Football rights gives BT Vision flexibility but this flexibility is restricted

David Hellier, deputy editor at City AM, wonders how bold BT Vision will be following the recent football rights deal when it comes to taking subscribers away from BSkyB and Virgin Media…

BT Vision’s surprising capture of the rights to 38 live Premier League matches from the beginning of the season after next is described as “the largest thing we have done in television to date” by the group’s chief executive Marc Watson.

But to what extent will it help the platform take subscribers away from its larger rivals BSkyB and Virgin Media?

Building a pay television platform in the UK, as others have found, is a hopeless task without an offering of top quality live football. Whereas films and general entertainment, such as BSkyB’s Sky Atlantic channel, enhance and help to maintain a subscriber base, the biggest driver of pay television has always been live sport and football in particular, which partly explains the price inflation of the recent rights deal.

BSkyB has always been the dominant force in sports programming and others have only been able to chip away at the fringes. ITV Digital’s foray into live sports rights was a disaster, as was Setanta’s. The Irish television operator ended up paying too high a price for the rights and in the end could not fulfill the deal.

ESPN, which has held the two small packages of football for the life of the current contract has made a better fist of it but has in no way threatened BSkyB’s place in the market-place.

In many ways, BT Vision, which is a platform operator as well as a rights holder, poses more of a competitive threat to BSkyB. The big three platform operators, BSkyB, Virgin Media and BT Vision, are all after the holy grail of “triple play”, which means television, broadband and telephone calls.

Bank of America Merrill Lynch – brokers to BSkyB, by the way – reckons that “the combination of fibre plus BT Vision 2.0 (the new style BT Vision) plus YouView plus extras sports rights makes BT a very credible alternative for most families”.

BT Vision is already gaining subscribers at a faster rate than its rivals, perhaps attracted by its very reasonable pricing (£4 a month) at the bottom end of its television packages. “We offer the cheapest way of getting into next generation television,” says Watson.

The football rights victory now gives BT Vision additional flexibility but this flexibility is restricted.

It would be to BT’s advantage, for example, to withhold the 38 matches from its rivals. But in reality this would prove too expensive, since it paid out £738 million for the rights and would nowhere near be able to recoup that cost just from its own subscribers even if the numbers go up substantially. In any case, Ofcom would almost certainly not allow it.

BT does have flexibility on its own pricing and here it depends how boldly it treads in the hope of taking subscribers away from its two larger rivals. “One option might be to offer a year’s free trial, which coupled with access to a subset of the nation’s games might be enough to unhook Sky or Virgin and to migrate customers to BT Vision,” says Mike Kennedy, partner at Restoration Partners.

Some doubt BT Vision, part of BT, will be allowed to be as bold as it needs to be to really progress its customer base. But at least it now has a firmer base on which to build.