Being outbid by upstart streaming sports company DAZN for Italian rights to Serie A wasn’t a sign of weakness for Sky, but rather another hint that the company is focusing more on returns on invested capital (ROIC) rather than merely chasing growth, Bernstein media analyst Peter Supino said in a note to clients.
Sky Italia has held exclusive Serie A rights in that country for years, but lost out to DAZN, which bid €2.5 billion over three years to carry the games. Shortly after, Sky Italia said it would reduce its workforce by 25 per cent over the next four years, part of a restructuring that would save about €300 million.
“The decision to not pay over the odds for sports rights in the midst of a pandemic, will likely cost Sky subscribers and revenue growth, but is evidence of a more prudent mindset and a test of Sky’s role as a content aggregator,” Supino wrote.
Whether that strategy extends to English Premier League rights, currently under negotiation, is still up in the air. But Supino pointed out that both Sky and BT have “reduced their willingness to pay inflated fees for sports content” over the past few years. UK broadcasters paid around £4.5 billion in 2018, down from its peak of £5.1 billion in 2015. While that downward trend could continue, the potential of other players like DAZN, Amazon, and Netflix entering the bidding could drive up prices.
Supino and other analysts have been cautious of Sky ever since Comcast bought the company in 2018 for $40 billion. Most analysts were worried at the time that entering the traditional satellite video business in Europe, when the rest of the world seems to be focusing on streaming, was a risky move.