Friday, February 06, 2009

The Highest Stakes

One point eight billion. Let's put that figure into perspective. That's £30 for every man, woman and child in the UK.

That's how much Sky (and Setanta) has just paid for premier League TV rights, making it one of the most expensive properties on earth. However, the NFL rights for the US are worth £50 for every single American (and for a much shorter season with fewer games), so Sky's deal would seem to be a bargain by comparison.

Still, let's translate this to web terms, and it helps us understand why there is such a gap between TV and Internet TV.

Let's say that every match has six ads before, twelve in the middle and six ads after. A total of 24 ads per match. At £20 CPM, in internet parlance, this is worth 48p.

So, the logic goes like this. Every single human in the UK has to watch 60 live games a year, end-to-end. Then Sky break even on ads.

Of course, Sky is actually a subscription TV service. They have managed to get people to pay for TV, which is totally novel in the UK. Not even Virgin Media can rival them in their ability to monetize their customer base.

Quite simply, this is a £1.8bn loss leader for as $4.12bn business. And no one else can afford to play at this table.

3 comments:

Bradley said...

Iolo, Sky's revenue is £4.1bn (that's pounds, not dollars - although hardly a difference in today's money!)

It's interesting watching you value TV using an Internet method though.

Bradley said...

One more thing Iolo - Sky's revenue over the 3 years of the Premiership deal is £1.7bn. During that time, their revenue will be £12.3bn. Maybe it's not so bad after all.

HOWEVER, it does make them a one proposition company - if they lost the Premiership, SkySports would not be so valuable to Virgin, and half their subscribers would leave straight away. You're right about no one else can afford to play, and the next 12 months will be interesting (for us) to watch how Setanta survive.

Bradley said...

And finally (maybe I should have thought about this and done 1 comment!) - how do you think BBC model the value of their Highlights rights?

£170m for Match of The Day rights - is that good or bad (for the Beeb and The Premierships)?