The UK’s BT, formerly the monopoly phone provider British Telecom, has been trying to build its pay-TV business for years and looked like it had scored a rare winner against market leader Sky when it persuaded industry regulator Ofcom to force Sky to supply it with football coverage earlier this year.
It promptly set out to undercut Sky’s prices to consumers only to receive a nasty shock when the pay-TV giant, 37 per cent owned by News
Corporation, promptly raised its wholesale charges, thereby making BT’s consumer offer loss-making.
Undeterred BT pressed on, sticking to its prices and backing them with a heavyweight £30m ad campaign. Sky fought back with a campaign plugging its high definition offer (which BT can’t do).
But BT has to make money somewhere so decided to link its football offer to a two-year contract and the requirement for fans to sign up to BT’s phone services. So all of a sudden its football didn’t look like such a bargain after all, particular to those members of target households who don’t care about football and other sports and who took the view, shared by many, that BT’s phone services are expensive.
The upshot is that BT is expected to sell just 60,000 new TV packages by the end of September, hardly a decent return on £30m of advertising spend let alone all the other costs it must have incurred.
So BT, just like bust pay-TV operator Setanta which tried and failed to challenge Sky with football for three years, has learned an old lesson, don’t take on Sky at its own game.
It’s not just that Sky owns the primary rights to televised Premier League football and lots of other sports and has buckets of money. It also offers a peerless sports broadcasting service with plenty of regular innovation which rivals can only admire.
It’s also pretty good at competing very hard indeed. Which is something that BT, although its a hardly a minnow post-privatisation, has never really seemed to understand.