The triple-play rivals will also soon be going head to head in the mobile arena.
As BT and Sky get ready to add mobile services to their existing triple-play mix of fixed voice, Internet and TV services, the two UK rivals have now spent record amounts on securing rights to broadcast live Premier League football matches to boost their pay-TV content offerings.
With Sky agreeing to pay £4.2 billion to show 126 live English Premier League matches a season from 2016 to 2019 and BT spending £960 million to show 42 games a season, the companies will spend a combined £5.14 billion over three years.
This is well above the £4 billion analysts had expected and above the £3 billion paid for the current contract. Although there are now concerns, particularly for Sky, over how they will cover the costs of the football rights as part of current subscription plans, the general consensus is that the two companies had little choice but to ensure they secured the necessary broadcasting rights to further their ambitions.
“The massive increase in Sky’s investment indicated the pay TV platform’s determination to retain leadership of the premium sports space in the UK – but seemingly also a strong, but ultimately unsuccessful, challenge by BT to gain an upper hand,” commented analyst Tim Westcott from IHS Technology.
Jefferies analysts noted that Sky is well positioned in the developing UK quad-play arena, with loyal customers and a differentiated product, but said: “This is a challenging outcome to explain.”
“At last week’s results, Sky again stressed the broad appeal of its content, arguing that pricing power is not dictated by football. Actual bidding tactics don’t seem consistent,” Jefferies noted. “Sky appears to have admitted that a dominance in [Premier League] rights is pivotal to its UK business. Investors may also question whether it was necessary to pay so much when neither BT (nor anyone else) seems to have been bidding ambitiously for more than two packages.”
Sky and BT will also soon be going head to head in the mobile business area as so-called quad-play providers: BT is in the process of buying EE for £12.5 billion, while Sky has reached a mobile virtual network operator (MVNO) agreement with Telefonica to use the O2 UK network.
