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Sky Winning U.K. Soccer Rights Sets Stage to Lift Takeover Price

Updated on
  • Broadcaster’s leading position at lower price seen attractive
  • Fox, Disney and Comcast are all potential suitors for Sky
Bloomberg Intelligence’s Paul Sweeney discusses the new broadcasting rights deal for English Premier League soccer.

Sky Plc is snagging more rights than ever -- and paying less to boot -- to broadcast Britain’s top soccer championship through 2022, a bonus for suitors 21st Century Fox Inc., Walt Disney Co. and Comcast Corp.

The European broadcaster won the bulk of the Premier League rights in an auction result announced late Tuesday but will pay 16 percent less per game, offering buyers comfort about the profit outlook of its pay-TV business. Sky, the subject of a takeover bid from Fox, rose for the first time above the offer price on speculation its minority shareholders will push for a richer deal.

Sky shares gained 3.1 percent to 1,093.5 pence, about 1.7 percent higher than Fox’s bid for the U.K. broadcaster, at 8:54 a.m. in London.

Fox is awaiting U.K. regulatory approval to buy the remaining stake of Sky that it doesn’t already own and has agreed to sell the broadcaster to Disney as part of a $52.4 billion film-and-TV asset deal. Comcast is also said to still be eyeing some of Fox’s assets, driven by its interest in Sky.

Sky and rival BT Group Plc are together paying 4.46 billion pounds ($6.2 billion) for most of the rights over the three seasons, compared with 5.1 billion pounds in 2015. It’s the first time in 15 years that the per-game price has declined, signaling a more rational approach by the broadcasters after years of rampant price inflation. Two packages of less desirable rights are still left to auction.

“The lack of content cost hyper inflation eases the path to the attraction of Sky to suitors,” Neil Campling, a senior analyst at Mirabaud Securities in London, wrote in an emailed note.

Premier League soccer has long been key to attract and retain TV and broadband subscribers and the cost of the U.K. rights has surged 30-fold over the past 25 years. Media and telecom carriers had been bracing for the potential of having to shell out even more as web giants including Amazon.com Inc. and Facebook Inc. dip their toes into sport to expand their video businesses.

Web Giants

Analysts had also largely been forecasting that the inflation would continue, with Credit Suisse seeing a 30 percent to 40 percent rise and Ampere Analysis expecting a 15 percent gain. The absence of a strong showing from the digital players and a content-sharing agreement between Sky and BT signed in December may have contributed to the restrained bidding.

“In advance, there was a lot of signaling from both parties that they were mindful of what they were willing to pay,” said Mostyn Goodwin, a partner at OC&C Strategy Consultants in London.

Both companies have struggled to justify to investors paying more for sport as the rights have become richer. BT has competing demands for its cash, including a fiber broadband roll-out and gaping pension deficit, and Sky has been emphasizing its investments outside soccer, including its studios business.

For Gadfly’s take on Sky’s new soccer-rights deal, click here

“Not only do we remain the home of Premier League football but also the home of top quality drama, entertainment, comedy and other sports,” Stephen van Rooyen, Sky’s U.K. chief executive, said in a statement after Tuesday’s auction.

Inconsistent viewing patterns for sport in recent years -- including a decline for the Premier League in the U.K. over the 2016/2017 season -- have also spurred questions about the value of the rights. Viewing in the U.K. this season has been up about 4.5 percent over last, based on preliminary figures for the first two-thirds of matches, according to a person familiar with the data.

“Sky and BT have, six years later than they might have done, got the cross-supply deal in place and finally got the inflation genie back in the bottle,” said Mike Darcey, a former chief operating officer at Sky, where he worked on five Premier League bids.

The auction outcome could make Sky attractive enough to even spur another bid, Campling said. With Comcast sidelined in December by the Disney-Fox deal but now showing renewed interest, the result could “sharpen the deal pencil” of the largest U.S. cable company and the Roberts family, its founders, he said.

(Updates with Sky executive comment from 12th paragraph.)
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