Has BT got what it takes to disrupt one of the most lucrative markets in television?
By Nathan Lee, Reporter, The London Economic
BT has launched the biggest counteroffensive on Sky’s football monopoly since Setanta and ESPN’s attempts to topple Murdoch’s empire ended in failure. Splashing £738 million on Premier League rights alone and investing in a number of other sports, one gets the sense that things could be different this time. But outmaneuvering Sky in their own backyard will be a fruitless endeavor if the numbers don’t match the expenditure.
Sky Sports is the reason the English Premier League is the most lucrative league in the world. After becoming one of the first TV channels to be encrypted using the VideoCrypt system, it easily outbid the BBC and ITV to acquire the live and exclusive football broadcasting rights at the start of the 90s. The 92/93 season was the first time the top tier became known as the Premier League and it was also the first time the media really took hold of British football, with Sky at the helm as top-flight sport became transferred from terrestrial, free-to-air television to pay-per-view.
Although money hasn’t been completely media dominated in the Premier League, ’93 championship-winning Manchester United relied on TV revenue as much when they won the 2013 title as they did back then. BT’s new cash and revene from its previously-failed Irish and American counterparts has only served to exacerbate the situation, but the free market has its ups as well as its downs, and if competition is allowed to survive, consumers may become more powerful than they were under monopolistic sky.
Against Sky’s pay wall, licence money and advertisement revenue have proved to be ineffective. That’s why BT are approaching from a completely unique angle; broadband.
The UK’s broadband market is valued at hundreds of billions of pounds and is dominated by only a few big players, which is why BT feel confident that by offering a new subscription package, the money spent on outgoings will be easily covered by incoming revenue from the lucrative internet market. But it’s quite a cost to cover. BT has spent upwards of £1 billion on sports rights and production and other costs could lead to annual bill of nearly £450 million according to some analysts.
BT says it has signed up more than 500,000 subscribers to its television sports channels ahead of the new football season, but the majority of its subscribers are existing BT broadband customers offered the new channels for free. In addition to recruiting Sky customers, BT will be looking to attract new subscribers too, but simple maths suggests that even if it upped its current subscriber numbers by two million, they will have to charge them close to £30 per month just to cover costs.
Do they have the clout?
To compete with Sky in the sports market it takes more than big names and financial clout. But BT has built a comprehensive package which is being backed by a proven market. With ESPN on side and rugby and tennis complimenting its Premier League matches among other spots, BT’s established British consumer base may have what it takes to gain a market share.
The Premier League has been synonymous with Sky since its inception. BT has entered the market with a new proposition and a competitive service which will only be beneficial for consumers. But it is taking Sky on in its own backyard, and previous failed attempts have highlighted that good intensions are irrelevant if they don’t match the numbers.