LONDON (Reuters) - Pay-TV group Sky (>> SKY PLC) has agreed to pay 4.2 billion pounds to show 126 live English Premier League matches a season from 2016 to 2019, pressured by fierce rival BT (>> BT Group plc) to smash analysts' forecasts and secure the best games.
After one of the most high-profile broadcast auctions of recent times, the Premier League said that Sky had won five of the seven rights packages, including the most popular Sunday afternoon matches showing the likes of Manchester United and Arsenal.
With BT paying 960 million pounds to show 42 games a season, the two companies will shell out a combined 5.14 billion pounds over three years, well above the 4 billion pounds analysts had expected and above the 3 billion pounds paid for the current contract.
Sky, which is 39 percent-owned by Rupert Murdoch's 21st Century Fox (>> Twenty-First Century Fox Inc) and synonymous with top-flight English football, said it would cut costs within the business and likely raise some prices for customers to afford the new contract.
Premier League Chief Executive Richard Scudamore said he was surprised by how much the matches had fetched, but he noted that the game was the beneficiary of the two media giants using football to draw and retain customers.
"These are huge companies doing huge things in a market that has gone way beyond football," Scudamore said.
Sky, has built its business around offering exclusive programming such as premium sports and drama to customers who can also take telephony and broadband packages.
But it has faced a far greater challenge in recent years, since the deep-pocketed BT copied its business model by buying up broadcast rights to attract customers to its new superfast broadband platform.
The 169-year-old telecoms company had already ramped up the pressure on Sky by winning the right to show all the live European Champions League matches for three years from the 2015/16 season, forcing Sky to up its game in the English auction to retain its position as a leading sports broadcaster.
Scudamore said the League had received a broad interest in its rights but would not say who else had bid to show the games, which feature world-class players such as Chelsea's Diego Costa, Manchester United's Robin van Persie and Arsenal's Alexis Sanchez.
After three days of bidding, Sky won the right to show matches on Sunday afternoons and early Saturday games, while BT will show Saturday evening matches.
"We went into the Premier League auction with a clear objective and are pleased to have secured the rights that we wanted," Sky Chief Executive Jeremy Darroch said.
Analysts at Bernstein said they had been surprised by the 83 percent rise in Sky's three-year deal.
"Sky is on a trajectory that is unsustainable if a significant portion of the cost base must be expected to increase by such large growth rates every three years," they said.
(Editing by David Goodman and Martyn Herman)
By Kate Holton and Paul Sandle