When British Sky Broadcasting paid £301 million sterling (€516 million) for Sports Internet, the fast-growing online company, last week, some commentators thought the pay TV operator had lost the plot.
Sports Internet assembled its component parts of sports content, statistics, online gambling and e-commerce at a cost of about £68 million sterling since its stock market listing last year. With revenues of just £240,399 at its most recent interim results, BSkyB's offer represented a huge gamble on its future profitability.
However, there is method in BSkyB's apparent madness; an event that occurred on the day the purchase was announced offers some clues to its thinking.
The deadline for the first round of bidding for the next Premier League broadcasting contract expired last week. BSkyB paid £670 million for the current four-year contract and has used it to drive subscriptions to its services. The deal expires at the end of next season, and BSkyB is likely to have to pay more than £1 billion to retain the first tier of rights to live Premiership games: losing the right to broadcast the Premiership would severely damage the company's offering to subscribers and hinder take-up of its new digital services.
Whatever happens, BSkyB is unlikely to maintain its exclusive hold over live Premiership football because the league has decided to sell its rights in seven different bundles. Together with the package of 66 live games, it is also offering 40 games for pay-per-view, two highlights packages and other sub-licences.
One set of rights relates to the Internet. Under the new contract clubs will be able to show delayed highlights, clips and goals on official club websites. Consequently, the sites - most are run on a revenue-sharing basis with Internet partners - will become far more valuable.
The Internet company with the most football partnerships just happens to be Sports Internet. Its Planetfootball arm runs websites for 12 Premier League clubs. Because of the purchase, BSkyB has direct relationships with Aston Villa, Coventry City, Everton, Leeds United, Leicester City, Middlesbrough, Newcastle United, Sheffield Wednesday (relegated), Southampton, Sunderland, West Ham United, Wimbledon and newly promoted Manchester City.
Add to this BSkyB's £2 million deal with Tottenham Hotspur to manage its website, its minority stakes and media agency deals with Leeds United, Sunderland, Chelsea, Manchester City and its stake in Manchester United, and you have a company intent on casting its net over as many top-level football clubs as possible.
BSkyB has consistently denied that its purchase of minority stakes in clubs has been an attempt to garner influence with them ahead of the next TV contract. The company's new-media strategy - as well as Sports Internet, BSkyB recently bought a 5.4 per cent stake in Sportal, a website operator - will enable it to capitalise on advertising and ecommerce revenues its clubs will generate from the Internet.
"We're beginning to see the realisation that distribution over the Internet is starting to have significant value," says Mr Brian Condon, director of Close Brothers Corporate Finance.
The broadcaster, which recently invested £250 million in its in-house website, skysports.com, must now be a leading candidate to run the Premier League's Internet version of Match of the Day.
The league plans to launch a central website showing clips and eventually highlights of matches. It would be run with an Internet partner and has a huge potential global audience.
BSkyB is applying the same principles to its Internet activities as it does it TV programming: the need to own compelling content to attract viewers and global users, which in turn can be translated into revenues.
Yet everything rests on BSkyB winning a big chunk of Premier League rights.
Only then will BSkyB know if its audacious strategy to make its brand synonymous with English football in widespread media has paid off.
