It’s being reported that BT has grabbed the rights to all Champions League and Europa League football matches from 2015. As things stand, this is seriously bad news on several different levels.
It’s obviously bad news for Sky and ITV, but that’s not really the major issue. Competition between broadcasters isn’t necessarily a bad thing, and no company has any particular right to succeed if another can do it better. So if that’s all there was to it, then I wouldn’t be too bothered.
What’s more important is that this is bad news for football fans. At the moment, Sky is the only significant operator in pay-TV football in the UK – BT’s 38 Premier League games a season, like Setanta and ESPN before them, is just a pinprick by comparison. At the moment, a football fan’s appetite can be pretty much sated by a subscription to Sky and the free to air channels. You’d have to be really hardcore to actually feel the need for BT Sport as well.
This deal changes that. While Sky will still dominate the domestic leagues and FA Cup, the loss of 350 European games is a major blow. These aren’t the trivial scraps from the season currently broadcast by BT, they are some of the most-watched fixtures of the year. And 350 is a heck of a lot more than 38.
So football fans, to get anything like comprehensive coverage, will need to subscribe to both Sky and BT. That’s clearly going to be more expensive than just Sky alone. The alternative is to do without most European games, which isn’t going to go down too well.
In theory, this isn’t such a problem for customers of BT’s “Infinity” fibre Internet service, as they get BT Sport for free along with their contract [update: see note at the end of this article]. But the problem here is that, unlike Sky, the BBC and ITV, BT’s own online streaming system is awful. It’s full of bugs, and even when working properly, is well below the quality you can get from SkyGo, iPlayer and ITV Player. If a large number of football fans switch to BT Internet in the hope of getting European football matches on their PCs and tablets, they are likely to find themselves seriously frustrated.
Therein lies another problem. Both ITV and Sky, the current rights holders, have said that BT’s bid was vastly higher than the value that they place on the rights. So BT appear to have bid considerably over the odds to obtain them.
That money has to come from somewhere. Partly, of course, BT is hoping that it will come from additional subscriptions that they sell on the back of this. But if Sky don’t think it’s justifiable, it’s hard to see how BT will be able to make this deal profitable on the basis of subscriptions alone. Which means that it’s going to come from other parts of BT’s empire.
If that were just a case of cross-subsidising from BT’s other retail operations, such as Internet and telephone, that wouldn’t necessarily be such a problem (although people who pay BT for a phone line just so that they can have broadband from another ISP may be less than chuffed about it). But there may be more to it.
BT is legally prohibited from using profits from its wholesale operation, BT Openreach, to cross-subsidise its retail operations. But wholesale is where BT is making money. Like all consumer ISPs, BT’s retail prices are squeezed to the bone. But their dominant position in wholesale provision allows them to charge pretty much what they like to other ISPs. And they do.
Ofcom is already investigating a number of complaints against BT about wholesale pricing, including one from TalkTalk which explicitly asserts that BT is breaking the rule prohibiting them from subsidising retail operations from wholesale profits. Ofcom has yet to issue a ruling, but the fact that BT retail can seemingly manage to pay well over the odds for sporting rights while still being one of the cheapest broadband providers is likely to raise eyebrows. Even if the accusations are not proven, this is likely to cause ructions between BT and its wholesale customers.
Possibly more worryingly, if the complaints are upheld and BT is forced to cut prices it charges to wholesale customers, that leaves a Champions League sized hole in BT Retail’s finances. Unlike Setanta, which bit off more than it could chew with Premier League rights and went bust as a result, BT is big enough to swallow those costs if necessary. But the money still has to come from somewhere, and retail pricing and customer service are likely to suffer the most.
As well as the question of where the money comes from, it also matters where it goes. And where it will mostly go is the clubs involved in European competition, as well as UEFA itself. That’s obviously good news for those clubs, but it’s bad news for clubs not in Europe as the income gap between them and European competitors will widen. And history shows that when organisations like UEFA get used to being on the receiving end of large sums of money, they don’t readily give that up. To get the rights back again, Sky and ITV will need to outbid BT next time round. It doesn’t take a genius to work out where that money might come from, either.
So, bad news all round? I think so. It’s bad news for Sky and ITV. And, in the long run, it’s likely to be bad news for Sky’s customers. It’s very bad news for football fans who aren’t BT Infinity customers. It’s moderately bad news even for football fans who, like me, do have BT Infinity. It’s bad news for BT customers who aren’t interested in football. It’s bad news for football clubs that don’t play in European competition. Just about the only people it’s good news for are clubs that do play in Europe, and BT executives.
[update] It’s being reported by the Daily telegraph that even BT Infinity customers will have to pay extra for most of the games. That makes it even worse a deal than I’d originally thought, even for people like me who have BT Infinity.