BSkyB, BT Win Rights to English Soccer Games for Record Amount

By Jonathan Browning and Tariq Panja - Jun 14, 2012 6:00 AM GMT+0700

British Sky Broadcasting Group Plc (BSY) and BT Group Plc (BT/A) won the bidding to show 154 English Premier League soccer matches, paying almost double the current price for the broadcast rights to the sport’s richest domestic competition.

BSkyB’s pay-TV Sky channel will show 116 matches starting in the 2013-14 season, with the phone and broadband company BT getting 38 matches. The sale of the seven packages raises 3.02 billion pounds ($4.7 billion), compared with 1.77 billion in the current pact, the league said yesterday. BT will pay 246 million pounds a season. Walt (DIS) Disney Co.’s ESPN sports channel lost the right to show Premier League matches.

BSkyB, the U.K.’s largest pay-TV broadcaster, in which Rupert Murdoch’s New Corp. owns 39 percent, increased spending to keep the rights to show most matches as it relies on sport broadcasts to lure subscribers. BT, trying to sell more broadband connections, will use the matches to start a new sports channel. The phone company hadn’t broadcast games before.

“It’s a decent commercial increase. We have a competition. It has value,” Premier League Chief Executive Officer Richard Scudamore said at a press conference. “We had numerous bidders in this commercial procedure.”

The new deal means for the first time a broadcaster outside of Sky will show matches between Arsenal, Liverpool, Manchester United and Chelsea. The teams had been known as the ’Big Four’ prior to the emergence of Manchester City and Tottenham. The Premier League has increased the total number of live matches shown to a record in the new contracts, which cover the 2013-14 to 2015-16 campaigns.

Newcomer BT

The previous deal involved 138 matches. BSkyB paid 1.62 billion pounds over three years and ESPN paid the rest.

BSkyB’s Sky Sports channel has held rights to Britain’s top soccer games since the Premier League’s inception in 1992. Rival broadcaster Setanta collapsed in 2009 and paved the way for ESPN, which shares rights to England’s F.A. Cup competition with ITV Plc (ITV) and also screens Italian, German and Dutch league matches.

“Because Sky is now so deeply entrenched, it’s all the more hard for a newcomer to buy their way into the market,” said Tim Westcott, an analyst at IHS Screen Digest.

BT said it will pay a deposit of 22 million pounds this month followed by six installments of 120 million pounds. The phone company kept its outlook for the 12 months through March 2013 while saying that earnings before interest, taxes, depreciation and amortization will be cut by about 100 million pounds and free cash flow by 200 million pounds in the fiscal year through March 2014.

Investments

“BT is already investing 2.5 billion pounds in fiber broadband,” the company’s CEO Ian Livingston said. “Securing Premier League rights fits naturally with this, as consumers increasingly want to buy their broadband and entertainment services from a single provider.”

BT said it expects normalized free cash flow of about 2.5 billion pounds in the 12 months through March 2015.

Sky will pay 760 million pounds a year for the 5 packages of live rights for each of the three years of the new Premier League agreement.

Cost Efficiency

“In what was a very competitive tender process, we are pleased to have secured the combination of rights that we wanted, providing certainty for us and our customers,” said BSkyB CEO Jeremy Darroch. “While the cost is higher, we have capacity for this increase through the combination of excellent work on cost efficiency across the business and choices over other future spending.”

Premier League teams including record 19-time English champion Manchester United, Arsenal, Chelsea and Liverpool draw millions of viewers from around the world. The April 30 match between United and Manchester City was available to more than 650 million homes in 212 territories, according to the league.

“It makes it much easier for everyone, it makes the clubs less reliant on benefactor funding,” Scudamore said.

The existing global rights are worth 1.4 billion pounds, more than some rival leagues make from their domestic contracts.

The bidding forced broadcasters to compete for the different groups of games, including packages that allowed selection of matches between teams near the top of the league, Scudamore said. BT is taking 18 first picks out of total of 38 available.

“BT have secured highly attractive highly competitive games,” Scudamore said. “That’s a game changer.”

In April, BSkyB’s German affiliate Sky Deutschland (SKYD) paid a record 2.5 billion euros ($3.1 billion), a 53 percent increase on the previous contract, to buy Bundesliga soccer rights for the four years through 2017.

The massive increase income will probably lead to a spike in player salaries. All previous revenue increases have been followed by almost an exact rise in player income.

The result is also a boost to English teams’ efforts to meet European soccer governing body UEFA’s new fiscal regulations that from 2014 will penalise clubs that fail to meet its break-even criteria.

To contact the reporters on this story: Jonathan Browning in London at jbrowning9@bloomberg.net; Tariq Panja in London at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net