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All to play for as £4bn Premier League TV auction looms

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02 February 2015

First round bids for live UK broadcast rights to Premier League football are due in at the end of this week.

BT’s surprise move into Premier League football in the last auction drove up the cost of the rights by an astonishing 77% to £3bn. This year’s auction, for the three-year period beginning with the 2016-17 season, is billed as one of the most eagerly anticipated in the competition’s history. 168 live matches are up for grabs, split into seven packages (see list below). Sky and BT are seen as the likeliest victors.

But, with the possibility of Discovery-backed Eurosport and the Al Jazeera-owned beIN Sport joining the bidding process, the value of the rights could easily rise by another 20-30% say analysts – to £4bn.

Discovery boss David Zaslav reportedly travelled to London last month to meet the Premier League. The company took a majority stake in Eurosport last year, and tried to acquire Formula 1. The Qatar based beIN Sport is also seen as a possible bidder. The deep pocketed global sports network operates channels in France, the US, Canada and Australia where it holds rights to Serie A and the UEFA Champions League.

However, the pressure is on Sky and BT to emerge from the auction with a strong package of rights.

“The bottom line is that there is one set of rights that drives pay TV subscriptions in this country – and that is Premiership football. That is the one thing that Sky and BT cannot afford to loose,” says one leading sports producer. Financial broker Liberium recently carried out a survey of 500 Sky Sports customers, which showed that half would switch to rival BT if the latter won the majority of Premier League rights.  

This finding is echoed in a recent Ofcom report which concluded that access to sports channels ranked highest as a reason for subscribing to a pay TV service. And football is still the most important sport for subscribers to Sky Sports and BT Sport. A huge 60% of respondents said the Premier League was an essential part of their TV service. By comparison, no other individual sport or competition was considered to be essential by more than 22% (Test cricket was considered essential by 19% of respondents, Rugby Six Nations by 18% and Formula One by 18%).

There is so much at stake for both Sky and BT, that most observers believe they will be the highest bidders. “My gut sense is that it is a two horse race between Sky and BT,” says a media analyst. “The only question is whether BT gets more games than it did last time.” Many expect BT to at least attempt to increase its packages up from two to three of the seven available.

Observers contacted by Televisual question the commercial rationale for Discovery-owned Eurosport to put in a sizeable bid for live televised rights when it lacks its own pay-TV platform. Without this, they ask, how could it recoup the investment through carriage deals and ad revenue alone? “I think I will call it for Sky and BT,” says one analyst. “I cannot see any commercial reason why Eurosport would wish to get into a massive bid for live televised rights.”

BeIn Sport, meanwhile, is perceived as “not so strong at tenders”, says one football agent contacted by Televisual. It recently lost the tender for French rugby to Canal+. However, it recently emerged that it has been using London sports rights specialist Mark Oliver as a consultant on Premier League possibilities.

Sky’s track record with the Premier League should prove advantageous. Its partnership with the Premier League has been mutually beneficially since 1992. “The relationship that Sky has with the Premier League has to count for something’” says one observer.

Sky won the maximum rights available to a single broadcaster in the 2012 and 2009 auctions, and its bid team is very experienced. Ofcom recently judged that Sky “continues to enjoy an advantage over other bidders”; it knows it can make certain numbers work as it has built a large subscriber base and can bundle its key sports channels with other pay TV services.

Sky could also benefit from BT Sport’s expensive £897m capture of exclusive Champions League rights.  This has drained money from BT’s war chest, and will have increased Sky’s determination to hang onto the lion’s share of Premier League rights.

BT also had to put aside £2bn last month to plug its swelling pension defecit, and is in talks to buy mobile operator EE for £12.5bn. Analysts also say BT may be more cautious in the amount it bids as a result of tests being proposed by regulator Ofcom to make sure it does not price rivals such as Sky and Talk Talk out of the broadband market. BT currently offers its sports channels for free to broadband customers, a policy it may have to rethink under the new rules.

Sky, meanwhile, will be constrained by higher debt levels following the creation of Sky Europe, which saw BSkyB pay £4.9bn to take over Rupert Murdoch’s pay TV companies in Germany and Italy. Even if Sky were outbid, there are some who say it might not prove catastrophic for the business. Says one analyst: “Sky is far less dependent on football now. In the 1990s, the success of Sky was driven by sport and especially football. Now its offering is much broader.”

BT will obviously want a bigger chunk of rights – but the big question is what is the maximum affordable bid for the broadcaster. Unlike Setanta, BT has proved a solid, well resourced second partner for the Premier League, based out of its new sports broadcasting HQ in the Olympic Park.

“BT are in it for the long haul. They have shareholder support, massive studios, and know the value of the rights to them” says a producer.

The auction could, however, be delayed. Virgin Media has asked Ofcom to intervene, claiming that pay TV customers pay too much to watch Premier League football because of the way the rights are sold. It says too few matches are broadcast, which drives up the price of rights. Ofcom has launched an investigation, which will be concluded after this month’s auction.

Whenever the deal does conclude, money will be the key decider. It is Premier League chief executive Richard Scudamore’s job to get the best deal possible for the clubs. And it is in his interest to have two financially successful broadcasters, like Sky and BT, in the Premier League.

Premier League auction stats
168 live matches are up for auction, up from the current 154 – split into seven packages.

Up to 10 new Friday night games will be offered as part of one package that also includes 18 Monday night games.

No single bidder will be allowed to acquire more than 126 matches.

The current live rights are shared by Sky with 116 games, and BT with 38. In 2012, Sky bid £2.28bn, while BT bid £738m.

Premier League TV rights have soared since Sky paid £191m in 1992 over five years.

The BBC paid £204m for Premier League highlights in late January, allowing it to keep Match of the Day. This was 13.5% more than in 2012. ITV decided against bidding.

The 2012 process was run as a blind 
auction. Bidders had to submit a sealed 
offer for each package without knowing what others had bid or even their identity. This gave BT the element of surprise.

On-demand and internet clips will be 
auctioned at a later date. An auction for international broadcasters will also be held later this year. In 2012, international broadcasters paid £2bn for PL rights.                                                        

Sky remains the biggest UK pay TV retailer, with up to 10.7m customers. BT has 1m TV subscribers; in total BT Sport is available in 5m homes via different platforms. Total revenues of pay-TV broadcasters, including  Virgin and Talk Talk, hit £5.9bn in 2013.                    

BT won exclusive rights for the 2015-18 Champions League, and has some FA Cup matches and the Europa League. BT also holds rights to English Premiership Rugby, the NBA and some motor sports.

Sky holds the rights for Football League matches. Outside football, it has nearly all live cricket, all Formula 1 races, the majority of golf coverage, rugby league, darts and the NFL.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           


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