• Deal with Premier League ‘way above forecasts’
• BT also sees value drop after buying matches
More than £400m has beenwiped off the value of BSkyB after analysts warned that the company had spent too much on “blowout” TV rights for next year’s Premier League.
Sky’s shares, which had fallen by 8.2% at one point, closed down 3.5% to 671p. The collapse in the share price knocked £160m off the value of Rupert Murdoch’s News Corporation’s 39% stake in the satellite broadcaster.
The decline in the shares came the day after Sky splashed out £2.3bn on securing the TV rights to 116 matches each season for three years from the start of the 2013-14 season.
Sky’s shares have already lost a fifth of their value since News Corp dropped its bid to take over the whole of the company at the height of the phone-hacking scandal last summer.
BT, which made its first foray into live Premiership football by paying £738m for the rights to 38 games a season, also saw its shares suffer.
Shares in the telecoms company, which ousted ESPN as the second broadcaster of live Premier League action, closed down 7.4p to 201.7p.
Analysts at Deutsche Bank said Sky had paid much more than forecast: “The blowout rights inflation was way above our forecasts, but it’s not a game changer for Sky’s competitive position.” UBS strategists said the deal came as a “negative surprise”.
Each individual televised match will now cost the broadcaster £6.6m to televise, 40% more than under the previous deal. The deal means Premier League football is now by far the most expensive show on television, with even art house Hollywood movies costing less to produce.
Patrick Yau, an analyst at Peel Hunt, said the huge amount paid reflects “how important Premier League rights are to the Sky model”. “Sky has become synonymous with coverage of the league, so to maintain its position, it was prepared to pay as much as it did,” he said. Sky has held rights to the Premier League since its inception in 1992.
Ian Livingston, chief executive of BT, said the telecoms company’s success in winning two of the seven packages on offer, would be a “game changer”. Winning the rights to 18 of the 38 coveted “first pick” games means it will be able to broadcast some of the Premier League’s most high profile games, such as the Manchester derby between United and City.
Richard Scudamore, chief executive of the Premier League, said BT had won the rights to “top six v top six games” and had “secured highly attractive, highly compelling matches”.
Scudamore said the deal would pump at least £14m more a year into each of the league’s 20 football clubs. He said he hoped clubs would use some of the extra windfall on investment in “infrastructure, stadiums, youth development and the community”. Previous broadcast deals have led to spikes in players’ wages and transfer fees.
Steve Liechti, an analyst at Investec, said: “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.”
It is thought that Sky won’t pass on the extra costs to its 10m subscribers. A person close to the deal said Sky would pay for the price hike by cutting costs and spending less on other programmes. Yau estimated that Sky will need to save an extra £140m a year to pay for the extra cost of the rights.
BT admitted that its first foray into live Premiership football will knock £100m from its profits before tax and charges.