Market Insight

Premier League rights contract hits £5.1 billion as Sky and BT renew

February 10, 2015  | Subscribers Only

Tim Westcott Tim Westcott Director, Research and Analysis, Programming

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Sky and BT have renewed their agreements for live rights to the Premier League, with their combined spend increasing a staggering 70% to top £5 billion. Sky won the bidding for five of the seven rights packages on offer, and will air 126 live matches a season from 2016/17. BT will have the rights to two packages of 42 matches.

Sky said it will spend £1.392 billion a year, an increase of 83% on its current contract. BT will spend £320 million a year, a 30% increase on the current deal. BT has taken one key package from Sky - matches played at 5.30pm on Saturdays - as well as a package of mostly midweek matches. Sky's haul of includes matches kicking off at Saturday and Sunday lunchtimes, Sunday afternoon, the new package including Friday night games, as well as bank holidays and Sundays.

Under the current agreement: Sky is paying £760 million for 116 matches, while BT is paying £246 million a year for the rights to 38 matches They are paying a similar amount per match (£6.6 million for Sky, £6.5 million for BT). Under the new deal, Sky will pay an average £11 million per match and BT will pay £7.6 million.

The Premier League did not comment on whether other companies bid for the rights. Discovery Communications and BeInSports were both widely rumoured to be preparing bids. The league will now start the sale of international rights, a process expected to be completed by this time next year.

Our analysis

The 70% increase in the cost of live rights defied even the most wildly optimistic forecasts, even though the division of spoils in terms of matches is almost unchanged.The massive increase in Sky's investment indicated the pay TV platform's determination to retain leadership of the premium sports space in the UK - but seemingly also a strong, but ultimately unsuccessful, challenge by BT to gain an upper hand. Whether a third party - such as the cash-rich mobilie phone company Vodafone - also took part is as yet unknown

For Sky, the question is where it will raise the additional money it will need to fund the PL contract. An IPO for Sky Europe would be one way of raising cash. Sky will almost certainly have to raise prices (currently the Sky Sports package costs £24.50 a month via satellite) or find a way of increasing its market share against BT. 

BT Sport retains enough Premier League rights to remain a lower-cost alternative to Sky, but it has to be assumed that it had ambitions of usurping Sky's place as the leader in the sports premium pay market. From next season, BT Sport has exclusive rights to the Champions League and Europa League and is expected to increase charges for its three-channel package. (It has also said that it will air some matches free-to-air.)      

BT Sport launched in August 2013. A comparison of the metrics of both BT and Sky over the subsequent year suggests that Sky's core business has been largely unaffected.  

Between Q3 2013 and the same period a year later, Sky added a net 254,000 pay TV customers (a number that includes people buying passes to its over-the-top Now TV service as well as those taking a TV package). This was a 2.6% year-on-year gain - actually higher than the equivalent years to Q3 2012 and 2011.

While BT gained 142,000 TV subscribers over the same period (up 15.7% year-on-year) these subscribers are not taking premium packages, so this is not directly relevant to BT Sport. A better measure is BT’s broadband business, because IHS believes that BT’s main aim (at least up to now) has been to protect its share. At Q3 2014, BT reported 7.473 million retail broadband customers, a 7.4% increase on the year before.

This growth, however, is lower than both of the previous years. What’s more, Sky gained more than twice as many broadband customers in the year as BT (315,000 compared to 142,000). At least BT can point to one positive sign: the momentum of Sky’s growth in this market slowed from the double-digit gains in the three previous years.

What these numbers indicate is that BT Sport cannot be said to have either significantly slowed the growth of Sky’s TV business, or triggered an increase in BT’s broadband customer base. It should not be overlooked that Sky, in the PL contract starting in August 2013, increased the number of live matches. The broadcaster also brought new studio facilities on stream and revamped its coverage of the League. Sky then launched a reverse promotion against BT where Sky Sports subscribers were offered free broadband.

The Premier League may be the most important event Sky has the rights to, but it is not the only one: the broadcaster also airs the Champions League and Football League, international matches and Spain’s La Liga, as well as Formula One, cricket, rugby, tennis and golf. BT Sport is far from being a substitute product to Sky Sports, which is reflected in its full price (£12 a month for the channels in HD versus Sky’s £24.50 a month for the full six-channel sports package).

Five million homes have access to BT Sport. This total includes two million via Virgin Media and three million taking the service direct from BT (around half via satellite and the others via its own set-top boxes or via the BT Sport app). The pay TV offer is part of a wider consumer proposition (as the former incumbent, BT had a 51% share of fixed lines and 31% of broadband connections in the UK in Q3, according to IHS).

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