Sky UK is working hard behind the scenes to secure broadcasting rights to the English Premier League for the 2016-2019 seasons, and according to Guy Bisson from media analysis firm Ampere, likely to be paying around a 64 per cent increase in costs. The auction results could be known within hours.
But this might just be the ‘calm before the storm’ if a a note from investment banker Berenberg is a guide. The bank says: “While the Premier League auction is obviously the nearest-term catalyst to a change in consensus estimates, we think there are other signs that Sky will invest more in its business in future, and that estimates are likely too high.”
The “too high” comment refers to an expectation that Sky is going to have to fund much higher investments in original programming in order to fight off the similar actions from Netflix and Amazon. Sky CEO Jeremy Darroch is on the record admitting to putting well above the current £600 million into fresh programming (and matching ITV’s £1 billion figure).
But Berenberg also states that Sky is now obliged to enter a new investment cycle in terms of hardware. “Sky confirmed last week that it would be spending money on new, improved NOW TV receivers. There have also been press reports about ‘Project Ethan’, a plan to roll out new Ultra HD compatible boxes, which may be given to customers to secure their loyalty ahead of BT’s Champions League launch. We note that Ultra HD is clearly gathering pace globally, with services already launched in the US and in India, and we suspect Sky will, as usual, be a leader, rather than a follower, in respect of new services, particularly given how competitive the UK pay-TV market has become.”