When is a good deal not a good deal?


Pencil on Indexed Return GraphSky have just signed a £4.1bn deal for the rights for 5 of the 7 packages of English premiership football coverage; Up 83% more than they paid 3 years ago.

It’s interesting that the response from the city was for Sky shares to fall 2.2%. It seems that the price was around £300m more than City analysts had expected

The analysts estimate that Sky will look for make cost savings and increase prices.

The knock on effect could be that Sky price themselves out of the reach of subscribers. Maybe not in real terms, but in what subscribers see as value for money. Also, ‘cost savings’ could lead to other areas of Sky’s business being cut back.

BT paid £960m for 2 of the English premiership football coverage, up 30% on the previous deal. Yet BT share actually rose by around 3.5%

I think there is a good lesson here, a business needs to be sure of the return it will get for the investment and what the city will support.

For us smaller companies, we may not need the city’s backing, but it’s a sobering thought that we cant just throw money at winning a deal.

A key point is to decide what a deal is worth to you; and stick to that. Whether it’s on how much to quote or how much to bid for an opportunity.

Make sure you will make a realistic profit.

Making a real profit includes taking all costs into account – Including operating costs and asset replacement costs. If you would like to review your profit margins, I’d be happy to have a chat – 07766 080770

About Alex Petty

Blogger, runner, mentor
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