LONDON — Another 800-pound gorilla is preparing to stalk Blighty’s crowded media jungle and already the primate is eyeing Rupert Murdoch’s most prized U.K. asset — soccer.
The $6 billion tie-up between British cable ops NTL and Telewest, both listed on the U.S. stock market, follows years of often unrequited courtship.
Yet within 24 hours of the deal’s announcement on Oct. 3, the CEO-in-waiting of the new giant, Simon Duffy, was on the attack.
He wants to air the crown jewels of British sport, Premier League soccer, at cut-price rates. And he intends to outbid BSkyB, the Murdoch-backed satellite TV platform that found early success thanks to soccer, when the rights come on the market next year.
“If you look at the way the Premier League has been bid for and sold over the last several years the amount of money going into the game… has gone down and the amount of money people have to pay to watch Premiership games on TV has gone up. That can’t be right,” Duffy says.
NTL, which has 3.3 million subscribers compared with BSkyB’s 7.8 million, is planning a dedicated Premiership channel for as little as £10 ($18) a month. This compares to BSkyB, which offers sport as a premium channel as part of a package that costs a minimum of $60.
Duffy must win the rights in what is likely to be a complex auction that will involve players including commercial giant ITV, pubcaster the BBC, and the Irish-based sports specialist Setanta.
“We believe we can take money out of BSkyB’s pocket and give it back to the game and into people’s pockets,” promised Duffy in a radio interview.
He wants to do a deal that would give free-to-air webs a piece of the Premiership action.
Clearly he needs to talk up the new cable company’s chances. For despite being the U.K.’s second biggest communications player (its market cap is $5.6 billion), following decades of financial losses and wasted opportunities, cable suffers from a credibility gap in Britain.
Duffy hailed the merger as “momentous” and emphasized its “triple play” technology that gives subscribers the opportunity to hook up to TV, telephone and broadband services in a single transaction.
It sounds tempting, but is the hype justified?
“Momentous no, but the economic case is overwhelming,” opines Theresa Wise, senior partner at Accenture.
Synergies are reckoned to take out around $450 million of costs by 2008, but competition on all fronts will be intense.
“Arguably this merger is a year overdue,” Wise adds. “By coming now it has allowed British Telecom to win favors from the regulator they might otherwise have not been granted.”
If Duffy snatches Premier League games from BSkyB, the tie-up will have been worth the wait.
“At last this is the big chance for U.K. cable,” says an industry veteran. “If NTL gets the marketing right there will finally be a well-funded competitor for BSkyB.”
The competition between the new, enlarged NTL and BSkyB is complicated by the new player’s ownership of content firm, Flextech, part of Telewest’s assets.
Flextech controls a group of British pay channels including Living, Bravo and the U.K. TV portfolio, held jointly with BBC Worldwide.
BSkyB, along with pan-Euro broadcaster RTL, Discovery, Viacom and Time Warner, is keen to buy Flextech, but last week Duffy indicated that he regards Flextech as “a key asset” and a sale looks unlikely.
However, the UK TV business, responsible for more than half a dozen channels including oldies web, UK Gold, could still be on the market.
This is because of a change-of-control clause in the BBC’s original agreement with Flextech allowing the pubcaster to buy out the 50% it doesn’t own, or to choose whom this is sold to.
Last week BBC Worldwide CEO John Smith told the London Financial Times that “we would be very happy with Sky running our channels.”
The BBC will weigh up what is most commercially advantageous — raising the coin to buy out Telewest’s stake in UK TV or getting into bed with a third party.
A decision could take months. Despite the hype surrounding the merger of NTL and Telewest, the machinations of the British cable sector look set to proceed at a stately pace.