Market Insight

BT grabs ESPN for UK sports channel boost

February 25, 2013

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit

Want to learn more?
Have an expert contact you.

BT Group is to acquire ESPN's UK and Ireland TV channels business, adding the US company's UK rights to its own channel BT Sport, due to launch this summer.

ESPN, majority-owned by the Walt Disney Co, said it would separately wind down ESPN Classic throughout the EMEA region and ESPN America outside the UK. The scaling down of its European operations follows the sale of its 50 per cent stake in ESPN Star Sports in Asia to News Corporation last year.

Once the deal is complete on 31 July, BT will take over ESPN's live rights to the FA Cup, the Scottish Premier League, the UEFA Europa League, and the Bundesliga. In addition to these football rights, BT will also take over NCAA College Basketball, NCAA College Football and NASCAR. At least one ESPN-branded channel will form part of the BT Sport package.

No details of the financial value of the transaction were revealed. BT has already invested heavily in its planned venture, acquiring rights to the English Premier League and rugby union premiership and WTA women's tennis. In October last year, BT bought rights to another four football leagues previously held by ESPN from rights broker MP & Silva (see our commentary, BT adds to rights stockpile for sport channel, 29 October 2012).

ESPN will continue to own and operate its existing digital media businesses, including the ESPN.co.uk website, ESPNcricinfo, ESPNFC, ESPNscrum, and broadband streaming service ESPN Player.

ESPN, entrenched as TV sport market leader in the US, has been unable to build a satisfactory bridgehead in the international market over the years. Its investment in pan-European channel Screensport in 1989 was short-lived and in 2007 it acquired the US sports network NASN, re-branding it as ESPN America. In the same year ESPN bought rights from the failed Setanta Sports UK - notably its Premier League rights - and converted this opportunistic purchase into a UK and Ireland premium channel, launched in 2009.

ESPN was distributed on all platforms in the UK and Ireland - as an option on the Sky DTH platform, via DTT on BT Vision and Top Up TV, and bundled with the top tier XL package on Virgin Media. IHS Screen Digest estimates that it was available in 4.8m households at the end of 2012. Accounts for ESPN (Europe, Middle East, Africa) Ltd filed at Companies House in the UK reveal that sales were £150.7m in the year to 31 October 2011. This was slightly lower than the £153m reported the year before, but operating losses rocketed to £64.5m compared to £37m the year before.

While these figures suggest the business was already struggling to make a profit, last year's auctions for the rights to the Bundesliga in Germany and the Premier League in the UK appear to have made up ESPN's mind to cut the losses on its European pay TV venture. While ESPN is understood to have participated in both auctions, Sky Deutschland in Germany and BSkyB and BT in the UK put money on the table that seems to have been way more than ESPN was prepared to stake. (see Sky Deutschland splashes out on new Bundesliga deal (17 April 2012) and BT and BSkyB spark 70 per cent hike in Premier League rights (14 June 2012).

ESPN now becomes the latest in a series of ventures which have been unable to mount a sustainable challenge to BSkyB in the UK pay TV market. Inevitably, questions will be asked about whether BT is doomed to go the same way as ITV Digital, Setanta Sport UK and now ESPN UK. However, BT is a very different entity to these players - certainly to the private equity-backed Setanta Sport and ITV Digital, backed by struggling free-to-air broadcasters. BT's market capitalisation is £22bn, much larger than BSkyB's £13.4bn. As the incumbent telecoms company, BT is interested in pay TV not as a business in its own right but as an add-on to fixed line telecoms and high speed broadband services where it is facing a mounting challenge from BSkyB.

While BT's venture into pay TV will certainly have to prove its value at some point, the telco's voluminous pockets may mean it is able to stay in the game longer than its predecessors in the UK premium sports market. Barring, of course, a major strategic rethink similar to that of France Telecom, which closed its Orange Sport venture in France after it decided to dramatically cut back its investments in programme rights.

Geography
Ireland UK
Organization
BT Group ESPN Sky
Share facebook Twitter Google Plus Linked In Add This Contact Us