Rupert Murdoch used sports programming — specifically an exclusive Premier League deal in the 1990s — to help build Britain’s Sky into a nearly $40 billion company.
Sky’s deals with properties such as the Premier League and Formula One won’t change with Comcast’s $38.8 billion purchase of the company, a deal that still has to run through Britain’s regulatory process. Those are iron-clad contracts that will not be broken. But the cost of keeping those sports, especially the Premier League, on Sky when those contracts expire already is giving investors jitters.
At issue is the fact that Premier League rights are sold on three-year cycles, which means that Comcast will have to negotiate again for the league’s rights in 2021-22. In the U.S. market, networks have convinced leagues to sign long-term deals — ESPN’s SEC deal runs through 2034, for example — as a way to keep annual sports rights increases in check.
“One of the big pieces of content that we worry about is the Premier League for sports,” respected analyst Craig Moffett told a group of investors on a conference call last week.
Moffett has emerged as one of the biggest skeptics of Comcast’s deal to buy Sky, downgrading Comcast’s stock to “neutral” because of the high price paid for a satellite TV provider when “satellite video distribution is increasingly becoming obsolete,” he wrote in a report.
Sky has the rights to the Premier League but will have to negotiate for them again in 2021-22.Getty Images
One of the reasons Moffett and his colleague Michael Nathanson are so bearish comes down to the potential high cost of exclusive sports contracts. The analysts suggested that some of the deep-pocketed digital companies — Facebook and Amazon for example — likely will push those rights fees higher during the next round of bidding in three years. Facebook already holds Premier League rights in Southeast Asia, and Amazon holds ATP Tour rights in the United Kingdom through 2023. They could see the Premier League as a way to move further into the European sports scene.
Under the leadership of Discovery President and CEO David Zaslav, Eurosport also has been making big moves to secure sports rights and could be another bidder.
“You have to be quite worried, I think, that Facebook will ultimately make a play for the Premier League across Europe,” Moffett said. “Either Comcast will have to pay quite a bit more in order to keep those rights or, alternatively, Comcast loses those rights.”
In addition to sports, the analysts worried that Comcast will have problems renewing Sky’s other programming deals with companies such as Disney, HBO and Showtime, given that each company is rolling out direct-to-consumer services.
“Comcast is going to have to ramp up its proprietary content production to replace the proprietary licenses that they’re going to lose,” Moffett said. “That is essentially borrowing a page from the Netflix playbook. We’re now getting close to a decade where Netflix has been pursuing that strategy. It’s not something that happens overnight. It takes a lot of spending to do it.”
John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.
