In the week and a half since Sky won the lion’s share of the Premier League rights there’s been a lot of speculation and, in some quarters, angst about how it’ll recoup its £4bn investment.
Fears of massive price hikes are unlikely to come true – while the Premier League is a premium product, there’s a limit on what people will be willing and able to pay for them.
Sky has already spoken about cutting internal costs to help shoulder some of the PL increase, and it’s a sure-bet that pubs and resellers such as TalkTalk and Virgin Media will be also be expected to chip in.
Virgin’s recent complaints about consumers suffering from the way Premier League rights are sold are at least partially about the wholesale costs it pays to offer Sky Sports and BT Sport to its customers and how these squeeze its margins.
Some customers have expressed concern that non-sport content might be sacrificed in order to make the books balance.
I think this is unlikely, Sky’s recent European expansion gives it both greater buying power and the ability to strike cross-border deals with content creators which will be cheaper than separate deals for each territory.
This means viewers will continue to get big name US shows and original UK dramas.
And Sky has a growing number of subscribers to its NOW TV streaming service which generates money from people who largely never paid for TV before – this is all new money which helps covers costs.
Over at BT they’re pretty happy to have secured a more popular time slot at a much lower increase than Sky’s, but the extra costs has caused some speculation about whether BT Sport will remain free with the firm’s broadband packages.
Weaning customers off their free football would be difficult in the short term and unless BT is willing to dramatically push up the price it charges Virgin it would risk competing against a rival which was still giving away the channels as part of a bundle.
To engineer a situation where you competed against your own product would be absurd so we can almost certainly rule out a charge beyond the “modest” fee for those wanting to enjoy BT’s exclusive Champions League coverage.
In any event, the extra £80m per season BT will pay for its new Premier League rights will be dwarfed by the revenue and savings it makes from buying EE, a deal which will go through before the new rights kick in.
And giving mobile customers free BT Sport when watched over 4G and BT WiFi would be a great retention tool for EE and BT that could help the network stand out in what’s going to become an increasingly competitive market.
So despite the doomsayers, both firms are likely to do well from their renewed rights without milking customers – though the wider media are certain to tie their annual line rental price hikes to the football deal.
Inevitably there’s been some speculation about whether the two broadcasters can sustainably increase their costs again in another three years, and whether the record £5bn committed this time effectively locks out bids from new entrants.
This is a bit premature – with Ofcom investigating how the rights are sold there’s no guarantee that the current structure will be maintained and speculated take overs of TalkTalk, Sky or Virgin Media’s parent company could easily change the market just as BT Sport’s arrival did.
