Sky netted a sweet Premier League deal but the TV rights bubble isn’t over

The value of TV packages may have plateaued in the UK but footie bosses aren’t worried, with the game’s appeal growing globally and the likes of Amazon on the sidelines
  
  

Sky Sports pundits (from left to right) Thierry Henry, Gary Neville and Alex Scott before the Premier League match at Turf Moor, Burnley, on 3 February 2018.
Sky secured four of the five best footie packages for £3.57bn over three years. Photograph: Richard Sellers/PA

On the face of it, the outcome of the latest battle for Premier League TV rights appears to be business as usual. Sky has taken the lion’s share of the best matches, extending its stranglehold on the biggest prize in British sports broadcasting to at least three decades, with BT slotting into second place.

But with Amazon in the running for at least one of the two remaining rights packages, Rupert Murdoch poised to take full control of Sky and then sell it to Disney, and BT calling time on its big spending on sports rights, it is a seminal moment.

In the short term, Sky has put one in the back of the net, securing the four best packages out of the five awarded last week for £3.57bn over three years, a 14% discount on its current deal. BT took the other package. The end to the cut-throat sports rights battle with BT, which three years ago forced Sky to pay 83% more to secure the prime games, and resulting cost savings have pushed Sky’s share price above Murdoch’s £10.75 per share offer.

Independent shareholders, who will vote on Murdoch’s bid, assuming it finally gains regulatory approval, now think this offer – worth £11.7bn – looks too cheap, and have called for an increase of between 10% and 25%, which would take the price to £13.40 a share. Investors from 21st Century Fox may also seek a higher price for the proposed $66bn sale of assets, including Sky to Disney.

For BT, the result of the auction, which has seen it pay less for less, marks the end of its aspirations to usurp Sky as a sports rights owner. BT entered sports as a strategy to build an attractive TV service to stop Sky stealing its hugely lucrative broadband customers. It has largely been successful, but it has come at a cost the company, and investors are no longer willing to pay.

BT made it clear this time it would be happy being a “viable second”. BT reckons that with exclusive sports rights, including the Champions League and a content-sharing deal that means customers can watch Sky’s Premier League coverage, it doesn’t need to pay more for the top games. With a huge bill to roll out next-generation, ultra-fast broadband, a ballooning pension deficit and the fallout of the Italian accounting scandal, BT’s board thinks so too.

Customers won’t see any price cuts from the savings being made. Sky has said that its savings, about £600m over three years, will go into making more original TV content, such as Fortitude and Riviera.

And then there is Amazon. The Premier League has been trying to lure a deep-pocketed tech company, such as Amazon, YouTube or Facebook, to continue to drive up prices. The last two unsold packages aim to appeal by allowing simulcasting of 20 games of two full rounds of matches, but they haven’t proved popular. Sky, BT and Amazon have lodged bids, but they did not reach the reserve price.

The Premier League is now sweetening the deal by throwing in goal-clip rights and near-live re-broadcast of games, usually auctioned separately later.

The value of Premier League rights look to have plateaued in the UK, the £4.46bn netted so far is unlikely to hit the £5.13bn of the current deal when the remaining two packages are sold this week.

But football chiefs aren’t fretting. If Amazon dips a toe in the water this time and shows it can make live TV football coverage work, it may come back with a more lucrative bid next time. And with the shift from broadcast TV to streaming, other tech companies may enter the fray.

The global popularity of the Premier League also continues to grow, as does the value of rights. The 80 international rights deals that will be auctioned next are expected to take in significantly more than the £3bn paid last time. The final whistle hasn’t been blown on the Premier League rights bubble just yet.

Accountancy big four must be held to account over Carillion

A month on from the spectacular implosion of government contractor Carillion and the toxic mushroom cloud is still spreading. Several banks are likely to write off sizeable loans to the outsourcing firm when they report annual results this week. That will draw a line under the affair for them, but there is precious little certainty for Carillion’s former employees and suppliers.

While nearly 7,000 jobs have been rescued to date, 1,000 former Carillion staff have already been made redundant. More than 11,000 remain in the dark about their long-term employment prospects.

Nor is the effect on the estimated 30,000 small businesses that supplied Carillion likely to be quantified for many months. Some of those firms – subcontractors specialising in anything from landscape gardening to painting and decorating – already scrape by on wafer-thin margins. Now they have been left to whistle for what they were owed.

A joint inquiry by two select committees continues this week, giving MPs the chance to turn the spotlight on the ever-popular accounting profession. One key evidence session will be with senior figures at auditor KPMG, which had the dubious honour of approving Carillion’s valedictory full-year accounts.

Committee chairs Frank Field and Rachel Reeves have already accused accountants of “feasting on what was soon to become a carcass”, a nod to the £72m the so-called big four audit firms were paid by Carillion over 10 years.

In a letter to the committee, KPMG chairman and senior partner Bill Michael insisted that the firm had not failed in its duties. Construction, he explained with saint-like patience, is the kind of sector where deadly icebergs can appear without warning, no matter how hard you’ve been scanning the horizon.

Expect MPs to wonder aloud why auditors deserve to be paid millions of pounds if they are so powerless to spot the shadow of impending doom.

Little sense in letting London’s public transport go down tubes

The man who spent the first half of the decade shredding public services as a way to tackle the nation’s deficit never did manage to wipe it out. But George Osborne helped create a new one. This year, Transport for London must operate with no state funding, its £700m annual grant cut to zero over three years by the former chancellor. TfL faces a near-£1bn deficit as a result.

The 2015 deal between Osborne and Boris Johnson could yet be the former mayor’s most toxic legacy, overshadowing the garden bridge and other vanity projects. For now, TfL insists it can ride out the dent in its finances – at least if the expected revenues from Crossrail stack up.

But the spectre of falling passenger numbers, after decades of growth, undermines its business plan. Whether the fall in Tube riders is down to economic angst, internet shopping or Uber remains largely speculation; but whatever the reason, TfL must hope it’s a blip rather than a structural trend.

Otherwise, balancing the books will become an urgent concern. London’s increasing prosperity and ever-upgrading transport system had begun to feel a given, but that virtuous spiral can be reversed. Axing investment – as TfL has already done on two Tube lines – risks services stagnating, with an eventual economic impact when people face obstacles in getting to places of work or leisure.

Given the poor state of public transport in other cities – and the relative lack of investment in the north, according to some studies – the capital’s plight is unlikely to attract much sympathy nationwide. Yet whatever the superficial political appeal of cutting subsidy to the south, London pays far more into the Treasury than it receives.

Mayor Sadiq Khan has proposed that the capital at least retain some of the £500m vehicle excise duty it generates. The government must grasp any politically acceptable solution to soften the effect of abolishing TfL’s grant: it makes no sense to clog up the arteries of its golden goose.

 

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