BSkyB shares fall on BT Champions League news, but did BT pay too much?

BSkyB is dragging the FTSE 100 down 4.4 points, as it shares dropped more than eight per cent this morning, after rival BT won the exclusive broadcasting rights to Champions and Europa League football matches.

BT Sport will be the home of UEFA from 2015-2018, in a £900m deal announced on Saturday. BT has agreed to pay around £299m a season for the rights, which will be the first time a single UK broadcasters as won exclusive live rights to all matched for both tournaments.

However, BT shares are only flat this morning, due to questions over whether it overpaid. The deal totalled £897m, compared to the the £400m that Sky and ITV shared for the last 3 years.

Gavin Patterson, new BT chief executive, said today of the pricey deal: "Both tournaments are world class and firm favourites with many. The live rights will give a major boost to BT Sport and give people yet another reason to take our terrific service."

In a statement Sky said: “It seems BT chose to pay far in excess of our valuation. If we thought it was worth more, we’d have paid more. Nothing changes until 2015 and we look forward to 18 more months of live Champions League on Sky Sports. We will now re-deploy resources and continue to bring customers the best choice of TV across our offering.”

Mike van Dulken, head of research at Accendo Markets, points out that Sky still offers 2/3 of the UK premier league football (BT offers the other 1/3), so it's not out of the game yet.

He goes on:

While expensive, some might consider today’s acquisition price attractive given BT’s recent success in improving its customer retention after it began offering BT sports (football, rugby, others) for free in October to all broadband subscribers, and it obviously had to pay a premium for exclusive rights which are worth more than a shared offering.

Could today’s news help customer retention reverse to customer poaching, hurting Sky further? Or will brand loyalty prevail and Sky subscribers just change to BT Broadband to allow them to view BT’s sports offering via Sky, and so both providers benefit? As an Arsenal fan, it’s got me thinking, however, longer-term I’m wary of having to pay yet another monthly fee when BT becomes sole broadcaster of mid-week football. And how much that monthly fee is could well be the decider.