Forecasts that the Premiership bubble would burst in the credit crunch increasingly look premature, if not misplaced altogether. The Premier League has secured a record television deal that will be worth almost £1.8 billion over three years. The 5 per cent increase over the last deal will bolster finances of clubs until 2013 when the deal ends. By that time, even on the most pessimistic estimates, the recession should be over.
Forecasts that the Premiership bubble would burst in the credit crunch increasingly look premature, if not misplaced altogether. The Premier League has secured a record television deal that will be worth almost £1.8 billion over three years. The 5 per cent increase over the last deal will bolster finances of clubs until 2013 when the deal ends. By that time, even on the most pessimistic estimates, the recession should be over. With the overseas rights for 2010 to 2013 still to be distributed, the Premier League is on track for another record for its total broadcasting rights, surpassing the £2.7 billion it achieved in the 2007-10 round. The Premiership has also been canny in its current overseas deals, signing contracts to be paid in dollars. With the value of sterling falling against the dollar, it is thought that payments from overseas broadcasters have become worth millions of pounds more over the last few months.
Sky won five of the six packages available, the maximum it is allowed under EU rules. BSkyB paid £1.62bn of the £1.78bn total the Premiership will pay over three years. It is paying just under £5m a game at £4.7m and getting 115 games a season. Tony Syfret from Enders Analysis told the Financial Times ‘I estimate that Sky may make £20m more annually in increased advertising and revenues from pubs and clubs, but they are paying £103m more, so it is not absolutely clear what the benefit is for them, except putting Setanta in its place.’ However, if Sky had cut back on what it paid, the quality of English football would have suffered. There is already strong consumer demand for Sky subscriptions and by seizing the Monday night games – coupled with extended Champions League rights from next season – it will have enough matches to strengthen its appeal.
Irish broadcaster Setanta Sports is the big loser. It won a single package of 23 matches that will be aired at 5.15 p.m. on Saturday evenings. Analysts are sceptical whether it will reach break even point on its subscriber model. It’s an open question whether Setanta’s 1.5 million paying customers think it will be worth paying between £8 and £13 a month for the reduced service, including some football free weekends. It has saved more than £200m over the next three year deal and could use the cash to buy into other sports, improving its weak summer schedule. It could always try to sell itself to EPSN, the American sports broadcasting giant owned by the Walt Disney company, which was unsuccessful in the rights auction. EPSN could afford to buy into Setanta, providing the venture with real firepower with which to fight Sky.
UPDATE: HAVE SKY SCORED AN OWN GOAL? – 10/2/09
Brokers in the City of London are questioning whether BSkyB has overpaid for live football. Last week the satellite broadcaster won five of the six English Premier League broadcasting rights packages at a total cost of £541m per season, up 24 per cent from the current deal. However, JPMorgan argued that its unexpected capture of a fifth package was a Pyrrhic victory. Analyst Mark O’Donnell commented, ‘We do not think the additional revenue benefit of a fifth package is clear in justifying a £103m per annum step up in cost.’ Meanwhile, Cazenove downgraded BSkyB to ‘inline’ on valuation and growing regulatory concerns. An Ofcom investigation into BSkyB’s market power in exclusive sport and movie channels looks increasingly likely to be referred to competition authorities. The market’s verdict on the new deal was to mark BSkyB down 3.7 per cent on Monday against the background of a steady market.