Enders: Facebook ‘would be nuts’ to enter Premier League rights bidding war

Analysts believe it is unlikely any digital giants will bid for Premier League main packages

While rumours have been circulating that a major US tech company could enter the bidding war for Premier League rights, Enders Analysis believe that such rumours have been orchestrated by the competition organisers to “sow confusion and fear” and raise the price of the bids, when in reality none of the four major internet companies are in a position – or willing to – compete with Sky and BT.

What it chiefly comes down to is money. Over £2bn has been added to the price tag of premium sports rights in the UK as a direct result of BT’s entry into sports broadcasting in 2013, according to figures from Enders Analysis and Ofcom.

And the price is expected to continue to rise as competition between BT and Sky heats up; an analyst at investment bank Citi told the Guardian the cost of Premier League rights is expected to rise between 40% to 45% in the upcoming auction for the three seasons starting 2019/20, an increase of £600m a year for the period. The bidding war has meant BT is today paying as much for top football as Sky was spending for all its sports in 2007.

Taking into account these costs, any new investor should expect to set aside £10bn plus for Premier League rights, as BT did in 2012, according to a new report published by Enders Analysis. The analysts believe that the momentous costs for the rights mean there is no way to “dip a toe in the water” of the Premier League, as digital giants Facebook, Amazon, Netflix and Google might have hoped to do.

It’s not that either of the four major tech companies are short of money; Netflix and Amazon have committed $6bn (£4.58bn) and $4.5bn (£3.43bn) to content this year, Facebook’s revenues were $27.6bn (£21.1bn) last year and Google parent company Alphabet’s were $89.5bn (£68.3bn).

But the Premier League hasn’t proven as lucrative as it would have bidders imagine; neither BT nor Sky are profitable pay sports broadcasters, according to Enders' estimations. What’s more, while sports accounted for 66% of total multichannel content spend, it accounted for just 8% share of total multichannel viewing, the research company said.

“To my mind, all the talk from the Premier League is designed to sow confusion and fear, and to act like their product has magical and mystical properties, which it does not,” said Claire Enders, the founder and chief executive of Enders Analysis, while speaking at Westminster Media Forum this week.

While Netflix has approached Premier League clubs for behind-the-scenes documentaries, it made it clear to investors earlier in the year that acquiring sports rights like its rival Amazon "is not a strategy that we think is smart for us", while it focuses on bolstering up its TV and film content.

Amazon is unlikely to want to fork out huge amounts for the Premier League when its own bet on the NFL has yielded only modest audiences compared to television. Only an average of 370,000 viewers watched the first game streamed on the platform, compared to 14.6 million on conventional TV. It said in its earnings call yesterday (27 October) that the first four games of NFL Thursday Night Football have drawn a total of 7.1 million views.

Facebook has illustrated an interest in the Premier League but it would have to take a big hit on its UK profit margins. Its total revenue in the UK is estimated to be just north of £1bn, so bidding for rights would be "expensive for an experiment", Enders said.

"So I think Facebook would be absolutely nuts to go in for the Premier League. It is a gigantic investment...so I find that inconceivable," she added.

Google has so far not been willing to match Facebook’s and Amazon’s bids for sports rights.

The analyst suggested the most plausible way for these platforms to get into the Premier League game would be through international rights at a later date, or a non-exclusive deal for online streaming rights in the UK, but they added that give Sky and BT's pushes into online-delivered content "it is unlikely that the League would be willing to dilute the value of the main streaming packages in this way".

"We don’t believe any of them are in a position – or even willing – to contest the main packages," Enders concluded, believing the rumours a major US tech giant will join the bidding war have caught attention "no doubt to raise BT and Sky’s bids".

Jessica Goodfellow

The Drum's media reporter covering everything from publishing, TV, social media, radio and technology.

All by Jessica