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BSkyB’s share price tumbled almost 3 per cent (26.5p) on April 3rd on fears that the costs for acquiring all-important English Premier League broadcasting rights could rocket by as much as 40 per cent in the next licensing round.
Banker Morgan Stanley, in a note to clients, added fuel to the anxieties by actually including the anticipated 40 per cent rise in its own forecasts for BSkyB. If correct, a 40 per cent rise would add some £300 million per year to Sky’s UK sports costs. Offsetting this massive jump would be an anticipated lowering of costs for covering the Champions League. But the bank still expects Sky’s sports costs to jump by about 36 per cent overall.
“The next Premier League rights run for three years starting 2016/17 to 2018/19. The auction for the rights will likely take place in early 2015. Our base case assumes that Sky again takes five out of the seven packages. Wary of surprise third party bidders and of attempts by BT to buy up the most attractive slots, particularly the Sunday 4pm kick-offs, we assume that Sky pays 40% more in the next rights round, raising the price from £760m pa to £1064m pa. This is £190m pa higher than our previous forecast,” says the bank.