Being outbid by upstart streaming sports company DAZN for Italian rights to Serie A soccer wasn’t a sign of weakness for Comcast’s European satellite TV juggernaut 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, Sky’s Italian satellite TV arm, 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% 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 British Telecom have “reduced their willingness to pay inflated fees for sports content” over the past few years. The U.K. segment of EPL rights sold for about £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, Netflix entering the bidding could drive up prices. 

Supino and other analysts have been cautious of Sky ever since Comcast bought the British company in 2018 for $40 billion, a pseudo-consolation prize after it dropped its bid for Fox programming assets, which were eventually won by The Walt Disney Co.  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. That stance hasn’t changed.

Also Read: Italian Soccer’s Secret Weapon 

Former Sky CEO [now executive chairman] Jeremy Darroch had a plan to boost EBITDA at the Sky unit to $4 billion over the next few years, and Supino believes that new CEO Dana Strong should achieve that goal and then some. Strong had been CEO of Liberty Media’s Virgin Media units in the UK and Ireland and according to Supino, “earned her spurs” while she was head of Comcast’s Consumer Services unit, boosting margins from 39.7% in 2018 to 42.1% in 2020, and reducing capital intensity by 300 basis points during that period. 

The loss of Italian soccer will likely result in a loss of subscribers, but will also dramatically reduce its sports costs. Sky Italia is currently negotiating with Serie A for non-exclusive rights to about 30 % of games, so it won’t be entirely without soccer. Those rights will cost about €100 million per year, instead of €780 million, Supino estimated.

Even if churn doubles to 1.5 million customers at Sky Italia over the next three years, the satellite company can still increase EBITDA. Supino estimated that customer losses would result in a £690 million hit to revenue compared to 2018, but not having to pay for soccer would still result in a 14% increase in EBITDA to £391 million in 2024 from £342 million in 2018. 

The analyst added that the subscriber losses probably won’t be that dramatic because Sky Italia customers will still be able to access the games on the DAZN app, which is available on the satellite company’s Sky Q streaming platform. An increase in churn from 10% to 15% (about 700,000 customers) over the period would result in EBITDA rising to £605 million in 2024, according to Supino. 

 In that Xfinity Flex-like scenario, more Sky Italia customers are happy because they can still access the games via the DAZN app, and the distributor is happy because as an aggregator, it doesn’t have to weather the fees. 

“Under this scenario, margins widen significantly despite top line contraction,” Supino wrote. 

British Sky Broadcasting Group shareholders overwhelming approved the purchase of European satellite TV providers Sky Italia and Sky Deutschland from 21st Century Fox, a move that brings the $9.3 billion transaction another step closer to completion.

About 96% of BSkB shareholders voted in favor of the deal in a special meeting held yesterday. 21st Century Fox announced its intention to sell its stakes in the European satellite companies – it also owns a 39% stake in BSkyB – in July. The deal already has received approval from the European Commission, but is awaiting the green light from German regulators.

Fox will receive about $8.6 billion in cash ($7.2 billion after taxes) from the deal, money that was initially expected to be used in its unsolicited bid for Time Warner Inc. Fox abandoned that pursuit in August  after being rebuffed by Time Warner management, and has said instead that it will increase its planned repurchase of its own stock and invest in its existing operations. Time Warner, which said that it believed its growth opportunities were better if it remained independent, said yesterday that its Turner Broadcasting System unit would lay off about 1,475 employees, or about 10% of its 14,000-member workforce. 

Turner earlier had said it would spend about $10.8 billion over nine-years for rights to National Basketball Association games.

While many get ready for some R&R this weekend, thousands of video industry people will be burning it on both ends in Amsterdam as the confab continues to roll on.

Here’s a looks at what else is making news there. Check out our earlier IBC news roundups here and here.

-TiVo’s shot at achieving global domination is well underway. The DVR and video software company said it’s expanding its European footprint to include sales, marketing and account management staff offices in Austria, England, the Netherlands, Poland and Spain, noting that they’ll be dedicated to personalized video products – a move that happens to come on the heels of TiVo's acquisition of Digitasmiths. TiVo, which already working with Com Hem in Sweden, Ono in Spain and Virgin Media in the U.K., isn't saying how many staffers will be based at these expanded international posts, but the company employs 635 people worldwide today. So we reckon that the number we were looking for is something less than 635.

-Alcatel-Lucent said it’s working on a new architecture that will help pay TV providers store a customer’s favorite TV shows in the cloud at low cost while also maintaining compliance with content rights and copyright laws. Under U.S. rules, cloud DVRs must make a private copy for each recording request made by a given household -- horribly inefficient from a storage standpoint when compared to areas of the world that alllow multiple subscribers to stream off of the same recorded copy. Alcatel-Lucent said will be getting around this via a “virtual private copy architecture” that combines a tiered storage system with its Velocix Content Delivery Network (CDN), claiming that the approach can reduce storage costs by up to 75%. The company is developing a prototype of the architecture and expects it to be ready for trials in mid-2015, followed by commercial availability toward the end of next year.

-SeaChange International is demoing a new platform that integrates Freesat’s next-gen Freetime service with SeaChange’s multiscreen Adrenalin video backoffice platform. They’re pitching the combo, which includes a catch-up and recommendation engine,  to IPTV, satellite, cable and terrestrial operators. Freesat, a joint venture of the U.K.’s ITV and the BBC, is a subscription-free service with more than 200 channels, plus on-demand, that’s in over 1.85 million homes. 

-Envivio has shed more light on the tech partners who are tied into Nuage, its new multiscreen video platform. They include Microsoft (content protection), Adobe Primetime (video playback, authentication, DRM, and ad insertion/decisioning), Dolby (audio processing), and 1 Mainstream (automated video app platform).

-Brightcove has unveiled Brightcove Perform, a video playback system for multiscreen video that supports management APIs and its “HTML5-first” Brightcove Player. As the performance of Perform goes, the company is making the lofty claim that it can load up to 70% than competitive players, including YouTube’s. That player will also be available soon as part of the company’s flagship Video Cloud online video platform.

-Verimatrix said Swisscom has selected its Video Content Authority System (VCAS) to secure the operator’s new TV 2.0 service, which runs on an Android-powered set-top and marks Swisscom’s move away from Mediaroom, the former Microsoft IPTV platform that is now part of Ericsson. Swisscom TV 2.0 supports live TV and a seven-day replay service for 250 channels.

-EchoStar is using IBC to offer a sneak peak at a  home automation and security platform that will feature “do-it-yourself” installation and enable the control of thermostats, security cameras, door sensors, lights, doorbells and switches. EchoStar said the new product is expected to debut in “various territories” in early 2015.

-Second-screen specialist Visiware said its Sync2TV platform reaches more than 50 million users, with 500,000 of them “engaged” with several single TV shows. Visiware said it’s working with several producers and networks, including Disney, Embassy Row, Endemol, ESPN, NBC Universal, the NFL, ITV, M6, Sony, and TF1, among others.

-Harmonic has released its Polaris playout management suite of tools and integrated them with its Spectrum media server family. Harmonic also unveiled new multiscreen packaging and origination capabilities for its VOS software-based media processing platform that adds  packaging-on-the-fly and low-latency origin server capabilities that were originally developed for its ProMedia multiscreen applications. Sky Italia is one the first customers to deploy the VOS platform for its broadcast and multiscreen services.

-Speaking of Sky Italia, it has also deployed Imagine Communications’ Magellan SDN Orchestrator, a distribution system for both ASI and IP transport streams across broadcast routers and commercial IP switches that’s tied into a common software-defined network infrastructure