BT and Sky prepare for battle as Premier League kicks off
With the kick-off of the Premier League season this weekend, BT and Sky are set for their biggest match yet, battling to win over football fans with aggressive marketing campaigns and cut-price offers.
BT, which launched its sports broadcasting division just three years ago, has made a big bet on premium soccer programming, spending more than £1.8bn to snap up the rights to more than 400 football matches. This includes the exclusive rights to air every Champions League and Europa League match as well as 42 Premier League and two dozen FA Cup matches this season.
The UK telecoms group is hoping its new primetime line-up — BT Sport is broadcasting nearly all of its Premier League games on Saturday evenings this season — will enable it to lure more of rival Sky’s pay-TV customers. It is pitching itself to viewers as a one-stop-shop for football coverage by running advertisements with the tagline “Four Competitions, One Venue”.
BT is also seeking to leverage its £12.5bn acquisition this year of the UK’s largest mobile operator, EE, to broaden its sport customer base, offering six months of free football viewing to all EE customers.
Rival Sky, however, is still the UK’s dominant sports broadcaster. Last season, it aired 49 of the 50 most-watched Premier League matches. This season, the network is set to air three times as many Premier League matches as BT, including the most-watched Sunday kick-offs — and has branded itself “The home of the Premier League”. The broadcaster also has the rights to more than 100 English Football League matches, in addition to hundreds of matches from Spain’s La Liga.
But Sky’s vast programming schedule comes at a steep cost: in a high-stakes auction last year that saw the overall cost of airing Premier League matches soar by 70 per cent, the pay-TV leader agreed to pay £1.4bn each year for its Premier League rights. BT is paying £320m a year for its share of the Premier League matches.
Both Sky and BT make a loss on their sports programming, but compensate for the high costs by selling customers TV packages and high-speed broadband, respectively. With BT’s acquisition of EE, and Sky’s expected entrance into the mobile market later this year via a partnership with mobile operator O2, the two companies are also set to start competing for mobile customers.
So far, the cross-platform strategy has paid off.
BT’s move into sports programming in 2012 was partly motivated by concerns that Sky’s dominance of premium sports rights was undermining its core telephone and broadband markets — by some estimates, more than half of BT broadband customers who abandoned their subscriptions were switching to Sky.
Since launching BT Sport, however, the company has been able to reduce its rate of broadband churn — the share of its customers leaving for other providers — while bringing in new subscribers. The company reported a 58 per cent year-on-year increase in BT Sport viewers last quarter.
John Petter, chief executive of BT Consumer, said the company’s football and other sports offerings — the company also recently signed a multiyear deal with Cricket Australia to broadcast the 2016-17 Ashes series and the Twenty20 Big Bash tournament — were satisfying sports fans, while shoring up the long-term sustainability of BT Group.
“If it encourages more people to bring their broadband to BT or their mobile services to EE, there’s a commercial case for it,” Mr Petter said.
Meanwhile, Sky, which expanded into Europe in 2014 when it bought control of Sky Deutschland and Sky Italia from 21st Century Fox, has attracted hundreds of thousands of new customers each year, investing in new content across the board and rolling out its Now TV pay-as-you-go streaming services to compete with the likes of Netflix and Amazon Prime.
Full Sky Sports annual contracts start at around £25 per month, but viewers can watch the network’s sports coverage for as little as £6.99 for a 24-hour “day pass”. The company is set to reach an even wider audience this month, with the launch of Sky Sports Mix, a new sports channel for all Sky subscribers, regardless of whether they pay extra for Sky Sports.
Yet the already-high cost of broadcasting football is multiplying — in June, Sky agreed to pay the German Bundesliga €486m a season, an 85 per cent increase on the previous auction — leading many to question both Sky and BT’s long-term ability to control costs and maintain growth.
It is unlikely that the companies will pass the full cost on to consumers: Sky posted its highest level of churn in nearly a decade last month, after TV customers reacted to a 4 to 5 per cent price rise.
But many analysts point out that networks can only slash so much in operational expenses to offset football costs — Sky is targeting £200m in cost-cutting this year — before they are forced to row back on investment in other programming, such as premium scripted content.
Ian Whittaker of Liberum said the high levels of churn showed competition was increasing for Sky and BT, with pressure from “over-the-top” services like Netflix and Amazon “potentially undermining their pricing power and therefore revenue growth potential”.
Stephane Beyazian of Raymond James, another analyst, said both BT and Sky were “potentially financially at risk” if they “don’t bring down the pressure on sports content auctions”.
But Mr Beyazian added that the head-to-head battle between the UK sports broadcasters may be shortlived, warning that new competitors with deep pockets could be entering the space soon.
“Google, Netflix and Apple haven’t invested heavily in sports yet,” he said. “One day or another, they may give it a try.”