Kate Bulkley, Media Analyst.

BT scores with copycat tactics

By Kate Bulkley

Broadcast News

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For Broadcast November 14, 2013

Champions League could be a game-changer, writes Kate Bulkley

They say that football is a funny old game; minnows can beat giants and you learn to expect the unexpected.

So when BT Sport stumped up £897m for three seasons of Champions League rights starting in 2015, no one should have been too surprised.

Yet after years of pay-TV sport domination by BSkyB, it was a shock – there is a new bully in town and they clearly want to spend their wonga. The story behind the story is particularly interesting.

Obviously, Sky did not plan on losing the Champions League after nine years and it made an opening bid (with free-to-air partner ITV) of £688m, fully expecting there to be a second round.

Yet when Sky called Uefa on Friday evening, it was surprised to be told that there would be no round two – because the BT Sport bid was so much bigger. I can imagine there might have been a bit of Alex Ferguson-style tea cup throwing at this point over at Isleworth.

Talk about the boot being on the other foot – the tactic of the massive bid to take out all opposition is just how Sky has been controlling the TV sport market for years. And how the City has punished it. A 10.9% drop in Sky’s share price on Monday wiped a billion off its value and revealed what the analysts are thinking: everyone knows BT has deeper pockets and now, it appears keen to use them.

How can the fans of England’s top clubs miss their team’s European triumphs (or failures)? They can’t, so BT Sport can bank on a serious number of extra subscribers in two years’ time. But £900m? That’s more than twice the previous winning bid and £200m more than the combined rival bid (£500m from BSkyB and £188m from ITV).

Was someone using the wrong kind of calculator? It’s hard to tell. To pay that much more is either a crafty game-changer or financial madness, and when BT’s share price remained relatively unmoved on Monday, it seemed the experts thought it the former.

But BT is still playing massive catch-up and has rather quietly admitted that it will start charging its own broadband customers a “modest fee” for BT Sport once the Champions League deal kicks in, likely at around £5 a month. Not quite the “sport-for-free” message it has been trumpeting.

Meanwhile, BSkyB has taken the defeat on the chin – stating that Champions League accounts for 3% of Sky Sports viewing compared with the Premier League’s 18%. Plus, BSkyB has 85% of its sports rights already secured for the next three years.

Sky just has to make the best of a bad job. It has other irons in the fire: original content, broadband, movies. But the problem is that live sport is still a very important part of pay TV, whatever Sky says about triple-play.

Paying over the odds is how BSkyB got to be the dominant player, so BT has learned from the master.

This whole thing is like a huge game of chicken – who is going to blink first and stop making over-the-top bids that might never cover their costs? Wait until the Premier League rights come up for grabs in 2015 and then we might know the real answer.

I suspect it will be a very costly auction to win.

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