BT and Sky to Cross-Sell Sports as Amazon Challenge Looms

(Bloomberg) -- BT Group Plc and Sky Plc agreed to sell each other’s channels in the U.K. to recoup investments in sports content, with web players including Amazon.com Inc. threatening to challenge them for key rights.

BT will market and sell Sky’s NOW TV streaming service, which includes movies and sport, while wholesaling its own sport channels, which include UEFA Champions League and Premier League soccer, to Sky satellite customers, BT said in a statement. Talks between the two companies have been on and off for a number of years, and the services are expected to be available from early 2019, BT said.

“I want that product on as many platforms as possible,” Marc Allera, head of BT’s consumer business, said in an interview, referring to BT Sport. “That’s good for BT Sport and a good way for us to think about monetizing those rights.”

BT and Sky are coming under investor scrutiny for the skyrocketing cost of sports rights, key to their pay-TV propositions, just as the entry by Amazon and Facebook Inc. into the fray puts them on the defensive. The cross-selling deal changes the competitive landscape ahead of next year’s auction for U.K. rights to show the Premier League. Sky and BT together paid a record 5.14 billion pounds ($6.9 billion) for the live rights last time, an increase of 70 percent. 

“You could interpret it as being the two parties realizing that maybe the threat to them is not so much from each other, but maybe from other players like Netflix, Amazon, Google and so on,” said Sarah Simon, an analyst at Berenberg.

Exclusive rights are a core part of BT’s strategy, but there is a maximum price it’s prepared to pay in the February blind auction, Allera said. He said he’d discussed the Sky partnership with Premier League Executive Chairman Richard Scudamore on Friday morning.

Currently, BT TV customers can access “main event packages” from Sky Sports, an inflexible 27.50 pound monthly bolt-on to their subscriptions. The new arrangement will let them access the 11 Sky Sports channels and NOW TV’s entertainment content, which includes premium shows like HBO’s Game of Thrones. Each provider will be able to decide how to bundle and charge for the new services, Allera said.

Content providers and networks will need to seek further partnerships as consumers will want convenience rather than a cumbersome and expensive basket of fragmented subscriptions, Allera said.

“It’s about scale and choice, and you can’t provide that choice by going alone in this marketplace,” he said. “It doesn’t matter who you are, whether you’re Apple, whether you’re Facebook, whether you’re Disney, whether you’re Sky -- all of these companies will be acquiring and buying rights, and be increasingly active in this marketplace.”

©2017 Bloomberg L.P.