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Sky shares fall after Premier League TV rights deal | Sky shares fall after Premier League TV rights deal |
(about 2 hours later) | |
Sky's shares are trading around 2.5% down after it agreed to pay £4.1bn to show live Premier League football between 2016 and 2019. | Sky's shares are trading around 2.5% down after it agreed to pay £4.1bn to show live Premier League football between 2016 and 2019. |
Sky won five of the seven TV packages on offer, but paid 83% more than it did in the last auction three years ago. | Sky won five of the seven TV packages on offer, but paid 83% more than it did in the last auction three years ago. |
However, shares in BT rose more than 2.8% after it paid £960m for two of the TV packages, 30% more than last time. | However, shares in BT rose more than 2.8% after it paid £960m for two of the TV packages, 30% more than last time. |
Analysts at Jefferies said the outcome had been "sobering" for Sky, but "reassuring" for BT. | |
Sky and BT paid a combined £5.136bn for the live TV rights deal - far in excess of what had been expected. | Sky and BT paid a combined £5.136bn for the live TV rights deal - far in excess of what had been expected. |
Jefferies said the deal would be "challenging to explain" to Sky shareholders. | Jefferies said the deal would be "challenging to explain" to Sky shareholders. |
"For Sky, a sobering result," Jefferies said. "Even with some claw back on costs/pricing, we expect [analyst] forecasts to move lower," it said. | "For Sky, a sobering result," Jefferies said. "Even with some claw back on costs/pricing, we expect [analyst] forecasts to move lower," it said. |
The price Sky paid per year was about £330m more than City analysts had predicted. | The price Sky paid per year was about £330m more than City analysts had predicted. |
Jefferies estimated that Sky would try to claw back about £200m a year through cost-cutting and £100m through incremental price rises. | |
Analysts estimate that Sky Sports has about five million subscribers, out of a total TV subscriber base of between 10.5 and 11 million people. | Analysts estimate that Sky Sports has about five million subscribers, out of a total TV subscriber base of between 10.5 and 11 million people. |
The BBC understands Sky plans to mainly fund its bid by taking costs out of its non-programming budget. | The BBC understands Sky plans to mainly fund its bid by taking costs out of its non-programming budget. |
Sports and entertainment programming will not be affected, but areas such as customer services will find efficiencies by moving more online rather than being focused on call centres, for example. | Sports and entertainment programming will not be affected, but areas such as customer services will find efficiencies by moving more online rather than being focused on call centres, for example. |
Sky will also try to reduce the need for service visits by increasing the reliability of its set-top boxes, which are currently around 85% reliable, the BBC understands. | Sky will also try to reduce the need for service visits by increasing the reliability of its set-top boxes, which are currently around 85% reliable, the BBC understands. |
Subscribers are also likely to face some price rises, analysts believe. | Subscribers are also likely to face some price rises, analysts believe. |
Richard Hunter, head of equities at Hargreaves Lansdown, said BT appeared to have got the better deal. | Richard Hunter, head of equities at Hargreaves Lansdown, said BT appeared to have got the better deal. |
"Sky has paid dearly and is going to have to squeeze costs and customers to keep its finances on track," he said. | "Sky has paid dearly and is going to have to squeeze costs and customers to keep its finances on track," he said. |
"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," he added. | "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," he added. |
'Entertainment industry' | 'Entertainment industry' |
Premier League chief executive Richard Scudamore told the BBC Radio 4 Today programme that clubs reinvest TV rights money, "making sure the show stays as compelling and as interesting as it is". | Premier League chief executive Richard Scudamore told the BBC Radio 4 Today programme that clubs reinvest TV rights money, "making sure the show stays as compelling and as interesting as it is". |
He said that money ultimately gets "redistributed right down through grass-roots football". | He said that money ultimately gets "redistributed right down through grass-roots football". |
Although only about 5% of Premier League funds eventually filter down to grass-roots level, Mr Scudamore said he was not in a position to guarantee that the 70% rise in the price of TV rights would be reflected in funding for grass-roots football. | Although only about 5% of Premier League funds eventually filter down to grass-roots level, Mr Scudamore said he was not in a position to guarantee that the 70% rise in the price of TV rights would be reflected in funding for grass-roots football. |
He said it did not make him uncomfortable that Premier League footballers earn up to £500,000 per week, or that clubs employed some staff on the minimum wage. | He said it did not make him uncomfortable that Premier League footballers earn up to £500,000 per week, or that clubs employed some staff on the minimum wage. |
"The reality is, just like in the film industry, just like in any talent industry, just like in the pop music industry, the talent, the absolute talent... gets paid a disproportionately high amount compared with other people that work in the business." | "The reality is, just like in the film industry, just like in any talent industry, just like in the pop music industry, the talent, the absolute talent... gets paid a disproportionately high amount compared with other people that work in the business." |
"We're in the entertainment industry," he added. "The stars that grace the fields of football in the Premier League are world stars, it's a world market, and I don't set that market rate. It's set by the entire world market, and we, and the fans, want the best talent to come and play in the Premier League." | "We're in the entertainment industry," he added. "The stars that grace the fields of football in the Premier League are world stars, it's a world market, and I don't set that market rate. It's set by the entire world market, and we, and the fans, want the best talent to come and play in the Premier League." |