Magazine article Marketing

BT's Big Content Gamble

Magazine article Marketing

BT's Big Content Gamble

Article excerpt

The telecoms brand has paid in the region of pounds 1bn for sports rights, signalling the start of a high-stakes battle with Sky that will have ramifications beyond the arena of pay TV, writes David Benady.

BT has new-found grand ambitions for its pay-TV services, but can it really become as significant a player in that market as it is in providing broadband connections, fibre-optic cables and landlines?

The telecoms brand took the pay-TV industry by storm in June when it bought two of seven packages of Premier League football games. It is paying pounds 738m for the rights to screen 38 games a season for three seasons from 2013/14, with first pick on 18 of the top matches. Its unexpected entry forced up prices for Sky, which paid pounds 2.28bn for the other games, a 40% increase on the price of its current Premiership broadcast rights.

BT says the games will act as a 'calling card' to help it sell other services, such as superfast broadband, and assist in halting the flow of customers to rivals such as Sky and Virgin.

Michael Underhill, a research analyst at media and telecoms research service Enders Analysis, agrees that this is a major factor behind BT's outlay. '[The deal's] main role will be to stem the tide,' he says. 'BT is losing a lot of broadband subscribers to Sky, attracted by paying one bill for phone, TV and broadband. If BT can move some subscribers away from Sky, that will be a success.'

However, he doubts whether the strategy will be successful. 'I'm not entirely convinced that demand exists for a pay-TV service in the price range of about pounds 10 per month,' he adds.

Channel launch

BT is poised to unveil a sports TV service screening the Premier League, Premiership rugby (for which it paid pounds 155m), games from various football leagues around the world, and other sports fixtures. Its current moniker is BT Sport, although it might use a different brand name at launch.

It has already lured up-and-coming sports presenter Jake Humphrey from the BBC, and there are even rumours it is looking to poach Match of the Day presenter Gary Lineker from the BBC.

Once considered a plodding company content to milk its lucrative legacy, BT has now set its sights on the pay-TV crown held by BSkyB for two decades.

A source close to BT argues that it has woken up to reality. According to this insider, it makes little sense to be a purveyor of undifferentiated broadband and telephone services, in essence a provider of 'dumb pipes' through which others add value and take profits via live sports, movies and music. Its TV service, BT Vision, launched in 2006, has attracted 750,000 subscribers, just 4% of the pay-TV market.

'It has realised that content is king and that it can't compete with Virgin and Sky without a serious offering. People sign up to broadband and telephony because of the content, and BT is massively disadvantaged unless it has something to show,' adds the source.

Rupert Murdoch, chairman and chief executive of News Corp, which owns 39% of Sky, once described sport as the battering ram into people's living rooms. Now BT chief executive Ian Livingston is seeking to dispossess his rival of that weapon.

BT's consumer marketing director David James is forthright about the brand's ambitions. 'We are looking to be number one in telecoms and entertainment. That is a long journey. With voice and broadband, we are well positioned. The key challenge is to cement our position in TV.'

The planned sports channel is intended to turbo-charge BT's aspirations in pay-TV. The company is heavily promoting the recently launched YouView box, which it sees as a replacement for the BT Vision boxes, and it hopes that this, combined with its sports offering, will help it realise its goals.

Bidding war

Those ambitions go far beyond playing second fiddle to Sky when it comes to screening football. …

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