Playing Soccer With Billionaires Isn’t Cheap – Bloomberg
Playing soccer with billionaires doesn’t come cheap. BT Group Plc had to stump up 30 percent more to keep the broadcast rights to the UEFA Champions League from 2018 to 2021. Bidding against Rupert Murdoch’s Sky Plc pushed the price up to 1.2 billion pounds ($1.5 billion).
It’s an inexorable law by now: the cost of flagship sports rights, whether for the NFL or the English Premier League, only goes up. The gravity-defying force remains despite evidence that viewer enthusiasm for live TV sport is fading.
In Europe, price inflation has been spurred by telecoms operators bidding against the established pay-TV providers who used to dominate sport. The telcos rightly see exclusive content as a marketing tool to make their broadband and television packages stand out from rivals.
But the same holds true for pay-TV providers such as Sky, who need to differentiate themselves from new challengers such as Netflix Inc. and Amazon.com Inc. For a warning of what happens when you lose top sporting rights, look at Vivendi’s Canal Plus.
Hence the crazy bidding and the endless gush of TV money pouring into leagues and player pockets. In Germany, where Sky earned just 4 percent of its 1.97 billion pounds of Ebitda in the year to June, it swallowed 80 percent inflation to pay 3.5 billion euros on the rights to the Bundesliga through 2021.
For BT, which is locked in difficult negotiations with regulators over its national broadband network Openreach, retaining the Champions League contract is an expensive win after a run of bad news.
It shows it’s sticking with a sports strategy that has certainly lifted the brand. The financial effects have seemed positive, though it’s hard to untangle whether recent customer gains come from soccer fans or from more benign competition with TalkTalk Telecom Group Plc and Liberty Global Plc’s Virgin Media. BT’s consumer revenue has increased 16 percent to 4.6 billion pounds since it launched the sports channels in 2013; Ebitda has risen 7 percent to 1 billion pounds.
According to analysts at Jefferies, BT was losing about 200,000 lines per quarter (which can be people taking phone service only or phone and broadband), while Sky was adding broadband subscribers at a similar clip. The immediate impact of BT Sport was to reduce those BT losses by two-thirds.
Since BT doesn’t have much other exclusive content, it’s hard to see how it could keep adding broadband and TV customers without the soccer. Sky has defended its turf a little better in movies and series, keeping shows like HBO’s Game of Thrones and producing new hits such as the Young Pope.
That said, Britain’s telecoms regulators may look askance at BT’s big soccer payouts. They want the former phone monopoly to spend more on fiber lines, but BT has argued that it can’t commit without guarantees on financial returns.
That defense rings a little hollow when you see how much cash it’s spraying around on soccer’s gilded elite. The new Champions League deal will see it pay almost 400 million pounds a year for the rights, a tidy sum when compared to the 1.4 billion pounds of network investments at Openreach last year.
BT stresses that football is paid for from the free cash flow of its consumer business. But RBC analyst Jonathan Dann reckons the money committed to the new Champions League deal would have connected an additional 2 million homes to fiber, double BT’s current pledge for lines through 2020.
Linking BT’s stodgy brand to the glitz of Europe’s top soccer teams is smart marketing. But it won’t get BT any closer to doing its most important job: building the country’s infrastructure.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story:
Leila Abboud in Paris at email@example.com
To contact the editor responsible for this story:
James Boxell at firstname.lastname@example.org