[OLD BOY]

An interesting article in the Telegraph regarding the battle between BT and Sky Sports, and the reason for Sky's advertising blitz for subscribers.

http://www.telegraph.co.uk/finance/n...fans-cash.html

Edited

Sky and BT are in their own cup final for football fans’ cash

Sky is trying to sign people up to pay-tv contracts now for one, simple reason: next season Sky Sports will have no live coverage of the Champions League or Europa League

A new battle over the money in football, between BT and Sky, will start officially after FA Cup Final between Arsenal and Aston Villa.

Skirmishes have already begun. Outside Tube stations in London and in shopping centres up and down the country, Sky marketers are working harder than ever to sign up fans to new pay-TV contracts before they realise what is coming next season.

The reason for all this activity, and Sky’s attempts to lock its customers into new contracts now, is simple. Next season Sky Sports will have no live coverage of the Champions League or Europa League.

From a business point of view, this is not news. BT agreed in November 2013 to pay £897m to secure three years of exclusive live broadcast rights to both European club competitions. The raid wiped more than a tenth off Sky share price in a day. What is important is that most Sky Sports subscribers did not notice at the time, so the real world commercial impact is yet to be felt. Some of those who pay £35 a month and upwards for Sky Sports will be surprised to learn they will no longer be able to watch the Premier League’s top teams in Europe’s top competition. Some might even be a bit annoyed.

BT is counting on it. It has invested heavily not only in the Uefa screening rights but also in people and technology designed to fully exploit them. The big push will begin a week on Tuesday when the company will host a launch of “the next exciting chapter in the BT Sport story” at its television studios in the Olympic Park.

We know that new technology will be at the centre of this pitch to consumers. BT will seek to tempt Sky subscribers by unveiling a new set-top box capable of delivering ultra-high-definition pictures, to those few who have so far invested in a screen that is capable of showing them.

What will matter most to the market and to Sky, however, is how much the new chapter of BT Sport is going to cost people. The steep price of the Uefa rights means that BT will be unable to repeat the tactic it used, when it launched its Premier League coverage, of offering its channels free to broadband subscribers. Executives have said since it signed the rights deal that it will have to introduce charges to help cover its European football costs.

BT Sport is likely, nevertheless, to remain significantly cheaper than Sky Sports, and John Petter, the head of BT’s consumer business, has hinted as such. Petter is also certain to redouble efforts in the pubs and clubs market, a highly profitable segment for Sky. Live Champions League clashes are vital to attracting midweek trade through the winter months for many landlords. Some might, then, question the value they get from a Sky subscription, even though they will continue to show the majority of Premier League matches. The questions are then around how BT will package European football for consumers. Will it be part of a new premium tier of BT Sport with its own channel? Will there be discounts for those who subscribe to superfast rather than standard broadband? These are tactical secrets BT is guarding closely until the launch in an effort to ambush Sky once again.

It is another example of how, in the past three years or so, the dominant pay-TV operator — where the Murdoch gene for commercial aggression remains strong despite the lower family profile — has been increasingly forced into defensive mode. A company that is used to creating markets, being the first with new technology and taking market share from rivals, is now under sustained attack.

But Sky has shown that it can defend just as aggressively as it can attack. It has responded to BT’s offer of free Premier League football by giving away broadband. And while BT is betting on ultra-HD, Sky has accelerated its own new set-top box, also expected to debut this summer. It will emphasise connectivity and the ability to access programmes via multiple devices away from the living room rather than picture quality, at least to start with.

That plan makes perfect sense, given trends in viewer behaviour and the success of Sky’s mobile apps. Yet it highlights the fundamental challenge Sky must face in the next few years from rivals, not only BT, but also Liberty Global, the European empire of America’s cable king John Malone, which includes Virgin Media.

They own internet infrastructure, whereas Sky is merely a tenant. As more programming is delivered over the internet and viewers expect to be able to access it anywhere whenever they want, owning the wires and mobile masts will become a greater and greater advantage compared with satellite broadcasting.

Big, global bets are being made on that basis; witness Malone’s $56bn takeover of Time Warner Cable this week and his public courtship of Vodafone in Europe. The 12pc stake in BT that Deutsche will take as a result of the former’s acquisition of EE can be viewed as another bet on the value of large-scale network ownership, albeit a bet with more Teutonic caution built in.

If those bets come off, then Sky in its current form could have a problem. It is reshaping itself in two main ways that may help it compete long term. First, it is building scale of its own as it integrates Sky Deutschland and Sky Italia. By all accounts the £200m annual savings executives have predicted from the takeovers are underestimated. Secondly, the success of Now TV, the company’s internet pay-TV service, not only defends against Netflix, but could also signal a long-term option for the company. Although Now TV is much cheaper than a satellite subscription, recruiting customers is quicker and cheaper for Sky, not least because it does not involve sending out engineers to fix up dishes. A future Sky focused on Now TV might not be able to charge pay-TV customers as much, but it could have many millions more of them in more countries.

Sky is surely thinking about such possibilities, though the more pressing concern is obviously this summer’s clash with BT.

For pay-TV subscribers, if not those who enjoyed watching European football free on ITV, the intensified competition should mean some good deals are offered. They just have to wait for BT to make its move.