BT Sports launch ups ante in U.K. pay TV

U.K. telco BT has launched three sports channels to open a chapter of intense rivalry in the country’s pay-TV market. Yet the real battle is over broadband, as it increasingly is in other markets, in anticipation of a future when more and more of our digital entertainment is delivered by fixed-line networks, with only the final hop sometimes OTA via Wi-Fi or LTE.

For almost two decades UK sports broadcasting has been dominated by BSkyB, which quickly became the leading pay-TV operator as a result, now with 10 million subs or almost 70 percent of the market. Virgin Media, recently acquired by the Liberty Global group for $23 billion, is number two with 3.7 million pay-TV subs, but is purely a distributor, having effectively abandoned production of original content in 2010. BT Vision with less than 1 million subs is a poor number three in the market, but has raised its game by spending £1 billion ($1.55 billion) in acquisitions of rights to a variety of events in preparation for the launch of its three sports channels BT Sport 1, BT Sport 2 and ESPN. The biggest outlay was £738 million for live rights to English Premier League football games for the three seasons 2013/2014 to 2015/2016, including 18 of the 38 first-pick matches and access to a total of 38 live games each season, including the opening games. This is a quarter of the 154 matches to be shown each season, with BSkyB having the rest.

The BT sports launch has been interpreted as the biggest assault yet on BSkyB’s dominant market position in pay TV, but BT itself has admitted it is more about broadband. It is in some respects a defensive move, because BT is the market leader in broadband with 6.7 million subs, 51 percent of the UK total. But Sky has surged from 4.4 million to 4.9 million to overtake Virgin Media in second place, largely by acquiring the fixed-line broadband business of operator O2. Although BT has been increasing market share, Sky has been gaining ground steadily since entering the UK broadband business in 2006.

BT’s sports channels are in the first instance an attempt to repel Sky’s broadband advance, as can be seen from the fact BT is bundling them free for its broadband subscribers, who just have to sign up to receive the programmingon their PC or Mac. So, while more than 500,000 subscribers have already registered, most are existing broadband subscribers. BT claims to be quite happy with that, but over the coming months will be hoping to entice some of Sky’s broadband subscribers over. Whether that happens will depend on Sky’s response, with its first move being to offer current BT broadband subscribers who are also Sky Sports customers one free year of Sky Broadband Unlimited or six months free of Sky Fiber Unlimited if they switch to its broadband.

One beneficiary from the fallout between Sky and BT is UK commercial FTA broadcaster ITV, whose revenues have been boosted by a spate of ads from both.