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FRANKFURT (Reuters) - Sky Deutschland, part-owned by Rupert Murdoch's News Corp, heavily outbid Deutsche Telekom to retain key rights to German league soccer on Tuesday, a costly move seen as crucial for the loss-making pay-TV group.
Competition drove the price up sharply, with the German Football League (DFL) saying media rights for the four seasons starting 2013/14 would raise an average 628 million euros ($820 million) per year, up 52 percent on the current four-year deal.
Sky Deutschland retained rights to show Bundesliga matches via cable and satellite, as well as winning mobile and IPTV (Internet) rights previously held by Deutsche Telekom.
Sky expects top-flight German soccer to be a major draw for new subscribers in the coming years, a tactic that News Corp companies have used successfully in other European markets.
"Once we get to the window when the new rights come into play, which is effectively summer 2013, we are now the only place where customers can go to watch Bundesliga on a live basis," Chief Executive Brian Sullivan told reporters.
Sky, which has 3 million subscribers in Germany, said it would pay 485.7 million euros per season for the rights. Sullivan said the cost was fully within Sky's existing funding.
DFL head Christian Seifert told a news conference Sky succeeded with its bids for three of the rights packages because its offer was more than 20 percent higher than the closest bid.
There was a gasp in the room when Seifert announced the overall value of the deal.
Sky shares were up 7 percent at 2.1620 euros by 1500 GMT, having earlier been up as much as 25 percent after a report it had retained the rights.
Deutsche Telekom said it was confident of reaching a deal with Sky to sub-license some of the rights but no agreement has yet been struck.
Bayern Munich CEO Karl-Heinz Rummenigge hailed the deal as a "landmark" for German soccer.
While the deal showed the appetite for live sporting action among pay-TV groups, the Bundesliga, which has a strong domestic audience, lacks the international appeal of English soccer, which has lucrative overseas deals to augment domestic TV income.
The English Premier League gets an average 600 million pounds ($950 million) per season from BSkyB and ESPN for domestic TV rights, under a three-year deal that expires in 2013 and is about to be renegotiated.
Stefan Ludwig, director of the sports business group at Deloitte Germany, said the auction had exceeded expectations.
"A 50 percent increase in revenues is something that probably no one expected," he said.
However, Ludwig noted the increase did not mean that rights would rocket in value in other European markets.
"In other countries, the pay TV operators were dominant years ago and were driving up the prices then. In some ways, Germany is catching up now," he said.
Bayern Munich, Germany's richest club, was ranked behind Real Madrid, European champions Barcelona and Manchester United in terms of revenue in 2010/11, according to Deloitte. Schalke 04 was the only other German club in the top 10.
Bayern face Real Madrid later on Tuesday in the last four of the Champions League, Europe's top club competition.
Rummenigge said the deal would help German clubs, when foreign rivals are cutting costs to meet new financial rules being introduced by UEFA, European soccer's ruling body.
"This increase will help our clubs become more competitive when they play in international competitions like the Champions League and Europa League," the former Germany international striker said.
($1 = 0.7656 euro)
Additional Reporting by Peter Maushagen, Alexander Huebner and Harro ten Wolde in Frankfurt, and Keith Weir in London; Editing by Hans-Juergen Peters, Dan Lalor and David Hulmes