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LONDON (Reuters) -
Fears that satellite broadcaster BSkyB and telecoms company BT Group Plc overpaid for their 3 billion pound rights to live English Premier League football matches drove their shares lower on Thursday.
The three-year deal, which cements the Premier League's position as the most valuable domestic football competition in the world, is a 70 percent rise on the current UK agreement which expires at the end of next season.
The increase underscores the value of live sporting action to media and telecoms companies, who are being drawn into closer competition by converging technologies.
BSkyB, part-owned by Rupert Murdoch's News Corp, will pay 760 million pounds per season to show 116 live games - a 40 percent increase on the cost of its current deal.
Live football has been a mainstay of BSkyB's programming since the Premier League was launched two decades ago.
However, concerns over competition from new market entrant BT and the price overshadowed relief over retaining the bulk of the rights, sending BSkyB shares more than seven percent lower.
"The cost is higher than expected, and BT arguably looks a more potent competitor than ESPN, even if we have some doubts over its content strategy and pay TV product performance to date," said Investec analyst Steve Liechti.
BT'S GAMBLE
Shares in BT also fell almost 3 percent after the former state telecoms company surprised the market by agreeing to pay 246 million pounds a season to show 38 live games.
BT will oust U.S.owned-ESPN, a unit of Walt Disney Co, as the second broadcaster of action in the Premier League, home to clubs like Manchester United, title holders Manchester City and Champions' League winners Chelsea.
BT is spending 2.5 billion pounds on rolling out its fast, fibre broadband across Britain and sees the deal as a way of driving take-up of its BT Vision television offering which currently has 700,000 customers.
Other companies have struggled to make a success of Premier League deals, struggling for growth in the shadow cast by BSkyB's dominance. BSkyB now has more than 10 million customers.
"This move by BT has logic as a way to leverage its broadband infrastructure more effectively but may come as a shock to many investors as the company attempts to boost growth, as cost cutting becomes less of a driver of future earnings," Deutsche Bank analysts Robert Grindle and Matthew Bloxham said.
Premier League Chief Executive Richard Scudamore, delighted to have sealed such a recession-busting deal, noted that BT had first choice of matches for 18 of its 38 games - an advantage other second broadcasters had not enjoyed.
"This is top six v top six games," he told reporters. "BT have secured highly attractive, highly compelling matches."
The deal is a welcome windfall for clubs in England's 20-team elite, many of whom are losing large sums of money as higher revenues fuel a wage spiral. The Premier League sells TV rights collectively, unlike in Spain where leading clubs Real Madrid and Barcelona do their own deals.
It is also likely to boost the valuation of Manchester United, the world's best supported club, which is preparing to list on the stock market in the United States after ditching plans for a flotation in Singapore.
Scudamore said the agreement would help English clubs to comply with new rules meaning they must move towards breakeven or face exclusion from top European competition.
"It makes Financial Fair Play easier to achieve which is a very significant thing," he said.
(Additional reporting by Paul Hoskins; Editing by Elaine Hardcastle)
Fears that satellite broadcaster BSkyB and telecoms company BT Group Plc overpaid for their 3 billion pound rights to live English Premier League football matches drove their shares lower on Thursday.
The three-year deal, which cements the Premier League's position as the most valuable domestic football competition in the world, is a 70 percent rise on the current UK agreement which expires at the end of next season.
The increase underscores the value of live sporting action to media and telecoms companies, who are being drawn into closer competition by converging technologies.
BSkyB, part-owned by Rupert Murdoch's News Corp, will pay 760 million pounds per season to show 116 live games - a 40 percent increase on the cost of its current deal.
Live football has been a mainstay of BSkyB's programming since the Premier League was launched two decades ago.
However, concerns over competition from new market entrant BT and the price overshadowed relief over retaining the bulk of the rights, sending BSkyB shares more than seven percent lower.
"The cost is higher than expected, and BT arguably looks a more potent competitor than ESPN, even if we have some doubts over its content strategy and pay TV product performance to date," said Investec analyst Steve Liechti.
BT'S GAMBLE
Shares in BT also fell almost 3 percent after the former state telecoms company surprised the market by agreeing to pay 246 million pounds a season to show 38 live games.
BT will oust U.S.owned-ESPN, a unit of Walt Disney Co, as the second broadcaster of action in the Premier League, home to clubs like Manchester United, title holders Manchester City and Champions' League winners Chelsea.
BT is spending 2.5 billion pounds on rolling out its fast, fibre broadband across Britain and sees the deal as a way of driving take-up of its BT Vision television offering which currently has 700,000 customers.
Other companies have struggled to make a success of Premier League deals, struggling for growth in the shadow cast by BSkyB's dominance. BSkyB now has more than 10 million customers.
"This move by BT has logic as a way to leverage its broadband infrastructure more effectively but may come as a shock to many investors as the company attempts to boost growth, as cost cutting becomes less of a driver of future earnings," Deutsche Bank analysts Robert Grindle and Matthew Bloxham said.
Premier League Chief Executive Richard Scudamore, delighted to have sealed such a recession-busting deal, noted that BT had first choice of matches for 18 of its 38 games - an advantage other second broadcasters had not enjoyed.
"This is top six v top six games," he told reporters. "BT have secured highly attractive, highly compelling matches."
The deal is a welcome windfall for clubs in England's 20-team elite, many of whom are losing large sums of money as higher revenues fuel a wage spiral. The Premier League sells TV rights collectively, unlike in Spain where leading clubs Real Madrid and Barcelona do their own deals.
It is also likely to boost the valuation of Manchester United, the world's best supported club, which is preparing to list on the stock market in the United States after ditching plans for a flotation in Singapore.
Scudamore said the agreement would help English clubs to comply with new rules meaning they must move towards breakeven or face exclusion from top European competition.
"It makes Financial Fair Play easier to achieve which is a very significant thing," he said.
(Additional reporting by Paul Hoskins; Editing by Elaine Hardcastle)
Football Deal