Market Insight

BT introduces monthly fee for new BT Sport Europe channel

June 10, 2015  | Subscribers Only

Daniel Stevenson Sutton Daniel Stevenson Sutton Senior Research Analyst, Service Providers & Platforms

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BT has launched the next phase in its BT Sport-centric broadband-and-TV strategy, announcing new channel packages, a revised pricing model and advanced new services, as well as revealing new on-screen talent acquisitions.
• The BT Sport service is to be expanded to accommodate new European football content – 351 matches per season from the UEFA Champions League and Europa League – on a new channel, BT Sport Europe.
• The expanded BT Sport package is to remain available at no extra cost to the company’s IPTV customers, while BT Broadband customers who do not take BT TV will be automatically opted in to the service for a charge of £5 per month. 
• Customers of either BT Broadband or BT Mobile who choose to opt out of the pay package will still get access to the operator’s live Premier League matches at no extra cost via a slimmed-down BT Sport Lite offering. 
• BT also revealed that it would be launching a new 4K UHDTV service that will be exclusive to customers of both BT TV and BT Infinity fibre broadband. It was launch with the Charity Shield football match on 2 August. Pricing details were not revealed, though BT confirmed that this service will not be included in the £5-per-month BT Sport package. 
•    BT will air selected European football content – 12 Champions League matches and 14 Europa League matches – free-to-air via its DTT channel slot, which will now be used to broadcast a new limited channel, BT Sport Showcase.

Our analysis

Prior to yesterday’s announcements, BT had confirmed speculation that, due to the increased cost of sport rights as a result of the £897 million investment in Champions League and Europa League football, it would make transition to a pay model for its sports package. Thus the introduction of a £5-per-month charge to BT Broadband and Mobile customers comes as little surprise to the industry. BT had previously charged fees for an enhanced BT Sport service to all customers – access to BT Sport HD, for instance, currently costs BT TV customers an extra £4 per month – but the revised model differentiates its packages by varying the content available, not just the quality of transmission.

Since the launch of BT Sport in August 2013, BT’s TV subscriber base has grown by an average of 42,800 subscribers per quarter in the period ending 31 December 2014; over the 18 months predecing, the BT TV subscriber base grew by an average 25,200 subscribers per quarter. Pay TV revenues over the same period grew by 130% to reach £133 million with 1.1 million UK subscribers. BT TV includes a set-top box offering access to Freeview DTT channels, basic pay channels including Discovery Channel, Fox and Comedy Central, plus a video-on-demand offering.

With the UK 4K television market expected to reach 1.2 million installed sets by end-2015, BT’s move to launch a UHDTV service – while innovative – is unlikely to have a significant commercial impact. Gaining first-mover advantage over Sky, though – assuming the DTH operator does not push forward its own anticipated 4K service launch to beat BT to the punch – is notable, given the UK TV market leader’s reputation for innovation and its success in HDTV over the past 10 years. And thanks to its partnership with Netflix, BT is likely to be in a position to differentiate its UHDTV offering from Sky’s by providing its customers with access to the SVoD provider’s 4K catalog.

Another notable differentiator is BT’s new enhanced red-button connected-TV service, which will allow customers to switch between eight live HD broadcasts of Champions League matches. By utilising the YouView platform’s IP-based infrastructure to deliver enhanced interactive features – which also includes statistics tools, multiple camera angles and replay capabilities, all compatible with the BT Sport app – BT has the opportunity to curate a compelling new user experience for its Infinity broadband customers. Similar technologies have been experimented with to varying degrees of success. In the US, Microsoft has partnered with the NFL to develop a suite of apps for the X-box One and Windows platform to offer similar features. Multiple feed options have also been part of the standard red-button offering for several years – used in the UK by Sky for its own Champions League coverage and by the BBC for events such as the Olympic Games – though, notably, additional streams have not been available in HD. Advancements in this area, while not game-changing, does demonstrate BT’s commitment to pay TV innovation and developing an offering comparable to the established high-end services provided by Sky and cable operator Virgin Media.

While BT TV’s average growth of 4% quarter-on-quarter since Q1 2012 exceeds market leader Sky TV’s 1%, Sky reported 11 million TV subscribers in the UK and Ireland at Q1 2015, compared to BT TV's 1.1 million. IHS has always taken the view that BT's main aim is to support its broadband business rather than replace Sky as the pay TV market leader - though its lavish spending on sports rights is clearly intended to raise the pressure on Sky. BT said that of the 5.2 million homes taking BT Sport, two million had never taken a premium TV package before. 

Questions remaining to be answered are whether BT Sport Europe is sold directly to Sky customers in the same way the BT Sport package has been to date, though a wholesale deal with Virgin Media appears likely. BT also said notheing about whether the UHD channel will be available via the Sky platform. But the evolved strategy serves to enhance BT’s reputation as a provider of lower-cost, premium TV services, particularly when compared with telco rival TalkTalk.

IHS forecasts that BT TV will continue to perform well, with subscribers set to increase to 1.2 million by end-2015, up 12% year-on-year. 

Geography
Ireland UK
Organization
BT Sky Sky TV
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