Media giant Sky (LSE: SKY) has temporarily won the battle against telecoms giant BT (LSE: BT-A) for showing FA Premier League matches from 2016-19, though the former’s shares fell 5% in early trade while the latter’s rose c.3%, indicating that the market may believe the deal was too expensive.
The FA Premier League said Sky had won five of the seven TV packages, paying £4.2bn for the privilege, while rival BT paid £960m for the other two in a record TV rights auction. Sky also won the key Sunday afternoon games.
BT will have exclusive rights to the Champions League from next season, but will lose its early Saturday kick-off to Sky. The deal will run for three years from 2016.
Sky paid 83% more than it did in the last round three years ago. BT paid 18% more and has increased the number of live matches it will show from 38 to 42 a year. BT will pay £320m per season, against £246m per season at present.
The previous three-year deal cost Sky and BT around £3bn; this time it was over £5bn – 71% higher than the costs of the rights between 2013-2016.
After the auction, Sky admitted the amount it paid for the TV rights was about £330m more than analysts had forecast.
The results of the auction means it will cost the two broadcasters an average of £10.19m per game to show a single Premier League match, (as reported by the BBC).
So where does this deal leave Sky and BT?
For both these companies, it is a “win, win” situation. For Sky, paying for a “luxury brand” like the Premier League will drive subscriptions to its basic and premium TV, HD and Over-the-Top services, as well as its broadband and telephony services. For BT, no doubt this deal will attract more customers to its BT Sport channels and broadband products.
Where does this deal leave Sky and BT customers?
Sky customers seem to be the better off according to media analysis company Ampere Research. For every TV customer, Sky spends £125 on sports, of which £89 goes to the Premier League; by way of comparison, BT spends £209 per TV customer a year on the Premier League – a dramatic 134% more than Sky.
Where does this deal leave investors in both companies?
Some investors may think that BT and Sky have stretched their budgets when it comes to spending on these Premier League matches — but what’s new? Sky’s shares have been up 7% over the last year compared to a 6% hike for the wider FTSE 100. In comparison, BT’s shares have risen 16% over the last year, as compared to a 4% hike for the wider FTSE 100, and this news seems to have been well received by the market.
Sam Hart, analyst at Charles Stanley, says: “Whilst Premier League football can clearly be a key factor in the decision to take up a Sky subscription, we highlight that Sky Sports customers watch a wide variety of sports and that Sky also attracts many customers who do not subscribe to a Sky Sports package at all. The BT Sport proposition remains much narrower than Sky Sports and should probably be viewed as a supplement to a Sky subscription rather than a substitute.”
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Sabuhi Gard has no position in any shares mentioned. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.