Sport remains key to Sky as tech rivals plot pitch invasion

When asked about the importance of retaining the rights to live Premier League football last month, Sky’s chief executive, Jeremy Darroch, was keen to play it cool.

“The Premier League has remained fantastic,” he told journalists as the European pay TV broadcaster announced a 6 per cent slide in profits due, in large part, to the spiralling cost of the rights.

“It’s important but it’s critically only one part of the mix. That’s also true in some other sports; there are one or two other things you’ve seen us walk away from because relatively we can just see a better way to deploy the capital elsewhere.”

As a new Premier League season gets under way on Friday night, with Arsenal entertaining 2016 champions Leicester City at the Emirates Stadium, the big question is whether Mr Darroch is bluffing.

Early in 2018 the Premier League will put its rights out to tender for the next three-year contract, which will come into force from August 2019. It might seem a long way off, but already the League’s executive chairman, Richard Scudamore, is preparing the ground as he looks to top the current three-year UK deal with Sky and BT worth £5.14bn.

Mr Scudamore has thrown the door open to other potential bidders, paving the way for internet groups such as Amazon, Facebook and Google to challenge Sky’s 25-year grip on English top-flight football.

The questions have become all the more pressing for Sky after Amazon emerged as a serious bidder for a new five-year UK deal with the ATP to show the best male tennis players in the world on its Prime video platform.

Although both Amazon and the ATP have declined to comment on the deal, which was first reported last week by the Guardian, one person briefed on the negotiations said Amazon was close to securing an agreement.

If confirmed, the deal would be the streaming platform’s biggest sports deal yet and comes after Amazon signed a contract with the National Football League to screen 10 live Thursday night American Football matches.

With other US digital companies such as Twitter and Facebook eyeing premium sports rights, Amazon’s move into tennis has prompted speculation that the big tech groups are parking their tanks on the pitches of traditional sports broadcasters.

“It’s true that these guys are cash rich,” said Mike Darcey, Sky’s former chief operating officer and a former chief executive of News International. “But it’s a big step up from the ATP to the Premier League. You can’t extrapolate one to the other.”

Mathew Horsman, an analyst with Mediatique agreed. “It will be a while until Amazon come in for top flight domestic rights,” he said. “They are picking and choosing, doing a bit here and there.”

The difference in fees would appear to bear this out. As part of its current three-year deal with the Premier League, Sky is paying £1.4bn a season. The ATP deal with Amazon is worth a reported £10m a year.

But even if Amazon’s Jeff Bezos may not be about to take the plunge, Sky and BT are displaying a reduced appetite for paying ever increasing rights prices. The last two Premier League deals in the UK have seen consecutive 70 per cent increases.

For Sky, sport is now far less integral than it was when Rupert Murdoch was attempting to save BSkyB from bankruptcy in the early 1990s.

“It was something we decided to bet the company on,” former chief executive Sam Chisholm told Sky High, a book on the early years of BSkyB. “We decided to get the Premier League no matter what.”

Even by 2000, 80 per cent of Sky’s subscribers were still signing up to get access to premium sport.

However the broadcaster has shifted its focus during Mr Darroch’s decade in charge, investing heavily in films, drama and entertainment. Now sport accounts for less than 50 per cent of the company’s 12m subscriber base.

“The business [Sky] has done a lot over the past 10 years or so to broaden its appeal beyond sport,” added Mr Darcey. “But sport remains a significant part of the story and you can’t get away from that.”

Nevertheless Sky said it was committed to doubling the number of original drama projects it is investing in — from 11 in 2016-17 to 20 by 2018-19.

It spends about £3bn a year on non-sporting content (half its overall content budget) but this includes buying the rights to blockbuster movies and shows such as HBO’s Game of Thrones, its biggest hit with an audience of around 5m.

Riviera, an original Sky commissioned show about the murder of a wealthy art dealer in the south of France, averages audiences of more than 2m, the same as the viewing figures for Manchester City’s live game against Liverpool last season.

With average viewing numbers for Premier League games falling by 14 per cent last season — the biggest fall since Sky started showing the competition — it is easy to understand why Sky might be looking for cheaper, more popular alternatives to pricey football.

“We’re starting to see viewing numbers on some of these productions that are big,” said Mr Darroch. “And of course the difference they have relative to live sports is that they repeat for a long time so the tail of value . . . tends to be greater.”

And yet investors already frustrated by the lengthy hold-up as UK regulators weigh 21st Century Fox’s £11.7bn bid for Sky, will still be eyeing the coming Premier League anxiously, knowing the pay-TV group cannot afford to walk away.

“You have to take what Sky says with a heavy pinch of salt,” said Mr Horsman. “This is a negotiation. No chief executive of Sky wants to be the one who lost the Premier League.”

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