PERHAPS Sky should have remembered the advice of Marx brother Chico when it bet the house on premiership football rights back in 1992: “If you win today, you’ll only lose tomorrow. A sure thing is no fun.” Having had the premium sports TV space to itself for the last eight years, the media regulator is now forcing it to share its winnings with rivals.
Analysts don’t expect any material impact on Sky’s earnings in the short time. Although it will lose around £20m to £30m in annual revenues when Virgin starts paying the lower wholesale rates, it is almost certain to make this back through higher customer numbers. The approval of Picnic, which allows Sky to market its channels over Freeview, could actually push revenues up.
But as competitors chip away at its subscriber base, the satellite broadcaster will be forced to become a very different company. Rupert Murdoch, its biggest shareholder, describes premium sports content as the company’s “battering ram”: Sky has been such an innovative company, investing in new technology like high definition TV, because it has a secure premium subscriber base to fall back on if things go wrong. Without it, such fearlessness would surely diminish.
Sky is an aggressive company, used to taking market share from others – not ceding. Investors should ask whether it would operate quite so well on the back foot.