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Premiership win puts Sky on the defensive(Daily Mail Via Thomson Dialog NewsEdge)BROADCASTER BSkyB has demonstrated it has not lost its goal-scoring touch by securing the bulk of Premiership football rights until 2010. But the City was left wondering whether the satellite broadcaster is heading for a Pyrrhic victory after shelling out 28pc more than last time for only two-thirds of the matches. Gaining four out of the six available packages should be sufficient to keep most of Sky's 5m sports subscribers signed up. Nor should it stop its charge towards 10m subscribers by 2010. But after intervention by Brussels smashed Sky's 14-year monopoly, the City fears that boss James Murdoch will have to work harder to keep up margins and revenues. Shareholders must take into account extra annual costs of GBP97m - which belies Sky's old argument that football clubs would receive less if it lost exclusivity. There is also lost income of GBP35m from pay-perview games, which will be scrapped in 2007. Taken together, analysts think the result of the auction will dent earnings by up to 9pc in 2008, the first year of the new deal. Several cut their price target on the stock. 'While it may ultimately be successful, we expect a tough road to get there,' said Leigh Webb at Panmure Gordon. There are plenty of uncertainties to be resolved in the next 12 months. Last night, Sky was close to striking a joint deal with Setanta to supply 40,000 pubs and clubs. But that will mean handing its new rival a chunk of that lucrative big-screen income stream of GBP200m a year. Armchair fans who want to watch every game will have to pay extra to subscribe to Setanta. Its sports channel package already has 150,000 subscribers. The big question is whether Premiership football might be made available on the Freeview platform for the first time. 'We don't know. It is a possibility,' said Setanta's sport director Trevor East, who is confident there would be a market for it. 'There is no doubt that Sky has first pick of the big head-to-head games. But they can't pick every match that involves a top club.' The company would probably strike a wholesale agreement with Top Up TV - which already sells payper-view coverage of Scottish football matches for GBP8 a time. 'The potential is there to do it. But there is no deal in place,' East added. But there are also several positives for Sky, for whom football is a cornerstone. It keeps the key rights to the Sunday 4pm fixture. Major competitors NTL and BT - which will launch a TV service later this summer - scooped no games at all. And the auction raised the bar significantly above what free channels such as ITV would be prepared to pay for football in the future. Barring the World Cup and European fixtures, boss Charles Allen must find another route for winning back young men to ITV1. Lorna Tilbian at Numis thinks Sky (down 1p at 527p) has plenty of scope to replace income by increasing subscription charges or pushing down the amount it pays to show films or other sport. In fact, Sky has already reaffirmed it will meet operating margins of close to 30pc by 2010. The company is confident - even though Citigroup reckons those margins could be as low as 18pc in 2008 - after taking into account an estimated GBP74m of extra costs to win customers to its soon-to-launch broadband service. The challenge for Sky, which has 8.1m subscribers, is to keep adding to its bundle of channels and services to make it indispensable. 'High definition' cinema-quality shows are the next big thing from the broadcaster. But with close to 8m homes watching digital TV through Freeview, channel owners are sitting up to take notice. Factual broadcaster Discovery is said to be mulling whether to launch a free channel on the service. That would follow E4 and FilmFour's lead, after Channel 4 calculated it would make more money from advertising than from a handful of subscribers. Sky may have kicked the ball into the back of the net this time - but it will have tighten up its defence. HOW SETANTA MUSCLED IN IT has been a busy couple of weeks for Setanta. With a little help from Brussels, it broke Sky's monopoly on the Premiership by paying GBP131m to show 46 games a year. The broadcaster, little known outside Ireland and Scotland until now, also sewed up an extension of its coverage of the Scottish Premier League - worth GBP13.5m a year for 60 live matches.When Setanta first outbid the BBC for the TV rights to Scotland's Premier League football in 2004, it was just the tip of the Irish firm's ambition. 'We want to offer viewers an alternative to the Sky sports package,' said sport director Trevor East, himself a refugee from Sky. A seven-day-a-week football channel is on its way. It will be part of Setanta's seven-channel package, which has more than 150,000 subscribers who pay GBP14 a month on top of Sky and ntl charges. Details on Setanta's finances are sketchy because it files only abbreviated accounts. It has grown from humble beginnings with the help of a backer with deep pockets - venture capital firm Benchmark Capital, which owns a 40pc stake and is also a backer of auction site eBay. Set up in 1992 to air Irish soccer to expats in London, Setanta also owns rights to German and Italian football, as well as US baseball and basketball. As it grows, the broadcaster's biggest challenges lie ahead. Based on the GBP2.08 that Sky subscribers pay per Premiership game, Claudio Aspesi at Sanford Bernstein calculates that it will have to attract 1.4m viewers per game to break even. |