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SBD Global/June 18, 2012/Media

BT 'Gambles' On EPL TV Deal While Fans Could Pay For It

BSkyB "scooped the lion’s share of the rights" to broadcast live top-flight English football last week, according to Simon Duke of the SUNDAY TIMES. The competition "was fierce," forcing Sky to "dig deep." BT "sprang a big surprise, elbowing ESPN out of second place" in a bid to "secure a footing in Britain's lucrative pay-television market." BT paid £740M ($1.2B) in hopes its Premier League move "will bolster its fibre-optic broadband business, "which it is pushing out to two-thirds of British homes at a cost of £2.5B ($3.9B). This will "step up its battle" with Sky and Virgin Media "for control of Britain’s living rooms." BT Vision CEO Marc Watson said, “Football will drive our fibre business and give us a real opportunity to win new subscribers and sell more products to those customers." Sky shareholders were "counting the cost of the bitterly contested auction" as "Rolex dealers and football agents rejoiced. "Sky, having built an empire worth £11B ($17.2B) on live football, "could not afford to be frozen out." BT is "currently nowhere in pay-TV." Despite spending an estimated £1B on its BT Vision arm, just 707,000 BT customers use the online TV offering. Youview, an online TV service backed by BT and Britain’s main broadcasters, is 18 months behind schedule "after technical setbacks." Competing with Sky "is a huge gamble for BT." History "is littered with the wreckage of companies that tried to ambush Sky" (SUNDAY TIMES, 6/17). The London GUARDIAN opined that the arrival of a challenger to Sky "is to be welcomed, because competition will keep TV and broadband prices keen." But BT's move into sports broadcasting "will stick in the craw of the millions of households still waiting for a decent broadband connection." Ultimately, BT has chosen to "invest its money where the competition is." It is "laying fibre in Virgin Media areas," and "investing in TV in order to keep its own broadband customers from jumping ship to Sky" (GUARDIAN, 6/16). The FINANCIAL TIMES' Roger Blitz reported that Watson said, “At the right price we would have taken more. We took Sky’s games. We have got great quality games. We were very happy with how things went.” Sky’s move "shows how its business model is reliant on live football." Birkbeck Sport Business Centre Dir Sean Hamil said, “They are absolutely dependent on this. If they didn’t have live Premier League football, they would be in serious difficulty" (FINANCIAL TIMES, 6/15).

NOT EVERYONE WINS: Meanwhile, ADVANCED TELEVISIONS's Chris Forrester wrote that investment banker Goldman Sachs already believes Virgin Media "will be hurt" by the Sky/BT TV deal. Goldman Sachs downgraded Virgin Media from a "buy" rating to "neutral." The company said, “We believe BT’s decision to invest in high quality U.K. football rights could lower product differentiation between BT and VMED and also increases the risk of a loss of price rationality in the U.K. triple play market" (ADVANCEDTELEVISION.com, 6/15).

FANS PAY PRICE: In London, Patrick Collins wrote that when the new TV deal was announced, "football's cottage industries lifted grateful glasses." From "cosmetic surgeons and night club owners to the champagne houses of Bollinger and Pol Roger, to the frock shops of Armani and Versace, to the estate agents of rural Cheshire," they all realised just what this meant -- "business as usual." And who is paying the price "for this orgy of unreasoning largesse?" Sky has enjoyed "massive profits through their association with football." Those profits "will grow, since prices will rise to cover their costs." And, in a time of recession, this incredible windfall "could be used by the clubs to slash seat prices to bring them within the reach of lower income supporters." I "doubt this has even crossed their minds" (DAILY MAIL, 6/16). Also in London, Danny Kelly asked "why did the announcement of the bulging new bag of money cause not the popping of champagne corks, but a sinking feeling in the stomach?" Each successive football contract "has further sundered the traditional relationship between the game and its core support, has driven an ever-bigger wedge between what we had, a community-based passion, and what we have, a corporate entertainment." Football's "unstoppable economic boom" has had "obvious beneficiaries" including the players and their agents. For supporters, the experience "has been very different." For all the excitement they still get from the game, they "find themselves in the grip of an awful pincer movement." Emotionally, they are "further removed from things they originally loved about the sport" – the feeling of "being part of something organic and real," the knowledge that the players were "slightly better paid versions of themselves." The "other arm of the pincers is financial." Football was once "great and cheap to watch." It is still great, but now "you pay through every orifice to enjoy it" (GUARDIAN, 6/16).
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