customers. No decision has yet been made about the structure of the award of the rights and we still believe that our chances of acquiring the rights to the Bundesliga football with higher exclusivity overall are good.”

Contact for press:

Torsten Fricke
Corporate Spokesman
Tel.: +49 89/99 58-63 50  
torsten.fricke@premiere.de

Stefan Vollmer 
Director Corporate Communications
Tel.: +49 89/99 58-63 77
stefan.vollmer@premiere.de

Contact for investors and analysts:
Christine Scheil
Vice President Investor Relations
Tel.: +49 89/99 58-10 10
christine.scheil@premiere.de

Susan Eckenberg
Senior Manager Investor Relations
Tel.: +49 89/99 58-10 11
susan.eckenberg@premiere.de

This press release contains statements regarding future developments that have been based on current evaluations and have been made to best of the knowledge of the management of Premiere AG. Such statements with regard to future developments are subject to known and unknown risks, uncertainties and other factors that could cause the profit situation, profitability, value development or the performance of Premiere AG or the success of the media industry to diverge from those profit situations, profitability, value development or performance results that are assumed expressly or implied or described in these statements regarding the future. Considering these risks, uncertainties and well as other factors, readers of these documents should not rely in an incommensurate manner on these statements dealing with future developments. Premiere AG has no obligation to behave in keeping with such statements regarding future developments or to alter its behavior to accommodate future events and developments.

 

Key Figures Q2 2008

Overview key figures Q1 2008 for download (pdf)