Premiere in recount shock, CFO out

German pay-TV operator Premiere has recounted its subscriber figures using a new classification – with appalling results. The move, which was initiated by new CEO Mark Williams (pictured), exposed that the broadcaster has almost 1 million subscribers less than officially known.

Only 2.41 million households subscribed to the offers directly from the Munich-based broadcaster on September 30. At the last count on June 30 Premiere said it had 3.55 million direct subscribers. The number of indirect subscribers, which access Premiere’s package through third-party distribution partners Arena/Unitymedia and T-Home in Germany, UPC and Liwest in Austria and Teleclub in Switzerland, amounted to 704,000 on September 30. On June 30 the figure stood at 603,114.

So 940,000 households have been excluded from the subscriber figures. Most of them (606,000) relate only to agreements with business partners and have not yet resulted in subscription activations. 334,000 households still possess a Premiere smartcard, but their subscription contracts have been terminated and they are not currently paying for services.

At the same time, Premiere announced that it would post an EBITDA loss in the full year 2008 of €40 million to €70 million. The broadcaster did not previously give an outlook for this year’s financial development. In the light of the latest events, CFO Alexander Teschner has decided to resign with immediate effect. CEO Mark Williams will take over the CFO responsibilities whilst a search for a replacement is conducted.

There had been speculation in the industry that Premiere’s actual subscriber figures could be considerably lower than officially known. Through heavily-promoted special offers at discount stores, petrol stations and other retailers the broadcaster managed to push many low-cost packages into the market, critics say.

But instead of premium customers, which Premiere needs for enduring growth, the campaigns mainly attracted bargain hunters who tend to drop away at the first opportunity. This adds to households which were attracted to Premiere through marketing campaigns with sales partners, thereby gaining the opportunity to subscribe to the services. Despite not making use of the option, they remained in the subscriber figures as non-active customers.

Industry observers already assumed that a “dark secret” in the subscriber figures could have been one of the reasons for the sudden departure of Premiere’s previous CEO Michael Börnicke in mid September, most probably after the broadcaster’s largest single shareholder, Rupert Murdoch’s News Corp, took a closer look at the subscriber lists. Spurred by the latest findings, Murdoch confidante Mark Williams now wants to launch an in-depth examination.

“We are conducting a thorough review of operations and are confident that this will result in a new strategic direction supported by a financially sound business plan for the future growth and profitability of Premiere,” said Williams.

On November 13, Premiere will announce its results for the third quarter of 2008 and give further information.