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BSkyB pays over $3 billion and still does not get all English football rights

The share price of both BSkyB and BT fell as news emerged last week that they were the two successful bidders for English Premier League (EPL) football rights for the three seasons 2013-14 through 2015-16, because the price far exceeded market expectations.

On the face of it, the news was good for both companies, since BSkyB gained the maximum number of matches possible under EPL rules, while BT joined the party for the first time, ousting ESPN as the second EPL rights holder. In the event, BSkyB is paying £3.02 billion ($4.7 billion), spread equally over the three seasons, for rights to show a total of 116 live matches, while BT will pay £738 million ($1.15 billion) for 38 matches.

But, this represents a 39-percent rise in the cost per game in BSkyB’s case, from £4.7 million to £6.55 million, exceeding the operator’s worst case scenario by 19 percent. As a result, it has already had to announce cuts in other less popular sports, such as rugby and boxing, with a presumed impact on ad sales and possibly subscriptions, too. However, football is the big draw in the UK, and had BSkyB not gained rights to as many matches as it has, the impact on its stock value would likely have been greater.

At the same time, for BT, the rights will be very timely, coming into force as its newly revamped BT Vision pay TV service is gathering steam, aligned with the UK’s YouView hybrid OTT/digital terrestrial service. BT Vision already shows some live EPL matches but has to pay wholesale prices to BSkyB. Now, it will be in a position to market the rights itself to other emerging OTT players, as well as to cable operator Virgin Media, which did not bid itself. Currently, BT Vision is a poor third in the UK pay TV market, with around 700,000 subscribers, compared with 3.8 million for Virgin Media, and just over 10 million for BSkyB.