Sky's shares drop 10% as BT wins Champions League rights
BT Sport has announced an £897 million three-year deal to broadcast live Champions League and Europa League football matches - the first broadcaster to secure the rights exclusively.
The deal will see BT Sport show all 350 fixtures each season from 2015, snubbing both Sky and ITV who currently share the rights.
A statement from BT described the move as one that has "shaken up the UK TV market," while BT's chief executive, Gavin Patterson, said that he is "thrilled that BT Sport will be the only place where fans can enjoy all the live action from the Champions League and Europa League."
However, analyst Daniel Kerven at Bank of America Merrill Lynch has commented that it was not a particularly fair fight.
"We think Sky is an incumbent whose business model is built on barriers to entry that no longer exist," Kervan said.
"Whereas Sky has to make a 65% gross margin on rights to maintain its existing profitability, and a 50% gross margin to breakeven, we believe it faces competition from new entrants with no legacy profits to protect and more efficient business models," citing Netflix as a key example.
Kerven also said that Sky is now up against operators, such as BT and Virgin, that don't need to make a standalone margin on TV.
As the news hit the City, Sky's stock market value dropped by almost £1.4 billion with shares down nearly 10%.
The new rights are now expected to drive additional growth in BT Consumer revenue and profits over the medium-term. BT will pay a deposit of around £60 million in November 2013 followed by six-monthly instalments commencing July 2015. Despite these payments, BT's financial outlook is unchanged, the company said.
Commenting on BT's surprise win, ITV, which has held the rights of the Champions League since 1992, said it was not prepared to pay "over the odds" in the latest live rights round.