Originally Posted by ariusuk:
“The Premier League will know what it wants to achieve from each package, and also the minimum it will accept. It will base those figures on what the very clever analysts it employs calculate that the people it has invited to bid can afford to pay.
Sky, and other broadcasters, also employ very clever analysts. They work out how much revenue they would achieve by having the rights, in addition to the value of preventing a rival having the rights, and then work out how much it is going to bid. That figure being the lowest amount at which it can satisfy the EPL and beat the competition.
BT, as a newcomer to the market, doesn't have any real idea of how much it can make from the rights. But it can work out roughly what Sky would bid, because it has all the same data to work with about Sky's revenues and subscribers.
So its aim is to bid higher than Sky... but only by enough to win. They don't want to be overpaying.
And that is how all the bids were in the same range, and why they will be very close for the Champions League too.”
I agree entirely that doing lots of analysis re how much everyone else is likely to bid is a key part of bidding strategy. But I don't agree that it necessarily means that the bids ultimately submitted will be close. I'll use some numbers to illustrate the point:
Suppose Bidder A thinks the rights are worth 100 to itself - ie the most A is willing to pay for the rights is 100.
A's analysis shows that B should be willing to pay a maximum of 70 for the rights (and nobody else is willing to pay more than 70).
So what does A bid? 71? 72? 75? 80? Or even 90? Or even 100?
The answer is that it depends on A's appetite for risk on the
particular auction. If the rights are very, very important to A then A will be less willing to take risk on it and A will therefore move up the spectrum towards 100 (and away from 70).
However if A thinks the auction isn't that crucial - say the rights aren't that important - eg this is one of many auctions for rights of similar importance and A really doesn't need to win them all - then A will be willing to take much more risk and bid much more towards the 70 area (and even just bidding 71 if they are very relaxed).
Taking the PL - they are Sky's most important rights by miles so Sky's appetite for risk will be very, very low. So they'll play it very safe - the fact they have won 7 out of 7 PL auctions (for best package and most of rights) indicates they aren't cutting it fine - if they were they would have been caught out by now - you don't get lucky and win close calls every time.
Of course that doesn't mean Sky is bound to win the PL rights - they could be taken by surprise - as BT did - they might think they are playing it very safe when actually it is very tight. And of course someone could bid over Sky's maximum. But the point is they won't
think they are cutting it very fine.
Another good example is BBC MOTD. BBC regards MOTD as very, very important so they bid very high. Many people on here have often said BBC overpays for MOTD but what is happening is that they are bidding right up to their "100" point even if they think the most anyone else will bid is "70" (or even "50") - because they are not willing to take any risk on it.
I will cut this post here and continue below (to avoid this post becoming too long!).