BSkyB: How much for Premier League rights?

[Larry-G]

Asked what are the three most important offerings of any pay-TV company and the response is usually, 1, premium sport, 2, premium sport and 3, premium sport. And the costs of supplying that premium content is the current headache for BSkyB faced with an extremely deep-pocketed challenger in the shape of BT Sport.

The cash needed to pay for the upcoming English Premier League (EPL) series of three season’s TV coverage is going to be huge. A report from bankers Morgan Stanley says that BT Sport could spend £1 billion per annum on the EPL and still not be too out of pocket.

With this sort of sum already being talked about the bigger question is where does this leave BSkyB, which has been the – more or less – natural TV home for EPL for years and years?

The bank says: “To preserve its premium content position a successful bid for the EPL rights looks necessary, but consensus market forecasts of a 15-25 per cent increase (£114 -190 million per annum) in EPL costs for 2016/17 look scarcely enough. The extra packages on offer make this particularly the case. Failure to recapture a majority of the rights would be seen as threatening Sky’s premium content position and its perceived positioning in the pay TV market. It’s potentially another ‘no win’ situation.”

Worse, at least for BSkyB-watchers, is that the auction is at least one year away and yet already the market is ultra-sensitive to the impact on Sky from the BT threat. The auction, when it actually takes place, covers the three years from the 2016-17 season. BT presently has two packages in the Saturday lunchtime slot for £246 minimum per annum. Unlike in 2012, a single bidder will be permitted to buy all the packages this time, suggesting that records will be broken whoever wins the auction.

And should BSkyB ‘win’ the auction it might not make much difference to its subscribers, other than maintaining its existing position. “A victory in the next EPL auction would not be seen as a big driver of extra customers for Sky but rather as a means of preserving the existing subscriber base. It would though drive extra cost,” says the bank. “If Sky paid 30 per cent more for similar EPL rights in 2016/17 that would drive a further 8 per cent fall in forecasts (and a total 12 per cent fall in EPS in that year). If it paid 30 per cent inflation and bought all the packages, the £434 million extra cost would mean a 32 per cent fall in our forecast. Sky shareholders may have to accustom themselves to the new but undesirable paradigm of a UK pay TV duopoly.”

http://advanced-television.com/2014/01/14/bskyb-how-much-for-premier-league-rights/