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Can BT Sport challenge Sky’s dominance?
On August 1 2013, BT launched its sports TV offering, BT Sport, a flagship service broadcasting out of London’s Olympic Park. By paying vast sums of money to acquire the rights to a wide range of sports including Barclays Premier League football, Serie A football, Bundesliga football, Aviva Premiership Rugby, UFC, and MotoGP, and by poaching well-respected sports presenters like Jake Humphrey and Clare Balding, BT has shown that it is serious about rivaling Sky when it comes to sports broadcasting.
Sky’s previous competitors, Setanta and ESPN, ultimately failed to pose any serious threat to Sky as their offering proved insufficient. While they did show other sports, most notably boxing on Setanta, they relied heavily on football coverage. The main issue was that they simply benefitted from the European Commission ruling that exclusive rights should not be sold to one television company and acquired the remaining package almost by default. Their coverage lacked so-called ‘glamour ties’ between the more famous teams and this contributed to their failure to secure sufficient subscriber numbers. In order to mitigate this risk, BT has invested significant funds in acquiring the rights to other sports and has set up two dedicated sports channels which show sports as diverse as women’s tennis, MotoGP, and Aviva Premiership rugby. Live football, however, remains the key to success and BT has invested significant capital to secure exclusive rights to some Barclays Premier League matches and all UEFA Champions League football from 2015 onwards. The latter came at a cost of £897m ($1.4bn) over three years and represents something of a watershed in the UK pay TV industry as it is the first time that Sky has been faced with a competitor that is not only willing to outbid it for sports broadcast rights, but also one that has the financial muscle to actually do so.
With BT investing such vast sums to secure the rights to such sports, it is fair to ask how this is financially viable given the low cost of subscribing to the channels. A Sky customer wishing to add BT Sport to their package can do so for £12 ($19) a month plus a one-off £15 ($23.76) activation fee. There is no contract, just a minimum one month term and so recurring income is far from guaranteed. BT Broadband subscribers currently receive the channels free of charge provided they re-contract for twelve months and in the light of these facts, it is fair to conclude that BT’s primary aim is not purely to challenge to Sky in the pay TV arena, but is to protect its broadband customer base against Sky’s content-driven Triple Play package of television, broadband and home phone, an offering which represents a significant threat to BT’s position as market leader.
BT Sport is less than six months old and so whether or not it can help BT retain, and perhaps even add, new broadband subscribers remains to be seen. However, with ARPU growth being largely driven by broadband sales, BT’s strategy of focusing on the segment is justified.
For a deeper analysis of the UK pay TV market and BT’s attempts to challenge Sky’s long-standing dominance, see MarketLine’s case study BT Sport & BSkyB: The battle for supremacy in the UK sports broadcasting market