BT Vision is not behaving as crazily as one might think
David Hellier, deputy editor at City AM, says there are a few reasons why BT Vision might not suffer the same fate as its predecessors along this well trodden path…
It’s not often that one has cause to feel genuine sympathy for football club chairmen but there was a period during the mid-1990s that I really felt for them.
The clubs outside the English Premier League had signed a television broadcast contract with ITV Digital that promised to provide them with an uplift in revenues and a chance to broaden their fan base.
Sadly, the dream wasn’t very long-lasting as viewing figures woefully under-achieved and ITV Digital itself ran out of funds, leaving the clubs fighting the group’s shareholders, Carlton and Granada, for their money.
I was reminded of their plight last week as BT Vision announced a deal that is set to provide English rugby clubs with a big uplift in their revenues as they accepted a broadcast package that will take live English club rugby away from BSkyB and ESPN.
There are all sort of complications affecting the future of the European-wide Heineken Cup competition but essentially the clubs have been seduced by an uplift in short-term revenues to partially ditch Sky.
BT, which is paying £152 million for its rugby rights, is going neck and neck against BSkyB in ramping up its soon-to-be created sports channel, which it hopes will entice new subscribers to its BT Vision television service, thereby also drawing them in to its broadband and telephony services. Not only ITV Digital but also Setanta after it both tried and failed to do a similar thing.
There are a few reasons why BT Vision might not suffer the same fate as its predecessors along this well trodden path.
Firstly, it is part of a massively well capitalised group that can fund sports rights deals on a long-term basis even though it will be highly loss-making in the short-term.
Analysts reckons that its recent investment in Premier League matches, for which it has the rights for three years to 38 games a season, could lose it around £240 million. For sure, that’s a large sum but it pales into insignificance compared to the billions the group pours into extending its fibre broadband coverage.
Secondly, the pay television market in the UK is more developed than it was 15 years ago and a growing number of consumers are prepared to spend money on premium product, with some attracted to packages at a lower price point. There are still 12 million homes in the UK that do not subscribe to pay television services, giving providers a large penetration upside.
In the case of BT, it has a huge prerogative to defend its territory in telephony. Experts reckon of the 12 million households that don’t have pay television services, a majority are BT telephone users, so there is a defensive need to tie in customers with further services for fear of losing them to rivals such as BSkyB or Virgin Media.
BT Vision will struggle to get to a leading position in sports programming – Sky still has rights to Ryder Cup, European Champion’s League, the bulk of Premier League games, Formula 1 and much cricket – but there are reasons to think it is not behaving as crazily as one might think.
And, given the huge revenues and cash flows of its parent company, it is unlikely to end up in the financially stricken position of an ITV Digital or Setanta. Those rugby chairman shouldn’t fear too much just yet.
BT Vision’s general manager of products and propositions Damien Read is on the business models and platforms panel at MediaTel’s Connected Consumer event today. To keep up to date with news from the event, follow #MTConnected.