Monday, May 13, 2013

(Business) BT: A Real Challenge to Sky’s Dominance of the Pay-TV Market ?

For two decades, Sky have dominated the pay TV industry in the UK from its inception owing mostly to its vice grip over rights to broadcast matches of the premier league, the world’s most watched league, a feat in which Sky have played a large part in making a reality. Football fans for two decades have had to purchase Sky’s sky sports package to watch the fortunes of their favourite team unfurl before their eyes but with the challenge being posed by telecoms giant BT, Sky’s death grip over the UK Pay-Tv market may see a loosening of its grip.  

BT’s challenge to sky’s dominance of the Pay-tv market has been a long time coming which has required a lot of work outside the market as well as in it. BT has profited of the regulatory climate favouring the need of competition in the Pay-TV market, which Sky have basically cornered, warding off new competitors  with ruthless efficiency.

However for all BT’s encouraging challenge to the dominance of Sky regarding the Pay TV market, it still faces a very powerful foe as Sky have 67% of the market share while BT only have  4%[1].This dominance is largely down to the fact that Sky dominate  subscriptions via cable and satellite which represent much of the subscription market altogether thanks to laying much of  the ground in the UK pay tv market in the first place and BT’s rather late entrance into the market[2] .

This is why BT is avoiding the fatal mistake of past challengers to sky’s pay tv dominance as others had tried and failed miserably to loosen Sky grip over cable and satellite subscriptions, the most notable and infamous example of this failure was  ITV digital’s remarkable collapse which had left a mark on ITV that only now is truly recovering from[3].  BT are clearly playing to their strengths by offering its “ new sport channels and ESPN free for the first year to customers who take its broadband products, marking the first serious attempt to combine exclusive TV services and the internet” [4], effectively leveraging its dominance in the broadband market as BT have a “37% retail share of DSL, LLU and fibre broadband market [5].

In addition to expanding its broadband customer base through its foray into Pay TV  sports broadcasting,  BT also look to leverage Sky’s cable and satellite subscription dominance by offering its new sports channels, BT Sport 1 and 2,  in an attempt to reach those  “who do not have BT’s broadband” and compensate for it weakness regarding cable satellite subscriptions[6].

However, as The Mirror’s Graham Hiscott had pointed out, BT’’s foray into the pay Tv market has very little to do with the Pay TV market, While BT would like to make some gains from its investment into Pay TV and take some customers off sky in the process, the move  is clearly motivated by its attempt to  secure its ebbing long term dominance over the broadband market with Sky’s Broadband business growing at a rapid rate [7]BT even said as much in the ‘our aim and strategy’ section of  their 2012 annual report as the company sought to  exploit the UK ‘s large “broadband connectivity” by increasing broadband speed and “grow and enhance our(BT’s )TV services” [8].  

In sum, BT are sure to make some waves and fare better than past challengers simply by following the time tested wisdom of playing to your strengths, However, in BT’s case, its foray into the Pay TV  market is clearly an effort to maintain their strength and stifle Sky’s.

[2] Ibid
[3] BBC, 2002, ITV Digital goes broke,
[5] Ibid

[7] G. Hiscott, 2013, BT battle with Sky is all about broadband not sports,

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