C-Cube is actively enabling set-tops for leading DBS programs including the Kirch Program in Germany
c-cube.com
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Equipment-wise, the big winner in the German market is likely to be Finland's Nokia Group. Kirch's d-box is now the only decoder technology for German cable and satellite services, and Nokia has secured a contract to manufacture 1 million d-box decoders. ......FReDe, If your not busy could you hop over to Australia and make sure to take your screwdriver to check out the Nokia boxes. David N., do you think that CUBE lost this customer? Nokia may have more luck down under while waiting for the log jam in Germany to get sorted out!
Digital TV May Finally Take Off in Germany and Italy
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July 14, 1997
It looks like the digital cable markets in Germany and Italy are on the way to profitability in 1998, leading to a potential boom market for headend encoding equipment and consumer receivers.
Two key deals took place this month that lead many European media analysts to believe the murky waters of digital television finally may be clearing. In Germany, telephone monopoly Deutsche Telekom has reached an agreement with media baron Leo Kirch's KirchGroup and the Bertelsmann-backed CLT/Ufa broadcast group to cooperate in the rollout of digital service using Kirch's d-box technology. In Italy, Kirch has agreed to swap his interest in the Telepui programming service for Canal+'s interest in the German Premiere analog Pay-TV channel.
Provided the DT/Kirch/CLT deals is approved by German regulators, the rollout of digital television in the country should accelerate in 1998 and become a major factor by the turn of the century. Under the deal, the three partners will hold equal stakes in Kirch's Beta Research GmbH subsidiary that developed the d-box technology.
Although expectations are that this is the deal that finally succeeds in Germany, some analysts are doubtful, pointing out that similar agreements between Kirch, DT and others have been blocked by German regulators. However, Merrill Lynch Europe media analyst Neil Blackley said this agreement has some stark differences with past arrangements.
Hands Off Programming
"The key here is that Deutsche Telekom does not have an equity stake (in Premiere)," he said. "It is a third partner in the decoder consortium, but not the pay-TV consortium. DT is not overseeing subscriber management or television service. All they will get is a carriage fee."
Past deals were rejected on the grounds that DT, as the monopoly network provider, should not own or control cable services because it could stifle competition from competing services. In Germany, private cable operators must use Deutsche Telekom's backbone to deliver service to the nation's roughly 17 million subscribers.
Equipment-wise, the big winner in the German market is likely to be Finland's Nokia Group. Kirch's d-box is now the only decoder technology for German cable and satellite services, and Nokia has secured a contract to manufacture 1 million d-box decoders.
However, Anita Farrell, who tracks Nokia for Merrill Lynch Europe, said she is "not assuming anything yet," as far as German digital TV is concerned.
"From time to time, it looks like it's finally going to happen, but then it falls back into confusion," she said. "Right now, we'll wait and see. We don't recommend anyone buying Nokia on the prospects of increased sales of d-boxes."
Encoder Boom
On the encoder side, the addition of numerous cable headends and Deutsche Telekom transcoding stations to the satellite market for encoders is likely to produce robust demand for the likes of Nokia, Bosch Telecom, General Instrument [GIC], Scientific-Atlanta [SFA], News Digital Systems, not to mention chip providers like Thomson CGA, C-Cube Microsystems [CUBE] and VLSI.
"The real money is going to go to the chip manufacturers and compression equipment suppliers," Blackley said. "The payoff is going to be in the receiving equipment. The intelligence of the system will go the same way it has in he computer industry: into chips and software."
Blackley estimates that 11 percent of the German TV market will be digital by 2003.
Kirch's deal with Canal+ is a crucial component to the digital TV rollout. Pending approval from German and European Union regulators, Kirch will hold 62.5 percent of Premiere, which has amassed 1.25 million subscribers to its analog service. An installed base of analog users will be much easier to convert to digital service than trying to get new subscribers to digital from scratch.
Power Sharing
Still, Kirch is not going to have carte blanche over Premiere. CLT/Ufa holds the remaining 37.5 percent of the company, but Kirch is planning to transfer 12.5 percent of the company to CLT/Ufa, making them even partners.. With CLT already on board with Kirch in the Beta Research venture, expect Premiere to be merged with Kirch's DF1 digital service shortly.
Kirch's exit from the Italian digital TV market is expected to accelerate rollout there as well. Telepiu delivers to nearly 1 million subscribers, but has had mounting losses (US$133 million in 1996 on sales of US$304 million) and is operating under a hefty $115 million debt load.
Expectations are that with Canal+ in control, the service can begin turning a profit by the end of the century. Canal's first move is a US$424 million cash infusion backed by a 5-1/2 year loan from Chase Manhatten.
As telephone companies in the U.S. have learned, success in launching a new television service does not hinge on the technology inside the box, but on the programming it provides.
"It's not a matter of penetration of receivers and decoders. It's the services that people buy," Blackley said. "That's why it's imperative to have drivers such as films and sports. The combination of DF1 and Premiere, as far as program offerings and getting distribution in place, means that if it's ever going to work, then this is the time." (KirchGroup, Digital TV May Finally Take Off in Germany and Italy
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