The battle for Premier League football rights "has kicked off and fears that Sky will be on the losing side" sparked "the heaviest fall in its shares in almost five months" on Monday, according to Ben Martin of the London TELEGRAPH.
The auction for rights to the three seasons from Aug. '16 began on Friday and "is expected to be fiercely contested by rivals BT and Sky." Concern that Sky, which won the majority of rights at the last auction three years ago, "will lose out in the upcoming bidding war saw shares in the pay-television broadcaster slide 39½p to 863p, a 4.4pc drop that was the heaviest in the FTSE 100." Broker Liberum said that although competition from BT "is expected to drive up the price that bidders are willing to pay, this is not necessarily a major problem for Sky." Liberum's analysts said, "Even if Sky was to see 50 percent cost inflation for the Premier League rights from its current level… then this would only have a 12 percent impact on forecasts."
The main threat "would come from BT securing the lion’s share of the rights." The analysts said, "Our recent proprietary survey of Sky Sports customers suggested half would switch to BT if the latter won the majority of rights, or an equal number but initiated a price war. Losing the Premier League rights would put Sky’s highly profitable wholesale, pubs and clubs and advertising revenues at risk. Sky has to win this battle."
Analysts at Bank of America Merrill Lynch "sounded a similar warning" (TELEGRAPH, 12/15).
