BREAKINGVIEWS-English soccer deal is doubly worrying

Thu Jun 14, 2012 10:25pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Quentin Webb

LONDON, June 14 (Reuters Breakingviews) - English Premier League soccer has just broken a 1 billion pound ($1.55 billion) barrier. That is the annual cost for BSkyB (BSY.L), the satellite broadcaster, and BT (BT.L), the telecoms group, to share domestic rights to three seasons of matches, starting in 2013. In response, nearly a billion pounds promptly vanished from the duo’s combined market value. For their investors, the outcome of the auction is doubly worrying.

Part of the market backlash is simply because the payouts are bigger than expected. BSkyB, which gets 116 games a season, is paying 760 million pounds a year. That is a 40 percent increase on its current settlement, and at least double the increase most analysts anticipated. Soccer is less central to BSkyB than it once was, but still helps lure and retain subscribers and popular sport remains a key part of the customer appeal.

The company says it can run more efficiently and trim content spending elsewhere, so its financial targets remain intact. But there is a second worry: BSkyB, soccer’s dominant media partner, and BT, a surprise newcomer, are engaging in closer combat. Having started in different niches, both now offer “triple-play” phone, cable and broadband packages. BT has been slower to build its television service than BSkyB has been to move the other way, but the phone firm plans to build a dedicated channel around its new soccer offering. That still leaves BT a long way from BSkyB’s market-leading pay-TV service, built up over many years, but should make its alternative more attractive. And more hot auctions for important content could follow.

Even before the new deal, broadcasting rights were already the biggest source of revenues for premiership clubs. Most of those revenues end up in players’ pockets: wages ate up 68 percent of all club revenues in 2009-2010, according to Deloitte.

That may help secure sporting talent for the English soccer league, which is already one of the world’s most admired, and underpin the value of the rights just sold. But the stock market reaction suggests that rather too much of the proceeds of this new deal will end up in the pocket of players and too little in the hands of shareholders.

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CONTEXT NEWS

- Satellite broadcaster BSkyB and telecoms company BT Group Plc said on June 13 hey had won the domestic rights to show live English Premier League soccer. The three-year, 3 billion pound deal represents a 70 percent rise on the current agreement, which finishes at the end of the 2012-13 season.

- BSkyB, already the main broadcaster of premier league matches, will pay 760 million pounds a year to show 116 games a season. BT is paying 246 million pounds a year to show 38 games, and will launch a new television channel focused on soccer.

- Shares in both companies fell sharply on June 14, before regaining some ground. By 1512 GMT, BSkyB stock stood 4.1 percent lower and BT shares had dropped 3.4 percent.

- BSkyB statement: link.reuters.com/saq78s

- BT presentation: link.reuters.com/raq78s

- Reuters: BSkyB and BT get yellow card for soccer spend [ID:nL5E8HE4BX]

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(Editing by Robert Cole and Sarah Bailey)

((quentin.webb@thomsonreuters.com)) Keywords: BREAKINGVIEWS BSKYB/

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