August 28 2014 Latest news:
Friday, June 29, 2012
With the dust having settled following the staggering £3.018bn television rights deal secured by the Premier League (there’s more to come in the autumn when international rights are sold), we can draw three unequivocal conclusions from the league’s ability to raise its value to broadcasters by an astonishing 70pc.
The first is that, with a handful of notable exceptions, the overwhelming majority of the £1.3bn Premier League clubs will receive between 2013-16 will head straight towards players’ and agents’ bank accounts. The second is that the development and eventual flowering of English football talent will be even further checked as foreign ‘stars’ arrive here to collect enormous salaries and play some football. The longer-term impact this relentless flow of mostly very average overseas playing talent has had on England’s national team has been evident for all to see at Euro 2012.
After the new deal was announced, Richard Scudamore, the Premier League’s chief executive, said it would be worth at least £14m more a year for each of the league’s 20 clubs. He said he hoped they would invest a proportion of this windfall by investing in “infrastructure, stadiums, youth development and the community”. No-one is holding their breath in anticipation of this though. The third, though less certain, conclusion, is that BT can become Sky’s most potent competitor since top flight English football became primarily a pure money game in 1992. BT is spending £246m a season to screen 38 live matches from 2013-14. Last week, it handed over a deposit of £22m to the Premier League; the company will make six further payments of £119.3m every August and January until early 2016. The timing of these payments means that initially, the company’s earnings (or EBITDA to be accurate) will be reduced by £100m and its free cash flow (operating cash flow minus capital expenditure) will fall by £200m. But BT is big enough to absorb such an impact upon its balance sheet. Its free cash flow will, it says, return to normal by 2014-15 – that’s around £2.5bn – while its dividend and share buy-back programme remain unchanged. In other words, BT appear to have calculated that the company will have recouped the cost of buying the Premier League rights before the next round of rights negotiations, for the period 2017-20 take place, making it a potentially serious threat to Sky’s footballing hegemony. It makes commercial sense for BT to use football content to drive the take-up of additional services. It already has 6.14m broadband customers and, unlike other broadcasters who have bought Premier League rights, BT appears to have a credible business plan which focuses on attracting subscribers to its business. One City analyst said BT’s move was, “a bold one necessary to generate revenue growth.” Investors might be inclined to agree.
When BT floated in May 1993, its shares traded at around 300p. During the dotcom boom the price soared beyond 900p, though more recently, they’ve hovered around 220p; the Premier League rights announcement sent them below 200p.
Yet if acquiring football rights improves the company’s longer-term profitability (and share price), those investors who have stuck with BT may finally see the value of their investment rise.
A Norwich-based business which started as a “man with a van” operation is eyeing further expansion after seeing its predicted turnover increase from £6,000 to £340,000 within five years.