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Ian Burrell: A question of sport in the British pay television market

Media Studies: BT’s bravado has stung Sky, which sees itself as a dedicated – and unrivalled – investor in British sports

The resignation of Sir Alex Ferguson feels like a symbolic moment, not just in football but also in the British pay television market which is so closely aligned with the national sport. When the Premier League began in 1992, the start of a journey that turned Rupert Murdoch's struggling satellite broadcasting adventure into the dominant force in commercial television, Sir Alex's Manchester United were its inaugural champions. He will hold the trophy aloft again this season, for the 13th time in the league's 21-year history.

But as Ferguson departs, BSkyB's own fortunes – closely tied as they are to football – are threatened as never before. Sky is big – it made record profits of £1.2bn last year. But its new rival is BT, which on Friday announced annual profits of £6.18bn.

When BT announced it would offer its sports channels (including 38 of next season's Premier League games) free of charge to its broadband customers, the BSkyB share price fell by 6 per cent.

This is serious. Four years ago, when I went to meet the new head of BT's television operation Marc Watson, his predecessor Dan Marks had quit citing "frustration" at "the dominance of Sky in live Premiership football". Sky had just chewed up and spat out its Irish-based challenger Setanta.

But Watson didn't seem worried. "I wouldn't say we were frustrated at all, quite the opposite, I'm very optimistic about the future," he told me. Since then he has been plotting a strategy to use sport as the key driver of the BT customer base.

Sky is possessed of some great strategic thinkers. So rather than relying on its television revenues it went after the broadband customers that BT had inherited as a legacy operator. Since Sky became an internet provider in 2006, BT has lost about five million clients.

Watson's big play, taking a large slice of next season's Premier League coverage and forcing up Sky's outlay for the lion's share of games, stunned the football and television worlds. By offering the games for free, BT aims to keep its 2.5 million broadband customers who also take Sky television and might otherwise be tempted by the satellite provider's triple-play package of TV, broadband and home phone.

But BT's opportunities for going further and using football (along with other recently acquired sports rights including top-level rugby and tennis) to attract additional broadband subscribers are limited. Sky's last Premier League challenger, ESPN – an internationally established sports broadcaster but with no broadband business – chose to work with its rival, earning revenue by allowing Sky to retail ESPN games to the Sky customer base on its behalf.

Such an arrangement is unattractive to BT because it means no direct contact with the customers and their data – it does not know who they are and so can't offer a broadband deal or any other service. And big football fans are unlikely to come straight to BT for a full television and broadband package if Sky will not provide its 116 matches on the BT YouView platform (and that deal is far from done). BT has a meagre 770,000 television subscribers to Sky's 10 million.

All of which suggests that BT has not spent wisely in investing £1.3bn on developing BT Sport, except that the company's vast resources mean it is an altogether different player from Setanta or ESPN.

Thus Jake Humphrey, the sports presenter who is the face of BT Sport, confidently launched the service with the words "we are where Sky were 20 years ago". BT Retail head Gavin Patterson said: "We have the financial muscle. This is an investment we can afford to make without betting the farm." The signals are that this is a long-term strategy, which will in the short term protect the most vulnerable segment of the BT broadband base and raise the brand's profile as a content-provider.

BT's bravado has stung Sky, which likes to see itself as a dedicated – and unrivalled – investor in British sports, working closely with governing bodies over many years to raise performance standards and improve facilities. It said BT's claim to be offering Premier League coverage for free was nothing more than a "marketing gimmick" to improve its broadband business.

Gimmick or not, it's a clever message too. Most sports fans credit Sky with providing outstanding and innovative coverage in football, rugby, cricket and golf, pouring in money and enhancing the spectacle for those watching on television and in the flesh. But that money has also brought discontent, particularly among traditional football fans who claim that greed, inflated player salaries and high ticket prices have ruined the game. For them, BT's message of free football may resonate (even if its expenditure of £736m on broadcast rights has made the Premier League richer than ever).

The fact that BT can afford to stick around is worrying for Sky – especially when other rivals are upping their game. Last week's appointment of Tom Mockridge as incoming chief of Virgin Media was an indication of the ambition of American media mogul John Malone, one of Mr Murdoch's oldest business adversaries. Malone's Liberty Global cable empire will next month add Virgin Media to businesses it owns in America and Europe. In 2007, Malone rejected entering the UK market on the grounds that the "Death Star" of BSkyB was all-powerful. But the man nicknamed Darth Vader – one of the few to have had the better of Mr Murdoch in previous dealings – has decided the time is right to make a move.

Sky cannot be happy that Mockridge, a former News Corp loyalist who until recently was its deputy chairman, is at the helm of a competitor. He may feel he has a point to prove to Murdoch after being passed over for the senior role at News Corp's planned publishing division, despite having performed creditably as emergency chief executive of News International, steadying the company as it reeled from the phone hacking scandal. His words so far have been cautious. "I want to make sure I do not disrupt what Liberty and Virgin have already have achieved."

Virgin has been focusing on the speed of its broadband offering. But its message, carried in adverts by Usain Bolt and Mo Farah, is less convincing when rivals are emphasising their expertise in sports coverage. Third in the broadband market, Virgin and Mockridge will want to defend what they have.

The Premier League might be a poorer spectacle next season without Sir Alex Ferguson. But the contest among the media businesses which bring it to our homes and mobile devices will be the fiercest since the competition began.

Twitter: @iburrell

An oldie but a goodie with a masterclass in how to write your own magazine

For those who believed print media was a rapidly downsizing sector with declining career opportunities, The Oldie is running an event which runs counter to that theory. "How to write for Magazines and Newspapers" is a masterclass featuring the talents of "a crack team of experienced journalists" that includes John Sweeney (most recently seen in the bearded guise of an LSE lecturer while controversially filming undercover in North Korea for Panorama) and Rosie Boycott, former editor of The Independent and recently linked to the re-launch of feminist magazine Spare Rib.

The event is led by Fleet Street veteran Jeremy Lewis, who will also host a session on "how to avoid the common mistakes and pitfalls which will deter editors".

It's tempting to see this as a sign of resurgence in journalism. But the £175-per-head class at the East India Club in London is restricted to just 25 places. And the event is linked to The Oldie's "unique" policy of "encouraging readers and non-professionals to write for the magazine".

The Oldie doesn't really do the internet, but editor Richard Ingrams is smart enough to see the value of UGC (user-generated content), even if he would never use such an expression.