BT Sports paves way for Sky price battle and rights inflation

BSkyB will hit back at BT with new pricing promotions as double-digit percentage increases in the cost of key sports rights kick in, following BT launching its own sports channels in the UK, according to analysts.

Morgan Stanley issued a report following UK telco BT launching BT Sports yesterday and said that increased competition for English Premier League rights will increase their cost by about 15% when they are next up for grabs in 2015.

The investment bank expects BT Sports to have four-to-five million subs when that rights deal is up for renegotiation.

It said that News Corp.-backed Sky is likely to offer new promotional pricing to retain and attract new customers, but is unlikely to permanently slash prices for its basic broadband service, which is still cheaper than that of BT. The extra competition will restrict Sky’s ability to hike prices across its broadband and basic TV services the bank added.

The financial impact, assuming Sky sheds some broadband and basic TV subs to BT and is forced to increase its marketing spend, are potentially in the £75-100 million (US$115-154 million) range in its 2015 financial year, according to Morgan Stanley. That equates to about 5% of its EBITA profit.

BT said yesterday that its new sports channels will be made available free of charge to BT broadband customers.

BT will air three sports channels – BT Sport 1, BT Sport 2 and the recently acquired ESPN. In addition to its 38 live and exclusive Premier League football matches, BT has added Moto GP, Women’s Super League football, Australian ‘A’ league soccer and action sport and lifestyle programming from Red Bull Media House to its roster or sports rights.

BT will also air FA Cup ties, the UEFA Europa League, Scottish Premier League plus WTA women’s tennis and action from the UFC.

In addition to BT’s own five million broadband customers, the telco is hoping to appeal to broadband subscribers with other ISPs to encourage them to switch. BT is offering new customers BT Infinity, its flagship fibre product, from just £15 per month or copper broadband from just £10.

BT Sport will be available via BT’s own TV service, Sky’s digital satellite platform and also online or via a new app enabling customers to enjoy the channels on the move or at home on their PCs, smartphones and tablets.

BT customers will be able to view the service via both YouView and Vision+ boxes. The service will be available over its fibre network to YouView subscribers, with the ability to view the channels in HD for an additional £3 a month, waived to subs who sign up before the start of August.

The service will be available to Vision+ customers across the UK via their aerials. BT said today it had added 40,000 new TV subscribers in the most recent quarter, taking the total to 810,000.

Satellite customers who take BT broadband will get BT Sport for free. Others will be able get the service from BT in high definition for £15 per month or in standard definition for £12. BT is aggressively targeting Sky’s base by encouraging customers to switch back to BT Broadband and save money.

“UK Sports fans have had a rough deal for too long. Many have been priced out of the market but we will change this by giving away BT Sport for free with our broadband. Sports fans are the winners,” said Ian Livingston, BT chief executive.