Sky 'could earn 80m a year from ESPN'

By Andrew Laughlin, Technology Reporter

Citigroup has predicted that Sky could earn as much as 80 million every year from retailing ESPN's new sports channel, reports The Guardian.
The Disney-owned firm's new channel includes the 46 Premier League and 30 Scottish Premier League games previously owned by Setanta. ESPN's first Premier League game, Everton versus Arsenal, attracted an average of 428,000 viewers and had a 3.3% multichannel share between 5.30pm and 7.30pm on August 15. Full coverage of the game from 5pm to 8pm drew in 360,000 viewers and had a multichannel share of 2.7%.

The channel recently launched in standard and high definition on Sky and Virgin Media, as well as in SD on BT Vision, Top Up TV and Tiscali.
According to Citigroup, Sky earns around 2.50 per month for each subscriber who signs up to ESPN's channel. If the number of Sky customers taking the channel tops two million, the analyst firm estimates that this would generate 80m a year for the satellite platform holder.

However, this arrangement is also a "double-edged sword" for Sky as it has to be more flexible in the games being offered to ESPN compared to its predecessor Setanta.

This has meant that 14 of the 17 games being broadcast on ESPN in the run-up to November feature one of the "big five" teams - Manchester United, Chelsea, Liverpool, Arsenal and Manchester City.
"Sky has been a bit more generous to ESPN [compared to Setanta] in its choice of potential games this season in order to help ESPN's channel business," a Citigroup analyst explained.

"The downside, of course, is that if ESPN is really successful it may feel emboldened to extend its content acquisition strategy. Which, in time, at best would lead to greater sports rights inflation and at worst could pose a material challenge to Sky's dominant position as an aggregator of premium sports content in the UK."

However, Citigroup also pointed to the "limiting factor" facing ESPN in future that its number of Premier League games will be reduced to 23 for the 2010-11 and 2012-13 seasons.

"On balance we see ESPN's success as a positive factor [for Sky] as the impact on earnings could be direct and material," the analyst concluded. "Any direct risk, therefore, is from the 2013/2014 season onward."