Sale of BT Sport is a bellwether of radical change for TV sport and BT's direction

Martyn Warwick
By Martyn Warwick

May 4, 2021

via Flickr © Kevin Gong (CC BY 2.0)

via Flickr © Kevin Gong (CC BY 2.0)

  • Broadcasting rights cost too much and bids to renew are on the decline
  • Online streaming services could be the future. That's why Amazon, DAZN and Disney want in.
  • BT must decide whether to keep a toe in the water or leave the beach
  • Focus is on deployment of full fibre network and 5G. It's expensive and has to be paid for somehow

BT, the powerful incumbent former-monopoly UK telco says its semi-detached fixed-line telecoms division, Openreach, will "build like fury" to deploy 'superfast' full-fibre Internet connectivity across the entire UK by 2027. The project will cost £12.5 billion while EE's 5G plans will also soak up enormous investments. The BT Group will have to trim its sails and dispose of some hitherto prized assets to raise part of the cash needed to pay for its big plans. One of the first to go on sale is a stake in, or perhaps the entirety of BT Sport, the expensive and extensive portfolio of pay television channels provided by BT's Consumer division.

BT Sport provides live coverage of a myriad of events, including Premiership Rugby Union, the Europa League, the German Bundesliga, Ligue 1 of France and the English FA Cup which is one of the few remaining major free-to-air football extravaganzas. However, the jewel in BT's crown is coverage of Premier League and Champions League football. They are on offer to prospective purchasers as partial-ownership deal with BT, a joint venture, a partnership or even the opportunity to buy BT Sport in its entirety.

Among likely bidders for slices of the games pies are the sports streaming service Dazn, Amazon Prime, ITV, the independent British free-to-air network that was launched in 1955 as a competitor to the monopoly licence-fee-financed BBC television service, and Walt Disney. BT Group has retained the services of the investment bank Lazard onto look at "strategic options" for the sale.

Years ago, BT, casting around to define a new role for itself in a rapidly changing telecoms environment and ecosystem, lighted on the notion of transforming itself from its long-established incarnation as a sluggish and unloved network operator into that of a modern, leading edge content creator, provider and distributor. For a year or so there even were heady hints and suggestions that BT would build its own studios and set itself up to compete with the world's big film and TV studios. 

Unsurprisingly, reality stuck, the idea was abandoned and the focus moved on to investing massive sums in the rights to sporting competitions and events that would propel BT Sport into head-to-head rivalry with Rupert Murdoch's Sky satellite TV sports channels. BT Sport was launched in 2012 but the costs of obtaining television rights spiralled as fierce bidding wars with Sky upped the ante to almost unsustainable levels. As subscriber fees rose a truce was established as BT Sport and Sky came to an arrangement, (actually imposed on them by the UK consumer regulator), to permit fans to view Premier League games without being forced to pay for two separate service bundles from two rival providers.

It was just as well, the club supporters were getting restless and ansty - just as they are now over the club owner super greedfest that was the recent European Super League farrago. One wonders if BT's decision to divest was further spurred by the blazing anger of football fans and the probability that the costs of securing rights to broadcast matches in the future will be even more expensive than they are now, or perhaps the grass roots game will be massively devalued should another attempt to to form some kind of a super-league be successful. Whatever the answer, this is clearly a watershed moment.

BT Group goes back to the future with an "exit media" strategy

As watching "linear" TV continues globally to decline in favour of catch-up, time-shifted, on-demand and streaming services, the ground is shifting beneath BT's feet. The telco has to decide whether or not to retain some sports broadcasting rights or to sell them off completely and concentrate solely on becoming the biggest and best provider of fibre broadband infrastructure and 5G services (via EE) and making money via a sort of "back to the future" strategy.

When the sale of BT Sport was announced, the BT Group share price rose immediately by 3 per cent, so investors and The City like the idea. However, it remains to be seen if the stock boost will be permanent or just a short-term blip. BT struggled for years with a stubbornly low share price and also suffered a series of stock downgrades by analysts and financial institutions. That said, for the first time in more than five years JP  Morgan, impressed by Openreach's sudden burst of frenzied trench-digging virility, actually went so far recently as to upgrade the telcos share price outlook.

In the end, it's all about money, of course. Gaining and holding football broadcasting rights is expensive and estimates are that they cost BT Sport about £800 million a year. That's a lot of money to claw back from subscribers before the company can even begin to make a profit. The frequent prices rises levied on subscribers as BT Sport has tried to increase its value have not been popular.

Broadcast rights are awarded to the highest bidder once every three years and in 2015, at the height of the bidding frenzy the Premier League football rights went for the enormous sum of £5.1 billion. The last auction was in 2018 when £4.5 billion was raised. At the time the fall was regarded as either an aberration that would be corrected at the next cycle or as a sign that with bidders no longer willing to pay such vast sums, the big-money high water mark was past. However, a few months ago BT Sport paid £400 million (per season!) to renew its exclusive rights to televise European football in Britain for a further three years. It might well be regretting that commitment now.

Few would be willing to wager, with hyperscale streaming companies waiting impatiently in the wings, that the TV sports landscape will not be changed out of all recognition by 2025. As that deathless TV footy pundit Ron Manager reminds us all every week, just before falling off his chair, football is a game of two halves and, in the end, it's all about goals in the back of the net, (and money in the pockets of investors).

Twenty years ago, ITV introduced its Sport Channel in an attempt to cash in on the nascent demand for a digital content that included a pay-per-view option. It lasted barely 15 months having massively overbid for match access rights. It paid five times more than any other company had ever done before and the cost was unsustainable. Low audience figures and piracy added to its woes and the whole thing fell apart in May 2002, dragging the ITV Digital channel down with it.

With an eye to that debacle BT Sport will be be looking over its shoulder at streaming companies and worrying about getting lumbered with expensive access deals that could become albatrosses around the the BT Group's corporate neck.

There is another scenario though, and one that would certainly appeal to fans. ITV wants to get back into the football scene and would like to buy BT Sport outright or, failing that, enter into a partnership deal with it in a subscription channel. Should that happen it is probable there would be a more free-to-air content available on a mainstream terrestrial channel than is now the case or has been for many years. Currently, a few post-game highlights programmes and the occasional big national event such as the FA Cup Final are just about all that are left visible for those many households unable to pay £50 or more a month for a premium sports package.

What the BT Group eventually decides will reflect the coming realignment of coverage by online streaming services as the old model either changes to meet the new challenges or withers on the vine. The now defunct proposal to form the European Super League where massively wealthy clubs would have played each other eternally in an endless and pointless non-competition devoid of jeopardy, any possible relegation for poor performance or any new clubs being promoted to it. 

What's more, "local" English matches could have, would have, been played in Shanghai or Dubai as easily as in Manchester of Liverpool. That vision of supporter hell may have faded for now but may well head its ugly rear again in a new form in due course. Greed will see to that. After all, billionaire absentee club owners devised the Super League to make themselves even more money by streaming online pay-per-view games out to billions of spectators around the world.

Even I, someone whose depth of disinterest in football is deeper than the Marianas Trench and cannot ever be plumbed, can appreciate what a grubby, nasty and cynical betrayal the Super League would have been. The trouble is that the notion is too potentially lucrative to lay down and die. Like the hydra, when one of it's nine heads is lopped of it can grow two in its place. Sound familiar?

Email Newsletters

Sign up to receive TelecomTV's top news and videos, plus exclusive subscriber-only content direct to your inbox.