Analysis & Opinion

Special Report: What next for Sky, BT Sport, and the Beautiful Game?

It’s the biggest news in the industry for some time, and if BT Sport’s £897m three-year deal to exclusively broadcast Champions League and Europa League matches surprised us in revealing the extent and seriousness of BT’s pay-TV ambition, the wider implications of this momentous news are still more interesting. IP&TV made contact with Ted Hall, Senior Analyst, Broadband & TV, Informa Telecoms & Media, to try to make sense of this intriguing new horizon.

One of the most pressing questions is where this leaves BT’s broadband strategy? For Hall, though, the news does not betray a shift of emphasis – merely an expansion. “BT’s strategy is still fundamentally about broadband,” he insists, “but by evolving its sports channels into a genuinely premium offering, the telco can position BT TV as a fully-fledged pay-TV service armed with clear USPs.”

As for the incredible amount of money BT Sport have paid secure the rights (an amount of money Sky have been quick to characterise as excessive: indeed, at £299m a year for three years, BT is paying more than double the £400m BSkyB and ITV are paying for the current three-year contract), Hall is relatively sanguine,  pointing out that it gives BT the “perfect opportunity” to transition from its eye-catching “free” premium sports strategy to a more conventional pay model: “BT broadband customers will continue to benefit from better-value BT Sport deals, but the introduction of a fee for the channels seems inevitable if the telco is to properly monetize its exclusive rights.”

Something Hall firmly eschews is the suggestion (found in more than one quarter of the media) that the successful bid is in some way damaging to football and football broadcasting per se

“Before BT became a serious pay-TV contender, Sky had long been in the business of putting key sporting content behind a paywall. The operator was itself responsible for turning the Champions League into a product primarily aired on pay TV. [Sky's] acquisition of Formula 1 rights – previously exclusively free-to-air – is another example of this. BT’s big-money entry into the premium-sports business is no different – massive investment is the only way to take on a dominant player and paying over the odds for certain exclusive rights is an inevitable part of this strategy.”

Of course it is difficult to imagine a more “dominant player” than Sky. What risks are BT taking here? “The danger for BT is that its premium-sports rights do not have the desired effect on its TV and broadband businesses. Sky has long proved a trusted and valued provider of pay TV, and more recently broadband and phone services as well.”

Churn, Hall points out, has never been a significant problem for Sky – and even the loss of the Champions League, he suggests, “may not result in significant customer losses.” As for Sky’s anticipated reaction, interestingly Hall thinks this could indirectly enhance the profitability and prestige of some of football’s less vaunted fixtures (at least in modern times)…

“Sky will now look to invest in other key football competitions that have become less of a priority in recent years. The FA Cup and England internationals, for instance, were formerly staple parts of the Sky Sports offering, and the operator is now likely to seek to reinvest in these competitions. Its future sports-rights strategy will also be influenced by the level of success BT can achieve on the back of its premium-sports push, which may not be significant.”

One of the loudest noises amid the media’s response to Saturday’s staggering announcement has been sympathy for the consumer, with the Champions League now disappearing completely behind a pay-wall. What, asked IP&TV, were the real implications news for the football fan?

“It appears that there will be less European football on terrestrial TV, which is bad news for free-to-air homes,” Hall concedes. “However, BT’s pledge to show each participating English club on free TV at least once a season means that the reduction in the number of games will not be hugely significant, given that ITV’s rights package currently stands at just one game per match day.”

Indeed, Hall points out that, “for lower-spending pay-TV customers,” the impact could be positive – “given that BT Sport is still set to cost less than Sky Sports, as part of BT’s strategy of making premium sports ‘more affordable.’”

Hall suggests that it could well be the “higher-spending pay-TV customers” who are the most negatively affected: “those that want to continue to receive a full sports package will need to subscribe to both Sky Sports and BT Sport, which could be an increasingly expensive proposition.”

There are great opportunities to explore these issues in more detail in the coming months. At the Digital TV World Summit (3-4 December), Head of BT Sport Simon Green will be appearing, while at TV Connect (18-20 March, 2014), Alex Green, Director, TV, BT, will be speaking on “Creating a successful telco pay TV model.” Furthermore, TV Connect will also be hosting The Leadership Summit on the “return of telco TV.” This exclusive event for CXOs and Business Leaders will be led Mark Wilson-Dunn, Vice President Global Sales and Marketing for BT Media and Broadcast, with supporting contributions from Alvaro de Nicolas, CTO, BT Vision. For more information about next year’s TV Connect go here, and for more information about the Digital TV World Summit go here

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