Nov. 11 (Bloomberg) -- BT Group Plc, by taking control of the rights to two of the biggest contests in European soccer, ended British Sky Broadcasting Group Plc’s dominance in sports that helped the Rupert Murdoch-owned company become the biggest pay-TV provider in the U.K.
After signing up more than 2 million customers to its three-month-old BT Sport channels, the phone company said Nov. 9 it agreed to pay $1.4 billion for exclusive live broadcast rights to the UEFA’s Champions League and Europa League soccer games. BSkyB, whose Sky Sports channels have aired top U.K. soccer games since the Premier League’s inception in 1992, slumped the most in five years in London trading.
It’s an “Armageddon scenario in sports rights,” said Claire Enders, chief executive officer of researcher Enders Analysis, while also calling it a “case of more money than sense.”
BT, the London-based company that started three sports channels in August, is trying to attract Internet customers by making those channels free for its broadband subscribers. Prices for broadcast rights have escalated, with a four-year deal reached in 2012 by BSkyB’s German affiliate to show the Bundesliga soccer matches boosting average annual income from the German rights to a record 628 million euros ($840 million).
BSkyB fell 11 percent to 829 pence in London for its biggest decline since October 2008. ITV Plc, a commercial broadcaster, dropped 1.6 percent to 187.4 pence. BT added 0.5 percent to 374.10 pence, taking its gains this year to 62 percent.
BT said it will be able to absorb additional costs -- on top of the 1 billion pounds ($1.6 billion) it’s previously said it will spend over three years on the efforts -- without changing its financial forecasts.
“We think we can do this and it will make commercial sense for us,” Chief Financial Officer Tony Chanmugam said in an interview with Bloomberg Television. “It’s not going to change our financial guidance for this year or next year or the year after.”
Chanmugam said BT will make up the license costs by decreasing customer turnover and increasing subscription revenues and market share. “If you come to BT, you will pay materially less,” he said.
BT’s win marks the first time a U.K. broadcaster has won exclusive rights to all matches of both the Champions League and Europa League soccer tournaments.
The three-year agreement starts from the 2015-16 season. The UEFA Champions League Final was watched by 360 million viewers last season.
“This is definitely a negative for Sky and ITV and a bit of a coup for BT,” said Alex DeGroote, a media analyst at Panmure Gordon in London.
Television rights deals in Germany and England have boosted the revenues of Europe’s top five soccer leagues by 25 percent to a combined 5 billion euros a season, according to a report from TV Sports Markets, which provides information for broadcasters and sports organizations. Sales of rights through 2016 in England, France, Germany, Italy and Spain added 1 billion euros a season from the previous three-year period.
BT began encroaching on Sky’s dominance in sports rights in June 2012, when the former phone monopoly won the franchise to broadcast some English Premier League soccer matches. BSkyB shares fell the most in almost two years on May 9 after BT unveiled the new sports channels.
BSkyB had dismissed BT’s push into broadcasting as “a marketing gimmick” and said its own Sky Sports is in a different league.
BSkyB said it bid for the rights to air the tournaments “with a clear view” of what they were worth and that BT chose to pay far in excess of their valuation.
“ITV is lucky to be out of this, and Sky is lucky not to have won this auction,” Enders said.
BT last month reported a smaller-than-anticipated decline in second-quarter profit, despite the added expense of the broadcast rights and getting the channels running.
The company has said it expects revenue, excluding payments for carrying other companies’ calls on its network, to improve this fiscal year. Adjusted Ebitda will be 6 billion pounds to 6.1 billion pounds this year and as much as 6.3 billion pounds next year.
BT has the rights to 38 British Premier League soccer games, soccer matches in Italy, France and Brazil, rugby competitions, and tennis tournaments.
BSkyB has been diversifying away from sports rights as it increases production of original programs. The company will spend 600 million pounds a year on original commissions by 2014, compared with 380 million pounds in 2011. It spends more than 2 billion pounds a year on content, including sports rights.
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