Sky has sold its German pay-TV business to RTL, the former owner of Channel 5, in a deal that could ultimately value the business at almost £500m.
Germany’s biggest broadcaster, which is owned by the media conglomerate Bertelsmann, has agreed to buy Sky Deutschland for €150m (£128m), plus a further sum of up to €377m depending on the future performance of RTL Group.
Comcast, the parent company of Sky, has been looking to sell its German business for a number of years.
The jettisoning of the German operation is part of a wider plan by Comcast to make good on the eye-watering £31bn it paid to secure the whole Sky group in a bidding war with Disney in 2018.
Seven years on and the value of Sky has been written down by almost a quarter, the broadcaster’s stranglehold on new prestige TV shows and films has been broken, and bosses have had to resolve a £300m advertising gaffe with UK partners.
Sky Deutschland, which operates in Germany, Austria and Switzerland, has never made a profit but following a three-year restructuring programme bosses expect the business to break even this year.
The German market has proved tough for Sky, with fierce competition for prime sports rights and broadband customers making it difficult to emulate the success of its highly profitable UK business.
However, in December Sky Deutschland struck a deal securing the lion’s share of Bundesliga football matches, with the majority exclusive, through to the end of the 2028-29 season.
“Sky Deutschland has made significant progress over the past three years [and] is on track to achieve EBITDA [earnings before interest, tax, depreciation and amortisation] break-even,” said Dana Strong, the group chief executive of Sky. “This deal provides a strong platform for long-term success and ensures Sky continues to share in the growth of the combined business.”
Under the terms of the deal, RTL will have the right to use the Sky brand in Germany, Austria, Switzerland, Luxembourg, Liechtenstein and South Tirol.
The element of the deal that could lead to further payments can be triggered by Comcast at any time within five years of the deal closing later in 2026, provided that RTL Group’s share price exceeds €41. The stock is currently trading at €31.60.
The performance-linked payout is capped at €70 a share, or €377m.
In 2023, operating losses doubled as Sky recorded a pre-tax loss of £773m, fuelled by a £1.2bn writedown in loans to its German and Italian operations, and a £327m impairment charge at the lossmaking streaming service SkyShowtime, a joint venture with the US media behemoth and Channel 5 owner Paramount.
The combination of the two companies is expected to generate €250m in annual cost savings within three years.
“This combination of RTL and Sky is transformational for RTL Group,” said Thomas Rabe, the chief executive of 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.”
The combined business will create a sport, news, entertainment and streaming powerhouse with 11.5 million paying subscribers.
The combination of RTL and Sky, the biggest deal RTL Group has struck since it was formed in 2000, will create a company with €4.6bn in revenues.
Bringing together the two companies’ streaming services – RTL+ and Wow – means it will overtake Disney+ to become the third biggest player in Germany after Netflix and Amazon’s Prime Video.
The sale ends a difficult decade of ownership since BSkyB, as it was then known, struck a £4.97bn deal to take full control of Sky Deutschland and Sky Italia from 21st Century Fox in 2014.
Under the terms of that deal BSkyB paid £2.9bn for Fox’s 57.4% stake in the German business, almost six times the maximum return Comcast might ultimately receive from the sale to RTL.
However, while cracking Europe has proved difficult, the UK operation, which accounts for more than 90% of the group’s adjusted profits, has successfully focused on shifting its business model in the streaming era.
The recent Sky drama Day of the Jackal has proved to be the broadcaster’s biggest ever new series.
In the last Premier League TV rights auction, deep-pocketed Sky paid a record £5.2bn, winning four out of the five available “packages” of games through to the end of the 2028-29 season.
The deal, which included an unprecedented number of matches, at least 215 a season, has helped Sky to break viewing records.
