By Keith Weir and Kate Holton
LONDON May 9 BT turned the British
pay-TV market on its head on Thursday by offering free English
Premier league soccer matches to its broadband customers in a
direct challenge to Rupert Murdoch's BSkyB.
The news, released at a high-profile launch for the BT Sport
TV channels at the Olympic Park in London, sent shares in BT and
its rivals tumbling in a sign of how nervous investors are that
the telecom giant could drive aggressive sector restructuring.
Shares in BSkyB fell 6.4 percent, smaller broadband provider
TalkTalk dropped 12 percent while BT was down 2.2
percent, wiping a collective 1.6 billion pounds ($2.5
billion)off the value of those three companies in under two
"UK sports fans have had a rough deal for too long," BT
Chief Executive Ian Livingston said. "Many have been priced out
of the market but we will change this by giving away BT Sport
for free with our broadband."
Sky has dominated the British pay-TV market in the last
decade, luring customers with its high-quality sports and movie
programming and expanding into BT's territory to offer broadband
and telephone services to its 10.7 million households.
BT, a former state-owned telecom monopoly, fought back by
developing an online TV service, alongside its traditional
telecom services, that was designed to persuade customers they
should upgrade to its superfast broadband to watch the new TV
While the BT Vision service has taken time to get off the
ground - so far it has only around 770,000 customers - analysts
believe the acquisition of sports content will make the offer
much more appealing and pose a real threat to BSkyB.
BT said it would offer its new channels to any broadband
customer for free, while non-BT customers could pay 15 pounds
BSkyB, BT and Virgin Media, which is about to be
taken over by cable group Liberty Global, are all
fighting to offer customers so-called triple play - a
combination of broadband, TV and voice services.
"It's all about ...reaching the consumer with as many
products as possible," Panmure analyst Alex DeGroote said.
"If you're an investor in Sky the key point is that it's a
risk to the business and it's a risk to the numbers. Almost
inevitably they will have to cut their own subscriptions and
spend more on marketing."
BT, which is spending 246 million pounds a year on the live
UK rights to 38 English Premier League soccer matches, released
its long-awaited pricing details at the Olympic Park in London
where it will base its new sports operations.
Gavin Patterson, head of BT Retail, said an investment of
around 1 billion pounds over three years should boost revenues
and profit in the "medium term".
BT has signed up familiar faces from terrestrial TV in the
form of well-known British presenters Jake Humphrey and Clare
Balding, while former England striker Michael Owen and
Manchester United defender Rio Ferdinand will be part of its
It is the latest in a long line of companies which have
tried to break BSkyB's two-decade dominance of the sports rights
market in Britain. Ireland's Setanta and Disney-owned ESPN both
had Premier League rights but quit the market after failing to
Patterson said BT Sport would have higher profile Premier
League matches than predecessors and a more complete offering
after buying rights to English Premiership rugby and acquiring
ESPN's UK business.
"We have the financial muscle. Both previous owners of the
second set of Premier League rights were dependent on Sky, they
were a channel only business, we're not," he told reporters.
BSkyB has retained the rights to 116 live Premier League
matches, so a fight between it and BT is likely to be tough.
"Both BT and Sky share prices are getting hit relatively
hard, particularly Sky, which tells you that the market is
somewhat spooked by the slightly aggressive tone," Panmure's
"Clearly the concern would be that you have a pretty
well-capitalized, big new player in sports programming that
could use competitive pricing to undercut Sky."
BT will offer three sports channels, including one branded
ESPN. The channels will launch at the start of August ahead of
the August 17 Premier League kickoff.
"We've got a very strong balance sheet and we generate very
good cash flows and this is an investment we can afford to make
without betting the farm," Patterson said.
BT's entry has driven up the value of sports rights, with
the Premier League's domestic TV deal now worth more than a
billion pounds per season.