FRANKFURT/LONDON, April 5 (Reuters) - Incumbent Sky Deutschland is tipped to fend off a heavyweight challenge from Deutsche Telekom and retain the main live rights to top-flight German soccer, but the competition will drive up the cost.
The German Football League (DFL) will discuss bids at a meeting on April 17 when it is hoping to announce the contract award for the four seasons from 2013-14.
Loss-making Sky Deutschland, 49.9 percent-owned by Rupert Murdoch's News Corp, has been paying around 250 million euros ($328 million) a season for cable and satellite rights to Bundesliga action, and analysts see that sum rising by 10-25 percent for the next four seasons.
Deutsche Telekom, which has the internet and mobile rights, this week submitted a bid to rival Sky Deutschland. The two companies and the DFL all said they could not comment before the results of the auction were announced.
About a dozen bidders have reportedly pitched for various packages in an auction seen raising a record sum of at least 450 million euros a season, up from 412 million at present.
The DFL can accept any bidder offering within 20 percent of the highest offer and may opt to stick with what it knows best for cable and satellite.
"We believe that it is very likely that Sky will receive again the license to broadcast live Bundesliga," Silvia Quandt analyst Klaus Kraenzle said.
Unlike rivals elsewhere in Europe, such as Spain's Real Madrid or English champions Manchester United, German soccer clubs derive the biggest share of revenue from sponsorship deals rather than broadcast rights.
That puts a premium on audience: the more people watch the matches, the more sponsors are willing to pay.
"By maximising the eyeballs viewing shirt logos and stadium banners, we see this maximising commercial revenues for many clubs," JP Morgan said.
Bayern Munich are Germany's richest club, but ranked behind Madrid, European champions Barcelona and Manchester United in terms of revenue in 2010/11, according to a study by Deloitte. Schalke 04 were the only other German club in the top 10.
The Bundesliga has a strong German audience but lacks the international appeal of the English Premier League, which can do highly lucrative overseas TV deals.
Aside from Sky Deutschland and Deutsche Telekom, media reports said Unitymedia and Liberty Global's Kabel Deutschland were also vying for rights.
Deutsche Telekom has drawn public criticism for its bid, both because it is one third state-owned and because its move could put Sky Deutschland out of business entirely.
Sky Deutschland's business relies heavily on the rights because soccer is a big draw for its 3 million subscribers.
That model has been most successful in England where BSkyB, in which News Corp is the largest shareholder, has built its business in partnership with the English Premier League.
To shore up cash for the rights, Sky Deutschland sold new shares for more than 150 million euros earlier this year and has plans to raise about another 150 million by the end of the year.
Sky's predecessor Premiere lost the cable and satellite rights once before, when DFL awarded the rights to a new player called Arena in a shock move in 2005. But lacking infrastructure and reach, Arena ended up throwing in the towel and sub-licensing the rights back.
Deutsche Telekom, which generates more than 50 times as much annual revenue as Sky Deutschland, has been pushing its way into TV to offset sluggish growth in the telephone business.
If it wins the bid for the Bundesliga rights, it plans to sub-license them to third parties with no exclusivity. Under that model, matches could be shown on several platforms.
In addition, Deutsche Telekom has its own pay-TV soccer channel, "Liga Total", which has about 160,000 subscribers.
"Assuming a cost of 400 million euros per year, with 50 percent wholesaled back to cable operators, and that the Bundesliga package is sold at the same price as on IPTV today, Deutsche Telekom would need to sign up over 1.3 million subscribers to break even. This is likely to prove challenging," Nomura analyst Frederic Boulan said.
Sports rights are also drawing lively interest in other parts of Europe.
Al Jazeera, best known for its Middle Eastern news coverage, is taking aim at Europe's pay-TV market, using sport to build a global media brand, just as owner Qatar is raising its profile by hosting the 2022 World Cup.
$1 = 0.7518 euros Reporting by Maria Sheahan; Additional reporting by Christian Kraemer; Editing by Helen Massy-Beresford