* BT to offer new sports channels free over broadband
* Former telecom company takes a cue from Murdoch's BSkyB
* Sports rights holders benefit as value of TV deals soars
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 move, announced 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 telecoms giant's commercial challenge could reshape
the industry and slash profits.
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 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 service.
BSkyB was dismissive of BT's venture into sport, pointing
out that it still had rights to more Premier League matches, as
well as Formula One motor racing and English test cricket.
"BT Sport is not 'free' and customers are smart enough to
realise they'll pay for it through more expensive broadband and
phone services," said Stephen van Rooyen, MD of Sky's Sales and
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 pricing details at the Olympic Park in London where it will
base its new sports channels which will go live in August.
Gavin Patterson, head of BT Retail, said an overall
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 British presenters Jake Humphrey and Clare Balding,
while former England striker Michael Owen and Manchester United
defender Rio Ferdinand will be part of its soccer coverage.
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.
"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.