Kate Bulkley, Media Analyst.

Premier League: how much is too much?

By Kate Bulkley

Broadcast News

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For Broadcast June 28, 2012

Sky and BT have taken big gambles on PL rights, says Kate Bulkley.

Many of England’s football fans were crying in their beer this week after another penalty-kick disaster in Euro 2012 – but there are a few people in the nation’s soccer circles who are still smiling.

First and foremost is the English Premier League, and most obviously its chief exec, Richard Scudamore, who has secured a whopping £3.02bn from Sky and BT for three seasons of footy, beginning 2013/14.

Scudamore was at the Sky summer drinks party last week, and while he may not have looked as glamorous as Sky Living’s Next Top Model host Elle Macpherson, he certainly had the corner on Cheshire grins.

For the two winning broadcasters – and especially Sky – the numbers were eye-wateringly steep. It bought five packages, comprising 116 games, for a massive £2.3bn and its share price felt the impact, falling 7% on the day the deal was announced.

BT, which suffered a 3% share-price fall on the day, won two packages, totalling 38 games, and spent “only” £738m. That means the two broadcasters will pay £6.5m per game, a 40% increase on the current deal.

It’s a lot of money, but the stakes in pay-TV are high – Sky is anxious to hold its position as the ‘home of sport’; BT is eager for a place at the top table of pay-TV.

Sky has been fierce in defending its corner, telling the City that BT got the auction scraps; not least because it will have first pick and the BT games are all mid-week and Saturday lunchtime, which attract much smaller audiences than Sky’s Sunday afternoon games.

Sky paid a premium to select its 20 ‘first pick’ games before BT has its shot in the remaining 18 rounds, but then the price paid reflects the difference.

“Of the 38 best games, they have 20 and we have 18. They spent £2.3bn and we spent £730m,” retorts Marc Watson, chief executive of BT Vision.

“To go around the City saying we got seconds on the first picks is bollocks. And you can quote me.”

Sky chief executive Jeremy Darroch told me that the increased EPL costs can be “absorbed” easily. He believes it can cut operating expenses over the next three years, including call-centre efficiencies, cutting engineer headcounts and keeping administration costs flat overall, in order to make up the £70m gap in analyst projections that the EPL deal has created.

Those claims have met with some scepticism. “Sky would need to swing to -8% in year one to offset the £70m and rebase,” said one analyst who had built +5% on administration costs for fiscal years 2013 and 2014.

So has BT won enough PL games to attract new customers to its pay-TV and broadband proposition? The answer lies in how well the games are packaged and marketed, as well as which ones it gets. And then there is the intriguing question of whether the planned BT football channel shows up on YouView and on Sky’s coming answer to Netflix, Now TV.

At Sky’s summer party last year, James Murdoch was the focal point and News International was on the cusp of buying the rest of Sky. Now James is no longer Sky’s chairman and it’s Darroch who is taking a big bet to secure Sky’s future. What a difference a year makes – just ask Richard Scudamore.

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