The wait is final over to discover who will broadcasting Premier League football from 2016 onwards. There is no surprise this time in the successful bidders - Sky and BT. But there is surprise at the price they have paid - a huge £5.1 billion. That equates to over £10 million per game. This figure is 70% up on last time and above all analyst forecasts. Surely it is time to talk of the winners curse?
The winners curse is the idea that a winner of an auction may well end up losing money. The intuition is simple enough in that the winner of an auction is likely to be the most optimistic as to how much the prize is worth; that optimism may be misplaced. In the past, TV rights have provided some textbook examples of the winners curse. So, do we have another example?
One reason to doubt Sky and BT have overbid is the fact they know pretty well what they are bidding for. The winners curse is most likely to occur when the value of the prize is highly uncertain. But Sky have been broadcasting the Premier League for decades and so they surely know what they are doing. Moreover, football rights have come to be central to both Sky and BT's business plan. So, they may well be content to make a loss on football in order to protect their general image as top broadcasters.
Even so, the latest numbers are shockingly high. It seems that Sky and BT are not so much betting that football fans will continue to pay huge amounts to watch football but that they will pay ever increasing amounts of money to watch football. That seems a dangerous presumption. The football market is already saturated with fans disgruntled at the cost of it all. Can they continue to pay more? I do not think so. Will Russian oligarchs and Arab sheiks continue to plough money into the Premier League? Who knows.
So, what if Sky and BT have paid too much? Then, I'm afraid, the bubble may well burst. Since its inception the Premier League has hugely distorted the football market in the UK. And the Premier League also appears of the mind-set that ever increasing amounts of money can be expected. Take away the money and the whole thing might collapse. I think, therefore, that it is the Premier League who are taking a big risk by extracting so much money from Sky and BT. Sky and BT will survive the loss of £5.1 billion; I'm not sure the Premier League could!