The global sports rights bubble might have ceased inflating, but it has not yet burst as some over excited pundits have claimed. The latest round of bidding for English Premier League (EPL) soccer rights has not quite finished but the signals are operators are now joining forces to end the price inflation enjoyed for over a decade by premium sports. The two EPL packages still unsold, we presume because they did not reach their reserve price, were tailor made for the online providers because they bundled lots of matches together over a short period to attract surge viewing. Clearly then the big online players such as Facebook and Amazon, which we know did enter discussions with the EPL, are playing a cool long game keen not to generate rights inflation themselves.
Yet when the dust has settled and all the packages including international rights have been accounted for, the EPL clubs will be barely out of pocket compared with the current period running until 2019. In fact, remarkably little has changed, with Sky remaining the dominant force having secured four of the 7 packages leaving BT as the junior partner with one, the prime lunchtime Saturday match. BT in fact will pay 21% more per match than currently, £9.2 million ($12.9 million), while Sky enjoys a 16% discount at £9.3 million per match, the differences reflecting the relative appeal of different time slots and clubs.
The remaining games, about one fifth of the total, are likely to end up selling at around half the price of those sold so far to reflect their less appealing timing, which would bring the total auction price per game to £8.4 million. Although that is 20% down on last time the total number of matches sold has increased by a similar proportion. Furthermore, there are the outstanding international rights to consider, which may for the first time match the domestic total. Last time, in 2016, they sold for about £3 billion over the three years until 2018/2019 compared with £5.1 billion for domestic, but it is likely given trends with other European leagues that this will rise to nearly £5 billion. If that is the case, then the EPL could actually increase its income for those coming three seasons. Far from facing austerity as some analysts have suggested, the EPL will remain awash with money and considerably richer than its rivals such as the Spanish La Liga, where the resources remain over-concentrated in just two clubs so that most matches are less competitive.
The detailed outcome reflects the particular UK situation where at the time of the last auction three years ago BT was blazing into sports broadcasting with a high risk combative strategy aimed ultimately at overtaking Sky. That strategy failed despite BT winning exclusive UK rights to the Europe-wide Champions League, the world’s premier club football competition, largely because it overreached itself at a time of intense broadband competition as well. BT is also largely in charge of UK national fiber roll out through its Openreach operating subsidiary, which is consuming a lot of investment.
So BT has faced strong balance sheet pressure which led to a profit warning as well as demands for cash from pensioners and shareholders. Meanwhile Sky has also had to cut costs across its business to maintain investment in non-sports content to meet the SVoD threat in particular.
It was not surprising therefore that hostilities between the two rivals have cooled and ended in a truce with a mutual wholesale deal arranged in December 2017 which drew the sting from this EPL auction as the rumored bids from the big OTT players failed to materialize. Now subscribers to each can view all the other’s sports content for a premium and so do not need to subscribe to both.
To some extent the UK situation is mirrored on the global stage, with both legacy operators and the OTT players wary of stoking inflation and aware that a more cautious approach to rights acquisition could pay dividends. Of course, a new spiral of competitive bidding could easily erupt somewhere but the fact those two EPL packages comprising matches bundled over a weekend or mid-week period pitched at the OTT players did not appear to reach their reserve price suggests that they will end up going at a substantial discount per match over the primary weekend games.
This could then prove a turning point for OTT premium sport if as seems quite likely Amazon or Facebook do end up with those rights, or for that matter some of the international EPL rights. In fact, international rights represent the major growth areas for sports leagues like the EPL whose national markets are saturated but with scope for growth among foreign fan bases.