Following on from the announcement last week that Sky had added 204,000 new customers in the six months ending December, the broadcaster found its budgets being stretched to even new heights this week.
The bidding process for packages of Premiership football matches saw Sky come out yet again with the lions share over new competitor BT. From 2016 to 2019, Sky will show 126 games (up 10 on the current contract) at a cost of £4.18b (up 82%) with BT increasing to 42 games (from 38) and paying £960m (+30%). This means that each game is now worth an eye watering £10m.
The eagle eyed amongst you will notice the hike in what Sky paid for their packages in comparison to BT is rather considerable. Still smarting from BT’s shock acquisition of the Champions League rights, Sky knew they could not concede the golden goose. For the first time they are competing against a competitor with deeper pockets than themselves, and City experts believe Sky overpaid by as much as £330m. The BBC found themselves in a similar situation following the sealed bid process for the Match of The Day highlights package. With their sport portfolio under ever increasing pressure, they were expecting a rival bid from ITV that didn’t materialise. The result? The corporation coughed up an additional £30m, taking the total outlay to £210m over 3-years to retain the same rights.
So what does all this mean for us? For the consumer not much will change, the new(er) kid on the block remains well placed, and their on screen product will only continue to improve – rumours of Gary Lineker being piloted into anchor their Champions League coverage persist. Sky picked up the coveted Friday night game package, so expect a big promotional push on Friday Night Live (FNL) anytime soon – which could be a big play for their margin heavy pubs & clubs market. Clearly, with more games on offer, and significantly increased costs paid, the consumer can expect subscription prices to rise. How much longer can BT afford to give away BT Sports to high value customers? Can Sky afford to increase subscription costs, when for the first time they have a genuine competitor breathing down their neck? With both companies loading up their artillery in recent months; Sky creating Sky Europe and tying up with O2, and BT hoovering up EE, the battle lines have been drawn.
From our perspective at OMD UK, we have yet to see this content inflation pull through into increased costs for advertisers, but with this level of increase in the Premier League rights, it is certainly a watch point that we will be keeping a close eye on.