Thursday 8 December 2016

Only a fool would bet against the Goliath that is Sky

In the battle to win over sports fans at this time of year, the British broadcaster still has a strong competitive advantage over its main rivals

John McGee

Published 07/08/2016 | 02:30

Fronting the latest Sky Sports campaign this season is English football's favourite son David Beckham who has taken the baton from the sneaky hands of Thierry Henry, last season's face of Sky Sports.
Fronting the latest Sky Sports campaign this season is English football's favourite son David Beckham who has taken the baton from the sneaky hands of Thierry Henry, last season's face of Sky Sports.

While death and taxes may be the only two certainties in life, once you enter into the wacky world of advertising it seems that back-to-school promotions and adverts for Sky Sports are the only sure-fire bets during the normally quiet July to August silly season in adland.

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Turn on the television, open a newspaper, go online, or look at a billboard while walking down the street and there's bound to be an ad promoting one of Sky's several product offerings.

In August, it's generally a campaign tempting sports fans to sign up for Sky Sports, as they eagerly await kick-off in the Premier League - the biggest and most lucrative league in Europe.

At any one time, Sky might have up to four or five different campaigns under way to promote its various product offerings, but now is the time to woo sports fans with its lavish high-spending advertising promotions.

In many ways, Sky is a perfect example of a company that believes in the power of advertising. On a hard cash basis, it is the largest advertiser in both the Irish and UK markets in terms of its ad spend.

In 2015, for example, it spent around €20.6m (rate-card value) on advertising in the Irish market, according to Nielsen's AdDynamix figures. The biggest chunk of this - €7.8m - was spent on TV advertising. Another €7.6m was spent on press. This was followed by outdoor advertising (€3.2m), radio (€1.5m) and cinema (€277,000).

These figures, however, don't include digital which means the real investment in advertising is substantially higher.

In the UK, meanwhile, it spent a staggering €324m on advertising in 2015.

Fronting the latest Sky Sports campaign this season is English football's favourite son David Beckham who has taken the baton from the sneaky hands of Thierry Henry, last season's face of Sky Sports.

Produced by Sky's creative agency, Brothers and Sisters, the TV ad shows Beckham on a training run as he passes through streets, playing fields and of course the local boozer as he follows a live game on Sky Sport. All of this, of course, is meant to whet the appetites of football fans for what Sky has described as its "biggest season ever".

Given that Sky paid a whopping €4.95bn to broadcast 126 live matches a season for the next three years, it may well be right.

Meanwhile BT, the up-and-coming David in the battle against Goliath, coughed up €1.18bn for the right to broadcast 42 Premier League matches a season - in addition to the €1.06bn it splashed out on the Champions League broadcast rights. BT Sports is available as part of eir Sports' offering in Ireland.

The €6.1bn both companies have invested in TV rights represents a lot of money for the Premier League. Without this revenue, the vast majority of clubs would have been sent scurrying to the nearest insolvency practitioner a long time ago.

With 21.8m European subscribers, Sky may not be the only show in town when it comes to sport but it is certainly the largest in terms of the depth and breadth of its overall content offering - whether it's live sport, movies or dramas such as Game of Thrones.

The group's most recent results for the 12-month period to the end of June 2016, for example, show just how its recent high-stake gambles have paid off. Total revenues amounted to €14.09bn while operating profits were up 12pc to €1.83bn.

Some €9.86bn of these revenues and €1.77bn in operating profits were attributable to the UK and Ireland alone.

Although Sky does not give a specific breakdown of its Irish figures, it is estimated that of the company has more than 700,000 customers here.

Back-of-the-envelope calculations would suggest that Irish revenues could well be in excess of €370m a year. Throw in the estimated €20m-€30m it derives from advertising on the opt-out channels it owns or acts as sales agent for, then it is entirely conceivable that total Irish revenues could be well in excess of €400m a year.

"Sky has the deepest pockets and its strategy of buying international sports rights around the world has paid off handsomely for the company. For smaller broadcasters, it's difficult to compete with Sky," says Paul Moran, managing director of media agency Mediaworks.

"But I wouldn't rule out the likes of Liberty Global, which owns Virgin Media and TV3. Remember how TV3 successfully bought the broadcast rights for the last Rugby World Cup in 2015 and did very well out of it?

"It also remains to be seen what eir Sport and its BT packages does over the longer term and whether or not it can compete with the likes of Sky and Liberty," he adds.

In any David vs Goliath battle, however, the heart nearly always opts for the former. But given Goliath's recent on and off-field successes, only a fool would bet against it.

Contact John McGee at john@adworld.ie

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