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Will British Telecom’s Pricey Gamble on Premier League Rights Pay Off?

Telephony giant broke BSkyB’s stranglehold on the world’s most famous soccer circuit

According to media analyst IHS, Rupert Murdoch’s BSkyB last year spent $1.99 billion on sports programming — more than three times the amount invested in movie rights. The bulk of the pay service’s expenditure went to exclusive coverage of one content provider: the Premier League, the world’s most famous soccer circuit.

BSkyB has banked on soccer to draw subscribers almost since its inception, maintaining a stranglehold on Premier League matches by virtue of its willingness to pay ever-increasing sums for rights. In June 2012, the pay-TV service forked over a record $1.17 billion a year for three years for 116 games per season, with the current campaign to kick off Aug. 17. Averaging more than $10 million per match, the deal reps a 40% hike over the previous contract, which averaged approximately $7.2 million per.

Reason for the spike: competition from telephony giant British Telecom.

Unlike previous competitors like Setanta and ESPN, BT secured 18 “first pick” games — meaning BSkyB no longer has a monopoly on the season’s biggest clashes, featuring giants like Manchester United, Manchester City and Chelsea.

The telco’s overall investment in BT Sport is north of $1.53 billion, including the launch of a suite of channels Aug. 1, with state-of-the-art studios at the Olympic Park in London’s East End, an expensive production contract and a lineup of star sports anchors. It paid $378.2 million a year for its 38 Premier League matches — about $10 million per contest.

This means war. The core of the battle lies in drawing broadband subscribers and persuading people to take the triple play of TV, broadband and telephony.

In June, BT announced that BT Sport would be free to existing broadband customers. New subscribers get the channels as part of their broadband subscription for a minimum of $15. BT said that since then, more than 500,000 people had signed up for the channels, though most were existing broadband subscribers.

The offer was made to stop BT subscribers migrating to BSkyB, which has been poaching broadband subs from BT at an alarming rate. BT has almost 6.8 million broadband subs — but second-ranked BSkyB is gaining fast, with 4.9 million, after adding 1.26 million in the past year (to BT’s 434,000).

BSkyB — which has claimed the scalps of would-be rivals ITV Digital, Setanta and, more recently, ESPN — appears sanguine about the new challenge. A spokesman said: “We take competition seriously and always have done so. It drives us on to be better and to deliver the best possible service to customers.”

But it might be rattled: For the first time, BSkyB will show the season’s opening game, featuring Man-U, at no cost.

“Over the years, Sky has broadened out its sports offer by adding exclusive coverage of sports like motor racing and cricket. But Premier League soccer remains unquestionably the main driver for BSkyB subscribers,” explains Tim Westcott, principal analyst of TV programming at IHS.

In France and Germany, telcos grabbed soccer rights but failed to translate that into rapid subscriber growth. Will BT Sport be di erent? Marc Watson, CEO of BT Vision, insists his company can succeed.
“We intend to stick around in this game for the long term,” Watson says. “We are a big business, and this is our home market. … And we’re not that easy to chase out of town.”

BT is heavily committed, and in terms of market capitalization has even deeper pockets than the pay-TV company. “Having invested so much in upgrading its network, TV is an important addition to BT’s bundle of services,” Westcott says. “But it still remains very risky, because Sky is not going to stand still.”

To date, the only clear winner is the Premier League.

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