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.
[1]
BT, 2012, BT Group plc Annual report & form 20-F 2012, http://www.btplc.com/Sharesandperformance/Annualreportandreview/pdf/BTAnnualReport2012_smart.pdf
[2]
Ibid
[3]
BBC, 2002, ITV Digital goes broke,
[4] M.
Warman, 2013, BT Sport Channel:broadband takes on TV, http://www.telegraph.co.uk/technology/broadband/10046320/BT-Sport-channel-broadband-takes-on-TV.html
[5]
Ibid
[7] G.
Hiscott, 2013, BT battle with Sky is all about broadband not sports,
[8]
BT, 2012, BT Group plc Annual report & form 20-F 2012, http://www.btplc.com/Sharesandperformance/Annualreportandreview/pdf/BTAnnualReport2012_smart.pdf
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