BT takes on Sky in the sports broadcasting market

With the new Premier League football season only a week away, TV companies are heavily advertising the matches they will be showing. Until recently, BSkyB, having seen off competition from Setanta and ESPN, appeared to have an untouchable position in this market. However, competition now appears to be intensifying.

BT entered the market in 2012 by paying £738m for the rights to screen 38 Premier League matches a season for 3 seasons, with Sky showing another 116 matches. BT is clearly heavily backing its sports coverage with an initial outlay of £1.5b and them continuing to sign up high profile presenters and ambassadors including former players and a current manager.

Furthermore, BT dealt Sky (and ITV) a hefty blow last year when it outbid them to win the rights to exclusively show European club competition matches from 2015. Sky responded by saying that:

We bid with a clear view of what the rights are worth to us. It seems BT chose to pay far in excess of our valuation

If true, this would illustrate the winner’s curse which can arise in auctions. However, John Petter, chief executive of BT Retail, said that the deal demonstrated that BT Sport was committed to establishing itself in this market and countered Sky’s suggestion that they had overpaid by saying:

They would say that, wouldn’t they? Secretly, I’d expect them to be kicking themselves and full of regrets this morning

Clearly important to BT’s strategy is bundling its sports coverage in for free with their broadband packages. This is not without controversy since, at the same time as spending vast amounts of money to setup its sports coverage, BT is receiving large government subsidies to improve rural broadband provision.

An important forthcoming ruling from the Competition Appeal Tribunal will have a significant effect on how competition between BT and Sky develops. In this case Sky is accused of abusing its dominant position by refusing to supply BT’s YouView service with its sports channels at a reasonable wholesale price and could now be forced to do so.

It will also be fascinating to see how BT Sport’s strategy develops over time. BT is unlikely to continue to provide all its coverage for free once it includes the European matches that it has won the rights to show at great expense. It will also be fascinating to see the extent to which it continues to have success in winning broadcasting rights in the future.

Competition will inevitably push up the amount that the Premier League raises in the next rights auction. Current predictions are that these will be sold for over £4bn, up from £3bn in the previous auction. This will increase the amount the Premier League clubs receive and is also likely to further push up player wages. It remains to be seen the extent to which this will benefit viewers, not to mention pubs wishing to show the games some of whom have in the past looked for alternative solutions because of the high prices they have to pay.

BT wins court battle forcing review of Sky wholesale pricing decision The Guardian, Mark Sweney (17/02/14)
BT Sport does little to lift BT TV homes informitv – connected vision (01/08/14)
BT Sport continues to invest in football line-up MediaWeek, Arif Durrani (29/07/14)

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