Can Sky bounce back from BT defeat?

 
Bayern Munich lift the Champions League trophy at Wembley Stadium on May 25 2013

What is really striking about UEFA's auction of Champions League and Europa League television rights is that there was only one round of bidding.

What does that mean?

Well that BT's £900m bid was miles above that of British Sky Broadcasting and ITV.

So has BT paid too much? Or did BSkyB break the habits of its entire existence and foolishly bid too little?

Well, the newish chief executive of BT, Gavin Patterson, told me that his company's financial model of what the broadcast rights are worth would have allowed him to bid more (though not much more).

Meanwhile, a senior BSkyB source said that his company simply could not justify shelling out the £300m per year offered by BT.

Are these two conflicting statements reconcilable, or is one of them trying to sell me a pup?

Start Quote

The battle for supremacy in the broadband market just got vicious”

End Quote

The answer is that there is probably a bit of both going on.

The rights are worth more to BT than to BSkyB, because of its perception that being able to offer sport broadcasts can differentiate its broadband service from those of the big challengers - Virgin, TalkTalk as well as Sky - and fulfil Patterson's ambition of reversing years of declining revenues at BT.

Meanwhile, the thrust of all recent investment at BSkyB under Jeremy Darroch is to make its television service about much more than sport.

Or to put it another way, Darroch believes there are more rewarding ways for his company to deploy £300m a year of cash.

So for example BSkyB is already spending more than £500m a year on creating what it calls "original British programmes" - series such as the Tunnel, Dracula and Strike Back - with the published aim of increasing that to £600m by 2015.

'Retaliation'
BT sport presenters

I am told that having lost European football, BSkyB is likely to spend even more on drama - which, to state the obvious, will increase BSkyB's competitive threat to ITV and to my employer.

BSkyB also points out that European football represents only around 3% of viewing on its channels, compared with around 18% for the Premier League.

So the harm to BSkyB of losing the contest is certainly not lethal.

But it does not mean that the defeat is trivial.

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The history of BSkyB says it will not writhe around on the park in agony”

End Quote

First of all there is the difficult-to-quantify dent in how customers, investors and employees see a a business like BSkyB when its 100% winning record in a particular activity ends: BSkyB has never lost a sports auction quite as important as this one.

Second there are risks for BSkyB in trying to become a genuinely "broad" broadcaster. Creating compelling drama and side-splitting comedies that people actually want to watch is harder than luring sports fans to football, cricket or golf.

Third, and most important, the battle for supremacy in the broadband market just got vicious.

BT is number one in broadband; BSkyB wants to be number one and just got kicked in its most sensitive organ.

The history of BSkyB says it will not writhe around on the park in agony, and will take little time trying to find an effective way to retaliate.

The battle between BT and BSkyB just became very interesting.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    -1

    Comment number 774.

    Currlylarrymoe
    Yes, there is a lot that may be sick with the BBC. But then, what did the Romans ever do for Britain?

  • rate this
    0

    Comment number 773.

    Who cares its just a stupid game of football, as long as it stays off BBC and out of my pub that's all I care.

  • rate this
    0

    Comment number 772.

    @767JohnM - Spot on! Obnoxious Liberals. Diversity about everything except the one thing that matters, the brain/mind/thoughts. Seville is only the tip of a huge iceberg of perverts. We'll never get the whole truth. Sick, very sick. Gee, what's not to like about the bbc?

  • rate this
    -1

    Comment number 771.

    JohnM.
    Agree with the waste at the Beeb. But at £145 a year still pretty good value versus what an annual Sky/Virgin/BT subscription may be. And none of those are that great at customer service

  • rate this
    0

    Comment number 770.

    A large amount of champions league games are of very little interest to most football fans. I know when my pub is busiest.

  • rate this
    0

    Comment number 769.

    Back in the early eighties BT offered to cable up every house in the country if they where allowed to sell services. The government said no to protect the new cable companies.
    20 years later we have one Cable company with 10% UK coverage, BT, still the only one with wire to every house, finally rolling out fibre and a single satilite TV company trying to be an ISP.
    Doesn't fill you with pride.

