Sky shares drop after football deal

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Published: Wednesday 11th February 2015 by The News Editor

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The soaring cost of Premier League football rights put the skids under Sky shares today after it paid more than £4 billion for the lion’s share of games.

Sky and rival BT have agreed to pay a combined £5.14 billion for a three-year package of matches to 2019 – a rise of 70% on the previous deal.

Sky has almost doubled its investment to retain five of the seven packages, including a new Friday night slot, while BT Sport will pay £960 million for its matches, including Saturday evening fixtures.

Shares in both companies have risen sharply in recent weeks but Sky was down 5% today after the result of the auction was disclosed last night.

BT shares, which have been at a 14-year high, rose 4% as it was seen as having secured the better deal. Sky shares hit a record high earlier this year.

Sky admits that the price paid per year is around £330 million more than City analysts had forecast but insists it has plans in place to fund the bid.

It pledged to minimise the impact of higher rights costs on customers, with the majority of the funding for the new deal coming through efficiency plans.

Chief executive Jeremy Darroch said: “This is a good result and confirms that Sky is the unrivalled choice for sports fans.

“We went into the Premier League auction with a clear objective and are pleased to have secured the rights that we wanted.”

BT said its deal would cost it £7.6 million per game, an increase of 18% on the £6.5 million per game it currently pays.

However, it pointed out that the launch of BT Sport has supported the financial performance of the company by attracting new customers and encouraging existing customers to take more BT products.

Richard Hunter, head of equities at Hargreaves Lansdown, said BT appeared to have got the better deal following an expensive rights auction.

He said: “Sky has paid dearly and is going to have to squeeze costs and customers to keep its finances on track.

“BT has ended up with a good hand, Premiership, Champions League, FA Cup and European leagues all for a fraction of the annual cost that Sky is paying for its Premiership position.”

Three years ago the rights were sold for a combined total of £3.018billion.

Former Tottenham chairman Lord Sugar believes the new deal will have a negative effect on the future of the England team.

”(It is) an amazing amount of money,” he told BBC Sport. ”In one way it is positive for the teams, I think it is pretty negative for the future of international football for England.

”The more money that is given to the clubs, the more money is spent on players.

”Anyone who knows the effect of prune juice, it is pretty simple, it goes in one end and comes out the other and that is exactly what is going to happen with this money.

”A deal is a deal. I suppose the Premier League hierarchy have done a good deal in squeezing the most amount of money out of broadcasters and someone has done a very, very good job so I suppose they are happy.

”Will they be happy in a year when all the money they have got they have given to players and players’ agents is another story.”

Chief executive Richard Scudamore believes the Premier League is as much-loved across the globe as the BBC and the Royal Family, asserting the competition’s right to sell to the highest bidder despite the astronomical sums.

”To my core, I believe this is a success story,” said Scudamore. ”And I believe it’s a great UK export, it attracts a whole lot of positive feelings about the UK.

”If you go and do any international survey, things like the Premier League, the BBC, the Queen: they are things that people feel are good about the UK.

”Our own Prime Minister is quite happy to travel the world and talk about what a good thing the Premier League is.

”And we’re proud that our clubs and the league is looked at in that way.

”If you had your house and you were about to sell it tomorrow you would probably want to sell it for as much as someone was willing to pay for it.

”We have an asset here, clearly it’s an asset that people value, and we’ve marketed it in a way and put it up for sale and people have paid what they’ve paid for it.”

Published: Wednesday 11th February 2015 by The News Editor

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