BT Vision are going for broke in an effort to move up from their current third place in the UK televised sports market. They are discounting their offer to customers even though Sky have increased their charges for wholesaling their top sports channels.
BT Vision are going for broke in an effort to move up from their current third place in the UK televised sports market. They are discounting their offer to customers even though Sky have increased their charges for wholesaling their top sports channels.
The current position in the market is that Sky is close to its 2010 target of 10 million subscribers, compared with Virgin Media’s 3.7m and BT Vision’s 463,000. BT faces the challenge of stemming the loss of broadband customers to rivals such as BSkyB and Virgin Media while attracting new customers. BSkyB and Virgin offer broadband, often as free add on to a television contract.
What is going on here is what those in the know like to call a triple play fight. This refers to what economists call a bundled good: a bundle of pay-television, broadband and fixed-line telephone service all provided by the same company. What BT Vision are doing is unbundling Sky’s pay-TV business and selling it under their own banner. In a sense this is pay back time as Sky wholesaled its Openreach broadband service in 2005.
BT’s entry level product is estimated to be 17 per cent cheaper than that of Sky. What is on offer does not inlude Sky 1 which is regarded as a premier and innovative entertainment channel. The offer also only covers Sky Sports 1 and 2 which is of less use for those of us interested in minority sports like (ice) hockey.
BSkyB turned up the pressure of its rival by charging it more for the channels. BT will now have to pay £3 a month extra for each new customer, cutting the profit margin on its discounted price. Nevertheless, BT thought it could tap into a market of 4 million people without premium sports packages.
I am one of those people. The local council bans satellite dishes in conservation areas. The cabling in the street is no longer accessible so Virgin Media is not a solution. One neighbour has erected what looks like a booster station for RTL in his back garden, but I would prefer to use the space for growing something other than a satellite dish. But although I am a BT broadband customer, they have not tried to sell me their offer which suggests they need to get their marketing act together. I would give BT high marks for solidity and reliability, which is why I am happy to pay over the odds for their service, but sometimes I think they have never thrown off the security blanket of being a dominant utility even after all these years.
Sky have moved quickly to put their tanks on BT’s lawn. However, if BT were able to build enough scale in their pay-TV business, they might one day be able to bid for the Premier League rights. That would be a real challenge to Sky. But somehow I don’t see it happening.
[The writer is an occasional commentator on football and the economy for Sky News and Sky Sports News].