Sky still game for Premier League matches despite Disney’s Fox bid
Questions raised over broadcaster’s strategy with auction for TV rights set to kick off
For more than two decades, the English Premier League has relied on the financial might of Sky, with the company paying billions each time the league sold its much sought-after media rights.
But Walt Disney’s $66bn offer for the entertainment assets of 21st Century Fox, including its 39 per cent stake in Sky, has raised questions about the broadcaster’s strategy when the next round of bidding for the UK rights kicks off in February.
The Disney-Fox deal will take at least a year to win approval from US regulators, so it will not have been cleared in time to sway what is expected to be a multibillion-pound auction. Sky and BT, the telecoms group, paid £5.1bn for the current three-year deal, representing a 70 per cent increase on the previous deal.
Both Sky and BT are expected to submit bids in the latest tender for football matches to run for three seasons between 2019 and 2022, though the league’s executives were playing down the prospect of a similarly large surge in value this time round even before news broke about the Disney-Fox deal.
This likelihood increased with the recent signing of a content-sharing arrangement between BT and Sky which will start in 2019. The agreement between the one-time rivals will allow Sky to offer the BT Sports channel to its satellite subscriber base and make Now TV, its lower cost streaming service, available to BT customers via the telecoms group’s set-top box.
“With this reciprocal content deal, we think there is limited incentive for either Sky or BT to bid aggressively in the auction,” UBS analysts wrote in a recent research note.
While this may affect the price Sky is prepared to pay for the Premier League, Mathew Horsman, analyst with Mediatique, says the company cannot afford to lose its grip on the rights. “It is too unsafe for Sky, whether it is owned by Disney or Fox, to rely on a wholesale arrangement with BT to deliver sport to its customers,” he says.
“Sky can’t afford to not have direct ownership of the rights. The margins are nowhere near as good and the risks are huge. What would happen if BT decided it didn’t want to renew [with the Premier League]?”
This round is also being affected by the prospect of a big technology company such as Amazon or Facebook gatecrashing the party — and driving up the price.
A significant clause in the Premier League’s tender for bids suggests it is already thinking of new media in its future. The league said its new rights packages would be available on a “technology neutral basis”, meaning it is open to showing matches exclusively online and widely seen as an invitation to digital giants to enter the fray.
The move is an indicator of future rights deals, with the league’s executives banking on revenue growth being powered by overseas rights deals, currently worth about £3bn. This could prove attractive to digital groups looking to build international streaming services.
“We would expect a bid for international content distribution rights to appeal more to these ‘over the top’ [digital] players, given the Premier League’s popularity around the world and the ubiquity of these platforms,” says Dhananjay Mirchandani, an analyst with Bernstein. “Owning domestic rights cannot be a strategic priority for them in the way that it is for Sky and BT.”
Executives at Sky have privately suggested that they would not be able to match the financial might of Silicon Valley giants should they compete for live sport. Amazon outbid the company this year to win exclusive UK rights to ATP men’s tennis world tour matches, while in the past few months, Facebook and Twitter have competed for global sports rights, from NFL games to Indian Premier League cricket.
But it is unclear how keen the technology players will be to acquire a set of rights exclusively for the UK. “They want global rights, not local ones,” says one senior media executive.
Still, with technology players flexing their muscles in sport — and with audiences increasingly watching television via streaming services — media companies know they need to act if they are to maintain their dominance of live sports broadcasting.
A Disney-owned Sky should give the media company more firepower to compete for media rights while the combination of Disney with Fox’s other entertainment assets, such as the US regional sports networks that it is buying, could create a world leader in sports broadcasting.
Disney already owns ESPN, the sports cable network, and has the right to screen marquee US sports such as the NFL and NBA basketball.
“Sky adds the next layer for Disney,” says Claire Enders, founder of Enders Analysis. “It is the biggest pay-TV operator in Europe. Sky and Fox had an arm’s length relationship . . . but if Disney owns 100 per cent there is no barrier to building a dominant position in rights . . . it’s a huge start on a global adventure.”