BT has dealt a significant blow to UK rival BSkyB by outbidding Rupert Murdoch's satellite broadcaster for the exclusive rights to UEFA Champions League and UEFA Europa League soccer coverage for three years starting in 2015.
BT Group plc (NYSE: BT; London: BTA), which entered the sports broadcasting market only this year to bolster its TV-over-broadband lineup, bid almost €1.08 billion (US$1.44 billion) for the exclusive rights. (See BT's Got Balls.)
Currently, Sky and UK terrestrial broadcaster ITV share the much sought-after UEFA Champions League rights, which allow live broadcasting of hundreds of games featuring major teams such as AC Milan, Barcelona, Bayern Munich, Chelsea, Manchester United, Real Madrid, and many others.
Winning the exclusive rights is a major coup for BT and will provide it with major pulling power as it seeks to retain and attract broadband customers: Indeed, BT noted that the rights "are expected to drive additional growth in BT Consumer revenue and profits over the medium-term."
No doubt there will be plenty of questions from investment analysts coming BT's way today as the operator claims that the cost of the deal does not change BT's financial outlook: That must be quite the complicated forecast...
Whatever the explanation and reasoning, you have to admire BT's confidence, its willingness to be aggressive in a highly competitive market, and its commitment to a broadband-based strategy.
In terms of its position in the UK market, BT has clearly decided (rightly, in my view) that the only way to survive in the retail consumer communications market is to build and retain a significant broadband customer base that can drive revenues either through the delivery of BT's own services (such as the sports content) and advertising and through partnerships with third parties that want to ride on a trusted connection with guaranteed service levels. And in outbidding BSkyB, BT has shown significant commitment to its sports service.
Winning these exclusive rights is a big deal for BT in many ways: It has scored a significant goal both in terms of its broadband content strategy and against a fierce rival. But it's early in the game. BT will need to have a long-term strategy in place if this is to make financial sense and have already considered the answers to a few key questions, such as: What is its bidding strategy when negotiations for the European soccer rights for 2018 and beyond begin? What might the impact of widespread 4G LTE availability have on the consumer broadband market? What impact might the success (or lack of it) of British soccer teams in Europe during the next two years have on the potential attraction of such expensive sports content rights?
Those are longer-term implications. The first thing BT will need to consider is the response of BSkyB, which won't back off from a fight. It's very likely that BSkyB will channel the funds it will no longer need for European soccer in the 2015-2018 period into winning even more rights to domestic English Premier League coverage, which is of even greater value in the battle for British eyeballs.
There's no doubt BT's got balls -- but can it protect them from a BSkyB backlash?
— Ray Le Maistre, Editor-in-Chief, Light Reading