Financials show power of sports rights as BT and Sky battle for supremacy

BT has posted impressive financial results for the final quarter of 2013, as the British telecoms giant continues to challenge the long-held sports broadcasting dominance of BSkyB.

Financials show power of sports rights as BT and Sky battle for supremacy

Telecoms giant BT has posted increased profits for the final quarter of 2013, thanks to rising broadband demand and the initial success of its new BT Sport pay-TV service.

The company reported pre-tax profits of UK£617 million for the last three months of last year, with revenues of UK£4.6 billion - it's highest in a decade. The impressive figures come after BT made an aggressive entry into the UK sports broadcasting market last August in a bid to grow revenues by challenging the long-held dominance of BSkyB.

BT said it now has a total of 2.5 million subscribers to its BT Sport service, which beat off competition from BSkyB to acquire the exclusive UK rights to the Uefa Champions League and Europa League from 2015/16 for UK£900 million in November. 500,000 subscribers were added in the period the financial results account for.

Meanwhile, rival operator BSkyB’s pre-tax profits fell by 18 per cent to UK£527 million in the second half of 2013, although the company’s total revenues rose by 6.3 per cent to UK£3.75 billion thanks to strong advertising sales in the run-up to Christmas.

The decline in profits is largely down to an increased outlay in marketing and costly soccer rights as the company attempts to fend of BT’s challenge. BT’s presence in the most recent Premier League rights auction meant Sky was forced to pay UK£2.3 billion to retain the lion’s share of matches, a 40 per cent increase on its previous deal.

Despite the fall in profits, BSkyB chief executive Jeremy Darroch insisted BT's aggressive tactics hadn’t hurt his company. He did, however, warn that there is a limit to how much Sky would be willing to pay for sports rights, including the subscriber-driving Premier League on which the company has built its dominance, in future.

"Of course the Premier League is an important set of rights, we get that, we will go in with a clear view of what we seek to achieve,” he told The Guardian newspaper.

“Whenever [the auction] arrives we will be ready and in good shape for the process. With any set of rights there is a price beyond which we don't think it provides value. That was the case with the Champions League [which BT secured]. It accounted for just 3 per cent of viewing and there were better ways [to invest]."

Sky attempted to compensate for its weakening grip on the UK market by announcing six new long-term rights deals this week, including a four-year agreement with the Scottish Football Association and another for the rights to the 2017 British and Irish Lions tour of New Zealand.

Both groups’ results will do nothing to dampen the Premier League’s rumoured inclination to bring forward the auction for the next cycle of domestic rights, which begins in the 16/17 season. If recent trends are anything to go by, the league would normally finalise that process in 2015, but could strike early to take advantage of Sky and BT’s strategic positions, as well as reported interest from Eurosport.