Kate Bulkley, Media Analyst.

BTís out of the starting blocks

By Kate Bulkley

Broadcast News

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For Broadcast September 27, 2012

But challenging Skyís dominance wonít be easy, says Kate Bulkley

No one can deny that this has been a staggering summer of sport: from the London 2012 Olympics to Andy Murrayís first Grand Slam victory, and from Bradley Wigginsí Tour de France triumph to Rory McIlroy becoming the new Tiger Woods. And thereís also a huge confrontation shaping up in the UK sporting TV landscape, between BSkyB and BT Vision.

From a standing start, BT has taken some big bets: first, on 38 live Premier League games for the not insignificant sum of £738m; then, 69 live English Premiership rugby union games for £125m; next, it secured hip, young BBC presenter Jake Humphrey to front its forthcoming sport channel; finally, it signed up the man behind the Beebís London 2012 coverage, Jamie Hindhaugh, to launch the channel.

Potential subscribers to BTís sporting extravaganza are also being tempted with a free YouView box Ė well, free if you sign a contract for BTís Infinity broadband service or some other BT package, that is.

The channel and the Ďfreeí box are surely not the end of BT Visionís plans, because six years after launch the service is far from securing its early projection of 3 million subscribers by 2010. BT Vision has just over 700,000 subscribers compared with 10.4 million for Sky and 3.8 million for Virgin Media.

Itís all very well spending money on sport, but as ESPN, Setanta, BSB and OnDigital have discovered, getting enough rights at the right price to dent the Isleworth armour is not easy.

The good news is that BTís EPL deal is equivalent to 1% of its revenue, so the telco can easily afford to spend more to make its TV offer a Ďmust-haveí. But some are nervous about that Ė at least one City source thinks BT dividends will be under threat if it keeps on paying out for sport with only a low marginal return in the shape of people signing up for BT broadband.

BTís principle motivation is protecting its ISP business against Sky and VM, both of which are bundling TV, phone and broadband and attracting subscribers, many away from BT. It wonít be easy, with price competition from other online video offers from Netflix to TalkTalk (the other YouView ISP) to the Sky-lite internet video service, Now TV. How will BT stomach subsidising YouView boxes that offer Skyís Now TV? Well, perhaps having Sky-lite on YouView could help BT attract those who donít fancy a fully-loaded Sky pack.

The marketing spend for the BBC-led YouView is nowhere near the £48m originally budgeted, because getting the service up and running has taken much longer than planned, eating up more cash. But TalkTalk is embarking on one of its biggest ad campaigns ever and BT will likely match, if not exceed, that. YouView offers will be all over the place this Christmas.

So could BT Vision become a third pay-TV contender after Sky and Virgin Media? And can a double play of YouView and a BT sport channel make a bundle attractive enough to grow BTís retail business?

The juryís out, but remember Andy, Bradley, Rory and all those unexpected British Olympic golds? Not all successes are easily predictable, and the BT Vision battle plan is only just out of the starting blocks.

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