Football frenzy grips media

News Analysis: First BSkyB bids for Manchester United, now Carlton talks to Arsenal. The rest of the Premier League is waiting for the next move

NEWS THAT Carlton Communications, Michael Green's television group, is in talks with Arsenal took the market by surprise yesterday. Although British Sky Broadcasting's pounds 623.4m bid for Manchester United was expected to prompt a wave of similar bids, few observers had expected other broadcasters to move so fast.

The prospect of last season's double-winners also ending up in the hands of a media group sparked feverish speculation about what other broadcasters might do. Granada, the media and hotels group, was seen as a potential bidder for Liverpool or possibly Leeds United. Media companies such as United News & Media and Mirror Group, as well as cable operators such as Cable & Wireless Communications, were also drawn into the frame.

Investment bankers compared the frenzy to the City's Big Bang in 1987, when large banks swallowed up the few remaining independent stockbrokers in a free-for-all.

Experts said BSkyB's move had effectively pushed other media groups and football clubs into each others' arms. Rival broadcasters were worried by the prospect of BSkyB extending its dominance of football rights. Meanwhile football clubs suddenly faced the prospect of having to compete with Rupert Murdoch's millions in the battle to sign the best players.

"Every Premier League club except Manchester United is suddenly very worried," said one banker.

Ownership of sports clubs by media groups is well established outside the UK. In the US, Rupert Murdoch has bought the LA Dodgers, CNN's Ted Turner controls the Atlanta Braves and Disney has bought an ice-hockey team which it christened the Mighty Ducks. In continental Europe, the pay-television group Canal Plus controls the Paris St Germain football club. Silvio Berlusconi, the Italian media mogul, owns AC Milan.

The logic is simple. The sports teams provide a source of compelling programming for local television networks while also offering potential for spin-off projects. Disney has made several movies featuring the Mighty Ducks. How long before we see Manchester United stars Ryan Giggs and David Beckham on the silver screen in a movie produced by Sky?

In the UK, the rationale is more defensive. Rupert Murdoch told BSkyB to buy a football club after realising that it was the only way to make sure the broadcaster kept a grip on broadcasting rights.

Other broadcasters have realised they must follow suit. Ownership of a Premier League club gives them a seat at the table when the league starts negotiating the renewal of those rights next year. Meanwhile, if the Restrictive Practices Court rules next year that clubs must negotiate their rights individually, the broadcasters will be sure of controlling the rights to the clubs they own.

As a result, buying a club makes most sense for television groups that both generate and broadcast programmes. "Both Sky and the ITV companies are integrated distribution and content plays," says Adam Singer, chairman of Flextech, the television programming group. With BSkyB snagging Manchester United, the spotlight has fallen on the three biggest ITV companies: Carlton, Granada and United News & Media.

Despite the timing of its announcement, Carlton has clearly been thinking about such a move for some time. The television group has been talking to Arsenal for at least several weeks. Michael Green, Carlton's chairman, is also understood to have held talks with Chelsea earlier this year.

Granada looked at buying Manchester United a few years ago. However, it is unlikely to take on BSkyB directly. Granada has a 6 per cent stake in the satellite group and the two have a joint venture to produce television channels. They are also equal shareholders in MUTV, the cable channel dedicated to Manchester United.

Carlton and Granada have another good reason for wanting to own a club. ONdigital, their jointly owned digital broadcasting venture, launches later this year and will go head to head with Sky's digital satellite service. Exclusive rights to certain football matches would massively increase ONdigital's chances of success.

These are not the only potential bidders. Mirror Group says it is not in the frame(see right) although it was one of the losing bidders in the battle for Premier League rights two years ago. David Montgomery, the chief executive, also made an approach to buy Aston Villa before it floated on the Stock Exchange last year.

Cable operators may also be interested. However, Cable & Wireless Communications, the country's largest cable operator, claims not to be interested, while Telewest and NTL do not have the cash.

Now they've decided they want to own a club, which one should the broadcasters buy? Last night analysts were naming Liverpool as the last remaining big name on the market. The club is controlled by the Moores family, owners of the Littlewoods empire.

Along with Arsenal and Manchester United, Liverpool is the third likely entrant into a possible European super league. It also has a large following outside the UK, making its brand name and television rights more valuable.

The next tier of clubs includes Leeds, Tottenham Hotspur, Aston Villa, Chelsea, and Newcastle. Although they do not have the same international appeal, they could provide a boost to a local television operator.

Analysts yesterday suggested Granada could buy Leeds to bolster its Yorkshire Tyne-Tees television franchise while Carlton, which owns Central Television, could make a move for Aston Villa if talks with Arsenal broke down.

The possibilities are almost endless, but one thing is sure: Manchester United and Arsenal will not be the only football clubs to be swallowed up by larger groups.