The Evermore Expensive TV Fun Basket

Michael Hedges February 3, 2014 Follow on Twitter

The pay-TV business is certainly getting complicated. Customers once were enticed by premium movies and sports, a fairly straight-forward proposition; take it or leave it. Now the product range may include broadband and mobile connectivity as well as boxes on top of the TV set and boxes filled with DVDs. Every customer in the digital age can custom-order a basket filled with every want and desire.

The last half of 2013 was good to the UK’s biggest pay-TV operator BSkyB. Gross revenue grew more than 6% to GB£ 3.76 billion, according to results released last week, and the company added 77 thousand customers in the final 2013 quarter. Profits, however, took an 8% hit.

“It’s a noisy period in terms of competition,” observed BSkyB CEO Jeremy Darroch to the investor’s conference call, quoted by Bloomberg (January 30), “but you can see across the board our business is continuing to power ahead.”

Sports rights dug into the pay-TV broadcaster’s profit margin, the charge for UK Premiere League rights was GB£ 2.3 billion. UK telecom BT, now in the pay-TV business, lost out in that auction but subsequently acquired Champions League football rights for its BT Sport channel from 2015. BSkyB has 10.5 million customers and BT Sport has 2.5 million subscribers.

"Of course the Premier League is an important set of rights,” Mr. Darroch told investors. “We get that. We will go in (to rights auctions) with a clear view of what we seek to achieve. With any set of rights there is a price beyond which we don't think it provides value.”

BSkyB acquired Super League rugby rights beginning in 2017 as well as Scottish football, English overseas cricket and WWF wrestling. A bigger package of international cricket rights is coming up for auction and, reportedly, BSkyB and BT preparing to bid. UK rights to the US PGA golf series, now held by BSkyB, seem to be on the BT wish list.

Playing for sports rights requires deep pockets. Under the weight of all that cash, premium rights packages are divided up, each event seemingly carries a hypothetical value. BSkyB and BT have cash, or access to it, and competitive strategies. Customers and subscribers looking for their favorite match, game or event are only loyal to the broadcast provider to a point, which can easily be tipped by an HD movie package, a broadband upgrade or other candy in the jar.

Discovery Communications, the US-based TV originator, took voting control over Eurosport in mid January. Immediately speculation of a bid for English Premiere League rights, auction to commence in about a year, lit up the headlines – sports, financial and otherwise. Last year the company completed the acquisition of the SBS Nordic broadcasting assets from ProSiebenSat.1 Media Group.

“We will look opportunistically at everything, strong sports rights can be very compelling and ‘must have’ content for viewers and advertisers,” said CEO David Zaslav to The Guardian (January 24). “Eurosport is very strong in the UK and we’ll will look at all rights in the UK and Europe and make a strategic decision.” Discovery Communications biggest individual shareholder is Liberty Global Chairman John Malone. A year ago Liberty Global acquired UK multi-service operator Virgin Media for €23 billion adding a bit of competitive pressure to BSkyB and BT.

There are others with deep pockets. BeIN Sports, the sports broadcaster owned by the Al-Jazeera network, has been busily scratching up rights, largely for the Middle East and North Africa in Arabic, for a variety of sports. BeIN Sports was cut out of the bidding for French National Rugby League rights in what seems home-team advantage. Cable operator Canal+ offered one amount for the rights but the league wanted more so it opened bids. When BeIN Sports came to the table, offer unknown, the rugby league decided to suspend bidding and pass the rights again to Canal+.

It appeared last year that the European Commission was ready to step into the murky world of sports rights following the rather tenuous decision by the European Court of Justice favoring – but not – a British pub owner who bought a Greek satellite TV subscription. Movie rights are now the agenda item rather than sports rights. With European elections months away sticking a pin into Hollywood is much more useful.

See also in ftm Knowledge

The Games People Watch

Media and sports are a powerful combination. Together they capture huge audiences and considerable money. This ftm Knowledge file looks at the competition from football rights battles and cycling coverage with new media to the Olympic Games. 82 pages PDF (October 2012)

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