Graham Pomphrey: Premier League rights – caveat emptor

A sigh of relief was audible over west London yesterday evening as BSkyB discovered it had retained the rights to the English Premier league until 2016 – but at what cost?

Rumours had emerged that Al Jazeera and its seemingly bottomless bank balance were preparing to enter the costly, but potentially rewarding, world of English football rights. The Qatar-based broadcaster made waves in France when it snaffled the pay-per-view rights to Ligue 1 football in France, previously held by Canal Plus.

For Sky, EPL football has been the corner stone of its service since the creation of the league in 1992. Twenty years and 10 million subscribers later, the decision to invest so heavily in the League has paid off. But after the champagne corks popped last night Sky execs were forced to reflect on the huge hike in the amount it will pay the EPL – some £2.3 billion (€2.8 billion) over three years. That is a massive sum in all respects, but it seems even more gratuitous given Europe’s crippling financial situation.

Sky has reached an interesting point in its evolution. Reaching the 10 million subscriber landmark was an impressive achievement. But where does it go from there?

Pay TV growth has slowed and is unlikely to increase significantly, so the operator needs to look elsewhere to grow revenues. Sky has innovated well with value-add services like HD and Sky Plus proving particularly popular – but there are millions of customers who take Sky services purely for the football. To maintain its growth path, the decision was simple for Sky – it had to win those rights.

Now they have them, it will be interesting to see what demands the operator will make to balance out the whopping fee it paid. The cost of Sky Sports subscriptions will rise, no doubt. Whether cash-strapped viewers will be prepared for it is another matter. Insiders have also suggested that Sky will have negotiated concessions from the Premier League in terms of the scope of their coverage. The possibly of getting dressing room access has been muted, for example.

More surprisingly than the amount Sky has paid to retain the rights is BT sneaking under the radar to nick the two packages of rights currently held by ESPN.

No doubt Ian Livingston, BT’s CEO, could be heard muttering ‘caveat emptor’ to himself in the days before the telco submitted its bid – for the buyer must beware when previous owners of the two rights packages, ESPN and Setanta, struggled to build a sustainable business. Unlike those broadcasters, BT has the deep pocket required to take a financial hit and will no doubt be thinking about longer term strategies than trying to make a quick buck.

The telco has struggled to set the UK pay TV market alight with its BT Vision platform and will be hoping that the launch of a sports channel that airs exclusive Premier League matches will act as a catalyst to boost numbers. With the imminent launch of YouView, optimising its content offering is imperative. But perhaps even more pressing for BT is attracting customers to its new high speed fibre network – something that it could easily bundle into its exclusive sports offering.

So what about ESPN? The Disney-owned broadcaster is already considering exiting a number of international markets. Disney chairman and chief executive Bob Iger recently told investors that the broadcaster was “going to continue to look at [international] opportunities with an eye toward determining whether they have the ability to grow or, in some cases, become profitable or, if not, potentially exit those markets”.

While there’s no suggestion that ESPN will close its UK operation, it will struggle to retain customers without the carrot of the Premier League.

@dtvegraham