The first round of the blind auction for Barclays Premier League television rights is now taking place. The exact rules used are not made public, but it is possible to make an intelligent guess.
The first round of the blind auction for Barclays Premier League television rights is now taking place. The exact rules used are not made public, but it is possible to make an intelligent guess.
What we do know is that the bids are split into seven lots with no bidder allowed to buy more than five of the packages – a maximum of 126 games. Lot D with the Sunday afternoon games is the most appealing. There is a second round if there is a narrow gap in the offers for certain packages or if the winning bid has secured too many games. However, usually the bidding goes beyond the first round but there is no set number of rounds.
Bidders are not told whether they are in the lead after the first round or whom they are bidding against. This tends to force up the price. To ensure that bidders declare their hand early, at least one of the seven packages is likely to be awarded in the first round.
Sky uses sports as a loss leader. A survey by Morgan Stanley found that one-third of subscribers would switch to BT if they won the rights to the games that kick off at 4 pm on Sundays. That would cut Sky’s earnings by 15-20 per cent.
The likely new bidders, Discovery Communications and Al Jazeera, face some difficult calculations in making their bids. They cannot offset costs against sales of ancillary products such as broadband. Instead their revenue would come from advertising and pay-TV platforms paying to carry and retail their calculations. They have to think about how much they are prepared to pay in the light of their long-term strategic ambitions.