As Europe's incumbent telcos suffer declining revenues, they're all desperately looking for new sources of revenue to counter the erosion of voice revenues, the impact of regulatory changes and plain old competition. (See Euronews: Telecom Italia Suffers Sales Slump et al.)
Each has its own strategy. Telefónica SA, for instance, has a dedicated part of the company to focus on new opportunities such as cloud services, machine-to-machine (M2M) and advertising. BT Group plc, meanwhile, appears to have decided to throw the kitchen sink at sports content, especially Premiership soccer coverage.
The British operator signaled its intent to aggressively pursue sports fans in June 2012 when it bid £738 million (US$1.14 billion) to secure the rights to broadcast 38 English Premier League soccer games each season for three years starting in August 2013. Then, earlier this year, it announced plans to launch BT Sport TV, acquired ESPN UK and spent more money buying up the rights to broadcast a host of other sporting content, including European soccer, women's tennis and rugby union. (See BT Buys ESPN's UK, Ireland TV Biz.)
Now it has announced that it will offer its three sports channels -- BT Sport 1, BT Sport 2 and ESPN -- to BT broadband customers, of which there are currently about 6.7 million in the U.K., for free. Those who don't take their broadband from BT will have to pay to access the channels via satellite, online or on their smartphones.
Clearly BT is hoping it will persuade broadband customers currently signed up to its main rivals, including cable operator Virgin Media and TalkTalk, to switch providers (and it's rashly claiming that this will be a "quick and easy" process ...)
But it's BSkyB Ltd. that's really in BT's sights: The pay TV giant has about 4.4 million U.K. broadband customers and is expanding that subscriber base rapidly by offering TV, broadband and phone line packages.
The thing is, BSkyB also has more than 10 million TV customers and is well established as the U.K.'s leading sports broadcaster, with four round-the-clock channels and a popular (and respected) Sky Sports News service.
So taking on BSkyB with a rival sports service is a major gamble for BT, which has clearly decided that investing heavily to compete head on with the established sports content market leader is a wiser way to spend its money than developing services tailored around its core telecoms expertise.
One seasoned industry analyst thinks this is a good move. According to Jonathan Doran, principal analyst at Ovum Ltd., offering the sports channels for free to its broadband customers to counter its toughest rival is "a judicious strategic move which, with substantial TV marketing ready to go live today, should prove a successful ploy for BT." (He does, though, add that BT's TV strategy remains a little "muddled.")
Cesar Bachelet, senior analyst at Analysys Mason, is a bit more cautious, noting that the impact on Sky's TV subscriber base is likely to be limited but that BT might at least win back some of the broadband and fixed voice customers that churned to BSkyB.
Well, yes, it might. But at what cost? BT is not only investing in expensive content but is also lining up a host of expensive "specialist" commentators (some of which, I have to say, are more likely to put viewers off than attract them) and is embarking on a costly marketing campaign that it will need to maintain.
Wouldn't this money be better spent on simply making its core services more reliable? Or, dare I say, investing more in processes and operations that ensure a positive customer experience? That's usually a good way to hang on to customers in the first place.
BT's strategy looks ballsy. It also looks like a massive risk. Investors will be watching like hawks for a return on investment from this strategy, which to me looks ill-fated.
I don't represent the U.K. population, but I am a major (armchair) sports fan living in the U.K. who regards decent domestic broadband as an essential service for modern life. I won't be switching.
— Ray Le Maistre, Editor-in-Chief, Light Reading