Sky shares have dropped about 2.5% after London’s stock market reacted negatively to news that Sky paid $6.4 billion (£4.2 billion) for five of the seven Premier League TV packages.
Conversely, shares in BT — which acquired the other two packages for $1.46 billion (£960 million) — rose more than 2.8%. Sky paid 83% more than it did in the previous round three years ago under seemingly intense competition from rumored bidders Qatar’s BeIN Sports, which has already entered the French sports rights market, and John Malone’s Discovery Communications.
The deal will run for three years from 2016.
Questions already are being asked as to how Sky execs intend to make up for the dramatic rise in the cost of the rights package. Analysts believe that Sky might be able to make up to $200 million in savings from its non-programming budget, with the remainder likely to come from passed on costs to the consumer.
Sky’s eagerness to secure its position as the UK’s leading provider of sports comes in the wake of a rapidly changing TV landscape in the UK and across Europe. Deep-pocketed telco BT already is proving a formidable rival and now can offer Premier League rights, the FA Cup, Champions League and European football.
Sky, formerly known as BSkyB, finally completed its acquisition of Sky Italia and majority interest in Sky Deutschland to create a pan-European TV giant in a deal worth nearly $11 billion last November. The aggressive nature of its Premier League deal underscores just how strategic execs view the pay TV operator being able to maintain its market position, even if at the risk of overpaying.
Rumors have been rife that Rupert Murdoch, who owns a 39% stake in Sky Europe (worth more than $4B), could sell his stake to fund a renewed bid for Time Warner after being rebuffed last year. That might explain why Sky execs were so keen to keep the lucrative soccer rights under the Sky umbrella.