BSkyB pays heavy price for Champions League loss

Mon Nov 11, 2013 7:36am EST
 
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By Kate Holton and Keith Weir

LONDON (Reuters) - BSkyB BSY.L saw more than 1.5 billion pounds ($2.4 billion) wiped off its stock market value on Monday after Rupert Murdoch's dominant pay-TV operator admitted it had been out-muscled at its own game with the loss of Champions League soccer rights.

Shares in the British group, which had previously seen off three major challengers to its dominance of the home movies and sports market, tumbled more than 10 percent after it suffered its first major rights auction loss to once-staid telecoms company BT (BT.L: Quote).

The 168-year-old former state telecoms group agreed to pay 900 million pounds, or more than double the previous contract with BSkyB and ITV (ITV.L: Quote), to add glamorous mid-week ties featuring the likes of Barcelona, Manchester United and Real Madrid to the English Premier League matches it already shows.

The loss for BSkyB raises the likelihood it will have to ramp up what it pays for future content deals, including the next Premier League auction which is expected to be held in 2015 for the three seasons from 2016 through 2017.

It also suddenly leaves BSkyB looking vulnerable in a market it helped to build.

"It is hard to see how this does not signal a British crossing of the Rubicon and the end of peaceful co-existence in the UK telecom and TV worlds," analyst Robin Bienenstock at brokerage Bernstein said.

BT, which has spent years slashing costs and cutting staff after two major profit warnings in 2008 and 2009, stunned the sporting world last year when it won the rights to show 38 live Premier League matches a season.

While the new entrant to the market remained a minnow in comparison to BSkyB and its 116 games, the move was an early indication of how BT was willing to spend big to protect its core broadband and fiber services by combining it with an offer of high-quality sports programming.   Continued...