Soccer loss hits BSkyB shares
British Sky Broadcasting pleaded with European football officials for three days to reopen negotiations for the live television rights to Champions League matches after BT Group entered exclusive discussions.
The satellite broadcaster, which is 39 per cent owned by Rupert Murdoch’s 21st Century Fox, saw more than £1.3 billion ($2.2 billion) wiped off its market value on Monday after the company lost out in the auction. BSkyB has tried to play down the impact of BT’s win, but behind closed doors executives were rattled.
After learning that it had been knocked out of the bidding process at the first round of sealed bids, it lobbied the Union of European Football Associations to see if there was a way to revive discussions, but was unable to do so. BSkyB ended up not making a second bid for the rights, which eventually went to BT for £900 million.
BT’s successful strategy is understood to have been heavily influenced by Tony Ball, a non-executive director at the telecoms company who used to be chief executive at BSkyB. He is understood to have advised BT’s bidding team to table a large bid at the outset, amid fears BSkyB would find a way to secure the rights otherwise.
BT also took lessons from its bruising experience bidding for Premier League rights in the summer of 2012. The telecoms company had wanted to secure five out of the seven packages in which Premier League rights are sold – the most that can go to any single broadcaster. It succeeded in outbidding BSkyB but did not offer quite enough money to ensure the satellite broadcaster could not come back for a second-round bid. In the end, BSkyB took five of the Premier League rights, while BT had to settle for paying £738 million for the remaining two.
On Monday, BT shares closed slightly up, despite concern over the size of its bet on the rights to broadcast European football for three years. Analysts had expected intensifying rivalry over sports rights to push the price up by about 50 per cent, but BT ended up agreeing to pay almost double what BSkyB and ITV pay under the current deal.
Meanwhile, BSkyB shares ended the day down 10.9 per cent, amid fears its 20-year stranglehold on live football broadcasting was loosening.
BT’s defeat of BSkyB prompted warnings from analysts, who said further inflation of sports rights was inevitable and predicted increased intensification of an already fierce rivalry.
Investec described the loss of the Champions League as a ‘‘worst-case scenario’’ for BSkyB.