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British Sky Broadcasting (LON:BSY) report: BT might offer free Premiership

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Following rumours on Friday that News Corp might bid up to 800p/share for BSkyB, there are press reports today that BT could launch a direct attack on Sky’s pay TV position by offering Premier League football for free, based on the expected Ofcom ruling this month that could force Sky to resell premium content at reduced wholesale rates to its rivals.

- It is believed that ex-Sky executive Tony Ball, now a BT non-exec, is pressing for a boost to BT Vision, possibly by offering broadband for a little as ?15/month inclusive of, free, Premier League coverage. BT Vision has made slow progress adding only 15,000 subscribers (to 436k) in the Dec’09 quarter. BT has stated that it would look to offer Sky Sports a “midteens” wholesale price for content, depending on the outcome of Ofcom’s review.

- Throughout the Consultation process, Sky has strenuously opposed Ofcom’s approach, pointing out that it won the rights to premium content in an open competitive market and that content providers (e.g. the FA) significantly benefit from this income. Ofcom’s stance recalls a telecoms regulatory approach in which “significant market power” is penalised in order to redress the competitive balance. The problem for Sky is that access to premium content lies at the core of its offering. The spread of integrated free-to-air and VoD devices, such as IPVision’s “Fetchbox" (being retailed by Carphone Warehouse and others, also offers a means of access to premium content without a monthly subscription being required.

- On a 1-year view, Sky’s share price is up 24.6%, Carphone Warehouse +125.1%, BT Group -8.8%.