  • rate this
    0

    Comment number 768.

    Matthew. Do you really think Sky will reduce their prices? And you won't be paying even more to watch what you have been until now for even more? Yes, Sky may have stolen sport from the masses but BT aren't planning to give it back.

  • rate this
    +1

    Comment number 767.

    107.anna_chipie

    "I really don't know why people complain about a licence fee, currently £145 a year".

    No? Speak for yourself.

    I know exactly why I am complaining about it:

    - They over-pay newsreaders & 'talent';
    - They bombard us with liberal-left nonsense constantly;
    - They ignored Saville & others;
    - They award their executives huge salaries & golden handshakes.

    Clearer now?

  • rate this
    -1

    Comment number 766.

    I am very happy with this outcome. Sky stole many sports from the masses with their bidding monopoly over last 15-20 years. Now it has competition. Contrary to some other commentators I only see this as a good thing.
    So now as a sky subscriber you get less for your subscription fee. Im sure you are asking sky to reduce the price?...

  • rate this
    -1

    Comment number 765.

    Money, money, money. Why should we mere footie fans be surprised? I guess if we want to see the sport we were bought up on then we have to go to those streaming/download services as Matt956 points out.

  • rate this
    -1

    Comment number 764.

    762. John. I was being a bit devilish mate! You gotta realise that money rules the world for big companies and they need to show confidence by shelling out big to compete! Like a bully saying " I am bigger than you , so stand down son" Sorry John, but if you had buckets of money? Where would you spend it?

  • rate this
    0

    Comment number 763.

    Although they have also stolen the rights to MotoGP I will not be subscribing to subsidise 2 football channels

  • rate this
    +1

    Comment number 762.

    760.Bernard McCarthy "Competing in the world economy with bravado and confidence!"

    Bernard, Can you please give us the address of the planet on which you live?

  • rate this
    +1

    Comment number 761.

    So now if you want to to see your country play (albeit UEFA is about clubs, not nations, but teams still get national bias), then you have to pay BT as well as Murdoch?

    Oh and.. nice.. an incerasingly rare HYS that's open longer than 4 hours. Freedom of speech is clearly not to be trusted with members of the public.

  • rate this
    0

    Comment number 760.

    Ah.Capitalism! It is mysterious to us all!

    We were all up at arms at Energy companies being all powerful and taking us for a ride? Now we have BT. How did they get so rich behind our backs? Simple! They own the infrastructure and can charge what they want! Good on them I say! A British business doing what needs to be done! Competing in the world economy with bravado and confidence!

  • rate this
    +1

    Comment number 759.

    How much money is BT getting from the Eu to roll out broadband?

  • rate this
    0

    Comment number 758.

    Are the political powers that be going to "Fleece" the public once again in the name of letting the market get it right, only those with disposable income, also employment will be able to afford a TV/cable based information system and the BBC will be left to wither on the vine of a lack of cash or distribution due to the housing boom, already housing is being built with only BT or Sky for TV.

  • rate this
    -1

    Comment number 757.

    I so looked forward to watching the best of football in Europe what a travesty. I personally think the Champions and Europa tournament has been brill and will be sorely missed. I think BT has bought good and are starting to raise a few eyebrows nice to see abit of competition with the broadcasters. What's going on with virgin? of whom I am a customer.

  • rate this
    0

    Comment number 756.

    Almost everyone loses here.
    Consumers lose: those that want to watch all content have to pay twice, BT customers will foot the bill even if they don't want to watch.
    Sky lose: They lost the rights
    BT lose: Reading comments here most people won't pay 2 subs. Unless there's a big English club in the CL no-one will be interested. PPV will fail.
    The only winners are illegal streaming/download services

  • rate this
    -1

    Comment number 755.

    BTs customer service is rubbish. I subscribe to Sky sports but if all football went to BT I would sooner cut off both my hands than pay them a penny.

 

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