INSIGHTanalysis: BSkyB In The Box Seat In Premiership Rights Chase
BSkyB seems set to retain its dominance of televised football in the UK, despite the announcement last week that live Premiership rights are to be split into three packages when the current broadcasting contract expires next year.
Live coverage of Sunday afternoon and Monday night games helped to drive subscriptions at the fledgling broadcaster and the five year £190 million deal ensured a steady flow of income into English football. This contract has been superceded twice since and BSkyB now pays £367 million per season for Premiership matches. This represents a 900% increase since 1992.
However, the gravy train has now hit the buffers. This is due in large part to the advertising recession and the falling value of sports rights worldwide. There is also the small matter of an EU Competition Commission investigation into the way broadcasting rights are bought and sold.
Football no longer the ticket Last week the Premier League said that it was inviting bids for the next TV contract which runs for three seasons from the autumn of 2004. However, signs abound that BSkyB may not be willing to match the £1.1 billion it paid to secure the existing rights. The last deal was concluded at the height of the advertising and football boom and BSkyB faced competition from the likes of ITV Digital and NTL.
Three years have passed during which time ITV Digital has gone to the wall and NTL has struggled under a debt mountain from which it is only now emerging. Last autumn, sports business analysts at Sportcal speculated that without competition, BSkyB could renew its contract with the Premier League for up to 35% less than was negotiated in 2000.
The collapse of ITV Digital part-way through an ill-fated contract with the Nationwide League was a wake-up call to those who thought televised sport was a licence to print money. This, allied to a fall in the value of football rights in Germany and Italy has resulted in a new sense of realism in the market.
EU not playing ball Broadcasters and football bodies now also have to contend with the powers that be in Brussels. The EU has already said that the Premier League is flouting competition rules in the way that it sells collective rights to a single broadcaster.
The League has responded by announcing that live rights to Premiership matches are to be divided into three packages. The gold package consists of 38 games to be played on Sunday afternoons while the silver package comprises 38 Monday night matches. The bronze package includes 62 games to be shown on Saturdays at 1pm and 5.15pm while there is also scope for remaining matches to be shown on a delayed basis on either free TV, pay TV or on a pay-per-view basis.
According to Lehman Brothers, this scheme has been hatched with the whole intention of placating the regulators. Not only does it satisfy the demand to make more games available for television but it opens up the auction to multiple bidders. When the packages were revealed last week, there was considerable speculation that live top division football could be returning to terrestrial screens for the first time in over a decade.
Advantage Sky Premiership football has however been integral to BSkyB’s achievement in building up a subscriber base of 6.7 million subscribers and with its stated goal being to reach a 30%+ operating margin, there is little chance that it will loosen its grip. The satellite broadcaster is expected to bid for all three packages and may also make a collective offer to ensure that it retains exclusivity. BSkyB has already said that it will ‘aggresively’ reduce its offer if it is forced to share live rights with another broadcaster.
Even so, there is no guarantee that the BBC and ITV will even table bids. The BBC seems content with its audiences for FA Cup matches and England internationals and could be in breach of its public service remit if it was to set aside swathes of the schedule for live football. Meanwhile, ITV is widely considered to have overspent in agreeing to pay £60 million per season for Premiership highlights and with the advertising market still tough is unlikely to entertain the prospect of a bidding war with BSkyB.
The way is therefore clear for BSkyB to consolidate its hold on English football, particularly as the EU is set to allow joint selling by the clubs and has not insisted on a package of live rights being set aside for terrestrial coverage. Lehman Brothers predicts that BSkyB will end up paying £1.05 billion for exclusive coverage, just 6% less than under the current contract. This would be regarded by all parties as a satisfactory compromise in these uncertain times.