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Football’s new player BT changes the rules

BSkyB shares dive 11 per cent as BT’s record-breaking Uefa deal shows it to be a serious contender in the ‘triple play’ game

Gideon Spanier
Tuesday 12 November 2013 02:10 GMT
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Gavin Patterson was up until the small hours on Saturday, anxiously waiting for news of a deal which would show that the new chief executive of telecom giant BT means business. The good news came from his lieutenants, Marc Watson and John Petter, who were able to report from BT Centre in the City of London at about 2am that they had signed a record-breaking £900m deal to snap up all the live TV rights for top European club football.

“We were here and Uefa were in Switzerland, so it had to be counter-signed virtually,” says Mr Watson, the head of BT TV, still fizzing with excitement as he recalls signing the deal to become the exclusive broadcaster of 350 Uefa Champions League and Europa League games for three years from 2015.

The deal, which is thought to be worth close to 120 per cent more than before, was a stunning move. The current rights holders, BSkyB, the pay-TV giant that made its name with live football rights, and the free-to-air broadcaster ITV were left with nothing.

No British broadcaster had ever won all the UK rights for top-flight European football before. “We’re pretty confident that others are kicking themselves,” declares Mr Watson, who dismisses suggestions that BT might have overpaid at roughly £850,000 per European game. “We did our numbers; we knew what we were happy to do. We developed a strategy and we’re delighted with the outcome.”

Sky is particularly badly hit, as at present it has 129 live Champions League games a season. Those close to Sky admit there was a “big gap” between its own bid and BT’s much bigger offer. When Sky chief executive Jeremy Darroch’s negotiating team realised what was happening, their last-minute inquiries with Uefa about the bidding process came to naught.

ITV, which had rights to 45 European games, including some in the second-string Europa League, is also going to suffer as it loses a valuable advertising platform to reach affluent young men.

The share price reaction yesterday, the first day of trading since Uefa announced the rights deal, spoke volumes.

BT held firm, with the shares up 2p to 374.1p. Investors believe that Mr Patterson, who was promoted to the top job after Ian Livingston stepped down in September, has the strength to underwrite this investment. He has promised he can still meet BT’s financial targets. In contrast, Sky shares crashed 11 per cent, or 101p, to 829p, wiping £1.6bn off its value. ITV fell 3.1p to 187.4p.

Analysts were not only worried about Sky losing its strong foothold in live European football, but also the implications for other rights deals as they come up for auction – usually every three years. Barclays warned of “higher content inflation when rights are renewed”.

BT first stunned the TV market in June 2012 when it snapped up 38 Premier League games a season for £738m, forcing Sky to pay £2.3bn – a 70 per cent increase on the previous auction. At the time, Sky still looked to have got the better deal as it had 116 live Premier League games. But BT upped the ante this year, giving away football free to its broadband customers.

This new European swoop is potentially a bigger game-changer, as BT’s Mr Watson claims his channels now have “more live TV football than anyone else”, adding: “We’ve done a lot of research. The combination of Premier League and European football is the combination that football fans are looking for.”

For the City, it is clear that BT is proving to be a more serious rival for Sky than ESPN, Setanta and ITV Digital, which all tried and failed to take on the big beast of British pay-TV.

BT first moved into pay-TV as a retaliatory move after Sky began offering a “triple play” of TV, broadband and home phone that ate into BT’s broadband subscriber base. Increasingly, consumers want to buy all their home-communications services from one supplier, partly because it’s easier and cheaper but also because the technology is converging as TV becomes internet-enabled.

Crucially, BT and rival TalkTalk have woken up to the fact that TV is a great way to sell home communications as a package – something Sky and Virgin Media discovered long ago. Whereas broadband and home phone is seen as a utility, customers are more emotionally engaged with TV.

Some observers assume that BT will hike prices to fund its investment in TV, which is already in the region of £2bn. BT has already said broadband prices will rise 6.5 per cent and line rentals by 3.5 per cent in January.

“We’ve got a good track record of buying great football rights and making them affordable,” insists Mr Watson, contrasting some of BT’s cheap deals with Sky customers who have to pay £40 a month.

At least one game involving a British team will be broadcast free in every round of the Champions League, which ought to defuse some of the critics who are unhappy at the idea of all such games being behind a paywall. BT has no plans to let a terrestrial broadcaster such as ITV share the rights – something the broker Liberum Capital has mooted. “There’s a lot of value in exclusivity,” says Mr Watson.

Meanwhile, Sky and ITV have been left to nurse their wounds, insist that Champions League was just a minor part of their schedules, and talk up how they will invest in other programming.

It’s game on. And Mr Patterson’s BT has just scored.

Matched: football on screen

Before BT entered the market

BSkyB: 115 live Premier League games a season. Cost: £1.62bn for three years or £4.7m per game. 129 Uefa Champions League live games. Estimated cost: £240m for three years or £620,000 per game.

ITV: 18 Uefa Champions League and 29 Europa live games (including finals). Estimated cost: £160m for three years or £1.1m per game.

After BT entered the market

BT: 38 Premier League games a season. Cost: £738m for three years or £6.5m a game. All 350 Champions League and Europa League games a season. Cost: £897m for three years or £850,000 per game.

BSkyB: 116 live Premier League games a season. Cost: £2.3bn for three years or £6.6m per game. No Uefa Champions League games.

ITV: No Champions League or Europa League games.

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