Media

BT blows final whistle on sport as sale talks kick off


The launch of BT Sport in 2013 was a bold pledge to break Sky’s dominance of the pay-TV sport market and lower the cost of watching football for millions of people in the UK. 

Less than a decade on and BT is looking to exit the market. The FTSE 100 company has appointed investment bank Lazard to consider various options for its sport arm, ranging from a full or partial sale to striking a partnership or joint venture to reduce the financial burden of the division. Although it has fewer than 2m subscribers, the business costs about £800m a year to run and contributes little to no profit.

One former BT executive said it was inevitable that a group that has cut its dividend and trimmed costs would be looking at alternatives, particularly as it and Sky called a truce in the bruising battle for sport rights in late 2017 when they signed a cross-licensing agreement. “The minute that contract was signed with Sky, the rationale for owning BT Sport fell away,” he said.

BT has held talks with Dazn, Amazon, Disney, UK broadcasters including ITV and private equity companies according to multiple people with direct knowledge of the negotiations, with the group saying it wants to “explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth”. Dazn, Amazon, ITV and Disney declined to comment.

Any proceeds would be welcome according to some analysts who value BT Sport, once seen as the company’s growth driver, at zero in their forecasts. But even if no deal materialises, BT’s willingness to call time on the sport market will allow it to focus on its core telephony business as it ploughs investment into full-fibre and 5G networks.

BT’s cost per football fan is higher than Sky’s

“Whether it is a sale, or more likely a partnership, is less important than the fact BT has now turned a corner in its journey,” said Matthew Howett, founder of Assembly Research.

The push into sport broadcasting has been praised as breathing life into a moribund incumbent as BT took on the mantle of market challenger. Although profits remained flat, it boosted the group’s revenue and raised its profile in millions of homes and thousands of pubs across the country.

Sport also shored up BT’s defences in broadband, where it had been losing market share to Sky. The company’s churn — the rate at which customers defect to a rival — slowed sharply after the sport channels were launched.

BT made its first foray into the sport world in 2012 when it unexpectedly won the rights to broadcast 38 Premier League games at a cost of £738m over three years. Sky, the dominant sport broadcaster in the UK, had faced off competition from Irish player Setanta and US channel ESPN but the emergence of BT represented the first serious challenge to the satellite company.

BT’s intent was made clear with the launch of BT Sport the following summer as it unveiled a new studio complex built on the site of the London Olympic Games. Then-chief executive Gavin Patterson, only weeks after his promotion to the top job, outlined a vision to offer free football to its broadband customers and cut-price offers to everyone else.

BT’s push into sport raised its profile in millions of homes across the country © Shutterstock

Boris Johnson, as mayor of London, posed with a BT Sport-branded football alongside commentators Clare Balding and Michael Owen, two of the new faces the group had signed up.

Three months later, BT moved to blow Sky out of the water in European football. It paid £900m to acquire exclusive rights to Champions League games, helping its customer base grow to 4m within a year.

But the push into sport eventually proved to be a game of two halves as investors began to question the value of the lossmaking sport business.

BT does not break out the division’s bottom line but James Barford, an analyst at Enders, calculated that BT has lost up to £2bn on its foray into sport broadcasting, with annual losses in the region of £400m in the early days. 

BT lost almost four-fifths of its market value between 2015 and 2020 when the stock hit a 11-year low. The collapse followed a damaging accounting scandal, profit warnings and a major cost-cutting plan.

Line chart of Share price (£) showing BT's performance since entering sports broadcasting

A different approach to sport emerged after Patterson, a diehard Liverpool FC fan who hung the team’s shirts in his office, left BT in 2018. Marc Allera, who had taken over as head of BT Consumer, walked away from aggressive bidding for the rights to NBA basketball, Serie A Italian football and UFC ‘ultimate fighting’ competitions. “At the wrong price, everything is expendable,” he said.

In an attempt to make the division break even, BT raised the price of BT Sport and offered passes to non-BT customers who wanted to stream games. But subscribers peeled away in response.

BT Sport’s exit from any future football rights auction would prove damaging for the Premier League, which has benefited from pitting broadcasters against each other in competitive rights auctions.

The value of the Premier League’s UK screening rights contract has shot up from £670m in 1999 to £5bn today. That money has allowed English clubs to spend higher sums than their continental rivals in transfer fees and wages for star players.

However, the Premier League wants to scrap its next planned domestic media rights auction for the three seasons between 2022 and 2025, and instead roll over its existing deal with Sky, BT and Amazon on broadly similar terms, to provide financial stability in the pandemic.

Bar chart of  2019-20 (£bn) showing Annual cost of sports coverage rights

The end of the “rights bubble” is another reason English clubs are keen to avoid an auction.

Serie A last month approved a domestic media rights sale, led by Dazn, worth about €810m a season between 2021 and 2024, a roughly 20 per cent drop on its existing contract. Last June, Germany’s Bundesliga raised €4.4bn over four years from 2021 from the sale of domestic TV rights — 5 per cent less than the previous deal.

With BT and Sky no longer at loggerheads in the UK, that helps pave the way for a deal to sell the sport business to a rival like Dazn at a “realistic valuation”, according to one executive at the telecoms group, who argued that BT has proved that there is room for a sizeable competitor to Sky.

The outcome of the early-stage talks are yet to be decided but it is looking to be game over for BT Sport.



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