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Monday 22 December 2014

Murdoch Dissed By His Own Paper

The Murdoch empire has done rather well since Phonehackgate and the hacking trial, and in the UK much of that has been down to their shareholding in BSkyB. However, and here we encounter a significantly sized however, the satellite broadcaster garners much of its value – maybe too much of it – from its near-monopoly control of screening Premier League football.
That's what I think of youse bladdy Premier League auction, ya bastard Pommie drongoes!

And, competition being what it is, there is always someone else out there wanting a slice of the action. At first, BSkyB was able to see off competitors like Setanta Sports, which went bust. But then along came BT, with rather deeper pockets and significantly more ambition. The company that was formerly the UK’s monopoly telephone provider has been diversifying.

It is not such a big step from phone and broadband to take in broadcasting, and BT Sport has been buying up UK rights to several domestic and European competitions. It also has 38 Premier League matches per season, including 18 “first pick” fixtures, from 2013-4 to 2015-6. Now the newcomer is looking to the next Premier League auction, with a view to increasing its share of matches.
What might happen next has, interestingly, been set out in one of Murdoch’s own papers, the Sunday Times, where Danny Fortson has bad news for BSkyB. “For all its efforts to wean itself off the footie fixation, by investing in original comedy and drama, Sky’s fortunes remain firmly tied to the Premier League. According to a survey by stockbroker Liberum, half of its estimated 4m Sky Sports subscribers would switch to BT if the telecoms company won the majority of the games”.

It gets worse: “The stakes are clear. Merrill Lynch has warned that Sky’s shares would lose 80% of their value if the company suffered a defeat in the football auction”. So what can CEO Jeremy Darroch do? “The price is eye-watering – but Darroch has little choice but to pay”.

Then Fortson actually suggests buying BT shares rather than those of BSkyB. I kid you not. “Investing in a company before a big rights issue is seldom a sound strategy if you are looking for a quick return. But if you are prepared to wait, why not take a punt on BT”. He also opines that he would not put it past BT’s CEO Gavin Patterson “to deliver a knock-out blow to Sky”.

Whether Fortson has a future as a Sunday Times pundit after penning that missive is not known. But the predicament for BSkyB, and by association for the Murdochs, is clear: if BT Sport wins the majority of Premier League matches in the post-2016 auction, and the BSkyB share price tanks as a result, Rupe and his executive troops would be in deep shit. But his past behaviour would see little sympathy.

When even your own hacks think the game might be up, it might just be up.

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