BT buys ESPN's UK channels to beef up its forthcoming BT Sport
BT's move into sport looks like a minor deal, but it's part of the global competition for a converging TV/broadband market where the leading players include Rupert Murdoch's Sky and John Malone's Liberty Global.
BT, the UK's leading fixed-line phone and broadband supplier, effectively killed ESPN's sports channel last year when it bought the rights to some English Premier League games, leaving the Disney-owned TV channel with no compelling content. It's not surprising then that on Monday, BT announced that it was taking over ESPN's TV business in the UK and Ireland, subject to regulatory approval.
BT plans to launch its own TV Sports package this summer, based on its rights to the Premier League, FA Cup, Scottish Premier League, UEFA Europa League, and German Bundesliga football (for American readers: soccer). BT's sports package will also include some live Premiership Rugby and WTA tennis matches.
The acquisition means that BT will also be able to offer sports provided in the UK on the ESPN America channel. These include NCAA College Basketball, NCAA College Football, and NASCAR racing. BT may run these on an ESPN-branded channel.
The channels will be broadcast from a new BT Sport studio in the Olympic Park, London.
The deal does not include ESPN's web properties ESPN.co.uk, ESPNcricinfo (cricket), ESPNFC (football), ESPNscrum (rugby), and ESPNF1 (Formula 1), or its video-on-demand service, ESPN Player. It also excludes TV channel ESPN Classic, which looks unlikely to survive.
Although ESPN has a strong position in sports broadcasting globally, it has struggled during its four-year attempt to break into the UK market. It arrived perhaps a decade too late to compete effectively with Rupert Murdoch's BSkyB (Sky), which has been broadcasting since 1990. While they always looked doomed, both ESPN and the failed Setanta were trying to capitalize on the European Commission's attempt to break Sky's monopoly by preventing it from having exclusive rights to Premier League games. (Obviously, the European Commission will not cover any losses incurred by suppliers or consumers.)
When buying Premier League rights, BT said in a blog post at BT Vision: "BT will succeed where Setanta and ESPN failed because it is a much bigger business with millions of existing customers, and because the communications giant will have top quality games to sell."
The BT Vision business unit only has about 700,000 customers, compared to Sky's 10 million, but there is a significant market in broadcasting live sports in British pubs and clubs.
For BT Group, sport is simply part of a larger play for the broadband internet market. BT is currently rolling out FTTC (fibre-to-the-cabinet) broadband services in competition with Virgin's less widespread cable TV network, which carries Sky's channels at a substantial extra charge, and FTTC broadband.
Virgin Media is based on a conglomeration of numerous local cable companies. It was formed via the merger of two large competitors, NTL and Telewest, which then merged with the phone company Virgin Mobile UK. Earlier this month, US-based Liberty Global, owned by John Malone, said it had agreed to buy Virgin Media in a cash and stock deal worth $23.3 billion (£15 billion).
BT, the privatised phone giant that used to be part of the British government-owned postal service, will now be competing against two risk-taking multi-billionaires: Murdoch and Malone. Both of them control global empires. BT, by contrast, is less powerful than local European rivals such as Deutsche Telekom (which owns Orange and T-Mobile) and Spain's Telefonica (which owns O2 and operates across South America). However, Ofcom — the UK telecoms regulator that limits BT's prices — seems unlikely to pay any attention to BT's global position, rather than its local one.