Shares in Sky made the "biggest loss on the FTSE 100 on Wednesday as investors and analysts weighed the implications for the pay-TV company of the sharp increase in costs" to televise the Premier League, according to Michael Hunter of the FINANCIAL TIMES. Shares in its new rival in the televised sport arena, BT, "rose after the telecoms operator was more restrained in the record-breaking auction." The rights for three seasons of the football competition starting in '16-17 cost £5.13B ($7.8B), with games split between Sky and BT -- "significantly ahead of forecasts" and up by more than £2B ($3B). Jefferies equity analyst Jerry Dellis said, "Investors may also question whether it was necessary to pay so much when neither BT nor anyone else seems to have been bidding ambitiously for more than two packages. Even if Sky recovers half the additional £300 million ($457M) outlay, the overrun would still account for around 10 percent of group net income in 2017-18. At the next Premier League auction, BT may be in a stronger position to bid aggressively." Shares in Sky fell 5.7% to 900½p, while BT’s stock rose 2.9% to 457p, "one of the best showings on the leader board" (FT, 2/11). In London, Nick Goodway reported investors worried that Sky had "overpaid for its packages of 126 games." Hargreaves Lansdown Head of Equities Richard Hunter 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." Liberum analyst Ian Whittaker "slashed his target share price for Sky from 850p to just 530p," pointing out that while he had said Sky needed to win "at any cost," it had ended up with a "pyrrhic victory." Analysts at Deutsche Bank suggested Sky could push up subscriptions by
£1 a month but "have doubts" about its planned £200M ($305M)-a-year
savings, saying they would "test market credulity" (INDEPENDENT, 2/11).
BETTING ON FANS: In London, Henry Mance wrote "who will pay for Premier League rights -- customers or investors?" The main focus is on Sky, which has pledged to reduce spending by a further £600M ($913.9M) over three years, or 17% of its "addressable costs, to fund its bid." Sky said that most savings will come from "encouraging customers to make inquiries online rather than phoning its customer call centres." It said that spending on programs -- "including other sports and in-house drama -- will not be affected." The price of a Sky Sports package has "already risen" about 30% above inflation since '01, as "audience demand for football and other sports has grown." Deutsche Bank analyst Laurie Davison said the company could "feel far more confident" increasing prices, with the best Premier League rights secured. The problem for Sky is that "consumers have a real alternative -- BT offers less sport but at a much lower cost." The same is "true for pubs." More of them subscribe to BT Sports than to Sky Sports, "which is three times as expensive." BT's problems are "less acute:" its rights costs will increase 30% under the deal, "but remain a much smaller part of its overall spending." Investors have "largely backed the ambitious expansion of its consumer arm," including the £12.5B acquisition of the U.K.'s mobile phone operator EE (FT, 2/11).
