The German subsidiary responsible for marketing SES Astra‘s new digital platform faces a huge challenge, said Wilfried Urner, CEO of the Entavio subsidiary.

The service for digital satellite households in Germany, dubbed Entavio, will launch Sept. 1 with about 500 digital TV and radio channels. Entavio is a technical and service platform and does not acquire or bundle channels, which will continue to be distributed for free. Customers will be charged a monthly fee of 1.99 euros ($2.71) in order to pay for technical access, but Entavio is not a pay-TV service, said Urner.

“The main challenge in the communication with consumers is to explain that Entavio offers access to free TV without any subscription or extra charge and, with the same receiver, offers the possibility to subscribe to pay-TV offers," Urner told Satellite News in an exclusive interview. “The basis for this pay-TV access is a low monthly subscription to the technical platform of Entavio. It is important to understand that Entavio will not sell or buy set-top-boxes or sell or bundle programs itself. This will be entirely in the hands of manufacturers on the one side and program operators on the other side. Entavio therefore is a completely neutral and open infrastructure that gives the whole market access to the platform.”

While Entavio is not a pay-TV service, the first operator to offer its packages via Entavio will be pay-TV giant Premiere, which has around 3.5 million subscribers in Germany. “It was highly significant for us to have Premiere as the first customer in the pay-TV market,” said Urner. “Premiere’s benefit is the higher penetration of suitable technical receivers via all the other market participants. Thus it is a support of their strategy to focus on content and marketing.”

Michael Boernicke, CEO of Premiere, said Entavio will allow Premiere to further increase its reach without having to worry about providing technical services. “The launch allows us to outsource technical services and further focus on our competence as a content and program provider," he said.

While Entavio has Premiere on its side, ProSiebenSat.1, one of Germany’s largest broadcasters, decided not to use Entavio due to pressure from the German Cartel Office (The Bundeskartellamt), which was concerned that customers would have to pay for TV channels that currently are delivered free of charge. The decision, announced in December, was a blow for Entavio, Urner said, and forced the company to “come to a different business model" for Entavio.

“The focus at the beginning is to stress pay TV more than free TV,” Urner said. “The discussions about the encryption of free-TV signals, which broadcasters request as a service in the mid term, and the related investigations of the German Federal Cartel Office has led to the fact that free-TV solutions can currently not be implemented. We therefore developed Entavio as a platform, which fully displays the whole free-TV offer without any registration and which offers an open infrastructure to access pay TV. We know that this concept convinces broadcasters who run or launch pay-TV offers, and the fact that we have gained Premiere as a first major customer is a proof for this.”

Entavio hopes that confidence of Premiere will help persuade other content providers to sign deals with Entavio, Urner said. The company is in discussion with several broadcasters, but Urner would not divulge the name of the broadcasters or when the agreements might be completed. “We expect more pay-TV offers to follow in the course of this and next year,” he said. “… The advantages of Entavio for the content providers are evident. They can increase their technical reach without having to invest in technical infrastructure themselves. Entavio offers them the complete range of technology and customer services. This enables the broadcasters to concentrate on their core competencies in the content business and significantly lowers the entry barriers for new players into the market.”

Analysts however seem yet to be convinced about the merits of Entavio. One leading investment bank analyst who requested anonymity told Satellite News, “Valuation wise, I don’t think it (Entavio) will have a massive impact on SES. Obviously, management has high hopes for the project, but in the short term I don’t expect it to be a boost for the share price. However, this project will help the digital conversion in Germany.”

Eric Beaudet, a satellite equity analyst at Natixis Securities added, “I think the pick-up (for Entavio) will be quite slow. I am not that positive about it in the first few years. People will have to buy a set-top box and understand that there are going to receive the same free channels that they did before. If they want the premium offer, they will have to pay something more. There can be big potential sales but not in the next couple of years. I think they will gain other deals outside of Premiere, but I think they will be much smaller. The whole platform will be centred around Premiere, but with a couple of other pay-TV channels maybe joining.”

Urner would not comment on when he expects Entavio to post a profit. “We are, of course, working with specific target margins for the service business. It is, however, too early to speculate about break-even and profitability,” he said.