June 14 (Bloomberg) -- British Sky Broadcasting Group Plc and BT Group Plc slumped in London trading after paying a record 3 billion pounds ($4.7 billion) to win the bidding to show English Premier League soccer matches.
BSkyB, the U.K.’s largest pay-television broadcaster, lost 3.5 percent to 671 pence, the steepest drop in seven months. BT fell 3.5 percent, the most since Nov. 1, to 201.70 pence.
BSkyB, which relies on exclusive sports broadcasts to retain and win subscribers, will pay more than analysts had estimated, increasing spending on the soccer rights by 40 percent. BT, the U.K.’s largest Internet provider, will acquire the live rights for the first time, using the matches to start a new sports channel.
“It speaks to how important Premier League rights are to the Sky model,” said Patrick Yau, an analyst at Peel Hunt in London. “Sky has become synonymous with coverage of the league, so to maintain its position, it was prepared to pay as much as it did.”
BSkyB’s pay-TV Sky channel will show 116 matches starting in the 2013-14 season, with BT getting 38 matches. The sale of the seven packages raises 3.02 billion pounds, compared with 1.77 billion pounds in the current pact, the league said yesterday. BT will pay 246 million pounds a season.
BSkyB has held rights to Britain’s top soccer games since the Premier League’s inception in 1992. Rival broadcaster Setanta collapsed in 2009 and paved the way for Walt Disney Co.’s ESPN sports channel, which yesterday lost the right to show Premier League matches after the next season.
BSkyB will pay 760 million pounds per season, while analysts in a Bloomberg survey were estimating about a 20 percent increase to about 649 million pounds
The broadcaster, in which Rupert Murdoch’s News Corp. owns 39 percent, won’t pass on the additional costs to its more than 10 million subscribers, said a person familiar with the matter, declining to be named as the plans are confidential. BSkyB will pay for the increase by cutting operational costs and slowing spending on other programming, the person said.
The broadcaster will need to save an additional 140 million pounds, Peel Hunt’s Yau said.
“Investors in BT might justifiably think this wasn’t one of the options they thought they were buying into,” Citigroup analyst Simon Weeden said.
BT will gain rights to 18 out of the 38 top tier matches available, showing games including the traditional New Year’s Day match on the new connected TV platform YouView, said Marc Watson, chief executive officer of BT’s television service, which has about 700,000 clients. BT will also offer fiber broadband packages alongside the games, he said in an interview.
“It’s going to take a while to build, of course it is,” said Watson, a former independent league rights negotiator. “But we think we’ll start picking up customers quite quickly because customers are going to want to watch these matches.”
The new deal means for the first time a broadcaster outside of BSkyB will show matches between Arsenal, Liverpool, Manchester United and Chelsea. The teams had been known as the ’Big Four’ prior to the emergence of Manchester City and Tottenham. The Premier League has increased the total number of live matches shown to a record in the new contracts, which cover the 2013-14 to 2015-16 campaigns.
“BT have secured highly attractive highly competitive games,” Premier League Chief Executive Officer Richard Scudamore said yesterday. “That’s a game changer.”
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