BSkyB may face legal challenge to £1bn football bid

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The Premier League faces an almost certain investigation by Brussels if it decides to accept a knockout £1bn bid for all three packages of live football rights from the satellite television operator BSkyB.

BSkyB has made its £1bn offer conditional on winning all three packages of live rights. However, if it fails to secure just one of them, it will withdraw its offer and pay less for the individual packages that it does manage to secure, say industry sources. This arrangement is likely to offend competition regulators at the European Commission. Brussels is concerned about the lack of consumer choice in the airing of top English football games. Brussels launched an investigation into Premiership rights ahead of the award of new packages, which will run for three years from the start of the 2004/5 season. Bids were submitted on Friday.

The Commission put pressure on the Premier League, which awards the rights, to split the offering up after Sky easily outbid all the other broadcasters for the single package on offer the last time the rights came up. However, if all the live games still go to Sky, especially if the TV company gets exclusivity by making its bid contingent on getting every major package, Brussels will not have achieved its aims. The Commission would have just have driven the price up, netting millions more for the football clubs.

Alan Flitcroft, a partner in the media team at Ernst & Young, the consultants, said: "If Sky has a contingent element in its bid, it's not clear how the EC [Commission] or other companies would react."

In France, there was a court battle with rival broadcasters after Canal Plus outbid others with an offer contingent on exclusive rights to French football. In the UK, Sky's competitors could take a complaint to the Commission. A court challenge here would be costly and time-consuming.

Sky declined to comment, saying it had signed a confidentiality agreement with the Premier League. It is thought that Sky could have very substantially cut the £1.1bn it paid for the current Premiership three-year package, if the new deal had again been offered as a single proposition, as the competition is weak. However, even with the lack of rivals with resources to match it overall, it is thought that Sky needed to bid around as much as last time for the three live packages in order to ensure that no-one else had a chance. But this was contingent on securing all three live packages. Live exclusive football is a major draw to Sky's 6.6 million subscribers and Sky privately admits that even if a few Premiership live matches a year went to the terrestrial broadcasters this would reduce its must-have appeal to football fans.

A report from Merrill Lynch saw its "mid-point" scenario as Sky paying £378m a year or £1.135bn over the three years. Industry insiders said there was "no way" that Sky would be prepared to pay £1bn or more if it did not get the exclusivity that came with the last deal. It is thought that if its bid for all three live packages does not win - either because it is outbid for any of them (considered very unlikely) or because there's a legal challenge, it will withdraw its bids and re-submit much lower offers.

The value of sports rights have fallen significantly since the current Premiership deal was struck in the media boom time of 2000. However, Sky could justify paying £1bn or more for football rights to the City on the basis that it is getting more matches this time, so it is paying less per match.

The current deal costs Sky £1.1bn for 66 live games per season. The new deal offers 138 live matches per season.