Is English Champions League Triumph as Good as It Gets for BT Sport?

(Bloomberg) -- The all-English Champions League soccer final in Madrid on Saturday could be the moment that vindicates BT Group Plc’s bet on sports broadcasting. It may also mark the start of a retreat.

The match between Tottenham Hotspur and Liverpool crowns a thrilling season that saw unprecedented success for English clubs and fired up demand for the British phone company’s TV sport service, with Champions League viewership growing 26% from last season.

It’s hard to imagine a better outcome to BT’s six-year foray into sports. Its subscription channel drew a record average audience of 1.69 million for the semi-final second leg between Liverpool and Barcelona and, along with the other clash between Tottenham and Ajax, provided the highest digital audiences ever. The Europa League, the second-tier competition to which BT also holds rights, came up trumps in the U.K., with two English finalists battling it out on Wednesday.

When BT grabbed the Champions League from Sky in 2013 to hold on to broadband subscribers, it loosened Rupert Murdoch’s grip on British sports broadcasting. BT has spent or committed 4.8 billion pounds ($6.1 billion) to the English Premier League, the Champions League and Europa League, figures from Enders Analysis show.

This year’s viewing spike may not be enough to convince new Chief Executive Officer Philip Jansen to shell out what’s needed to retain the rights.  BT currently spends more than 700 million pounds per year on top-tier international and domestic soccer.

The former telecommunications monopoly’s status as a major player in sports has always sat uncomfortably alongside its responsibility to invest in the country’s national broadband network. Jansen’s predecessor Gavin Patterson fell out with industry regulators who demanded more concerted action to improve internet speeds. 

The new CEO is speeding up the rollout of fiber broadband and still needs to find enough cash for dividends and pension payments. BT’s investment in the Premier League, Champions League and Europa League was equivalent to almost a fifth of its capital expenditure of 3.8 billion pounds in the year to March 31. BT paid 1.18 billion pounds in 2017 to keep the Champions League until 2021. 

The looming auction of Champions League rights up to 2024 is shaping up to be “the litmus test for BT Sport,” said Guy Peddy, an analyst at Macquarie.

The 52-year-old Jansen is a big fan of Chelsea, which won the Europa Cup on Wednesday, but he’s made it clear his enthusiasm for the game doesn’t come at any price.

Asked by analysts on May 9 whether BT would bid again for the Champions League, Jansen confirmed it would, but said: “We’ll be very disciplined.”

That message of moderation comes as rivals appear to be stepping up their interest in the most prestigious soccer tournaments. Competition has increased, BT acknowledged this month in its annual report, with e-commerce giant Amazon.com Inc. winning a three-year broadcast package for the Premier League. 

Sky would like to use the Champions League to boost its NOW TV streaming service, which offers day passes for premium content, and bolster its Sky Sports TV package, according to a person familiar with the matter, who asked not to be named as the matter is private. Sky’s bidding firepower has grown since it was bought last year by U.S. cable giant Comcast Corp.

BT has already pulled back from sports with less appeal to British audiences such as Italian soccer and U.S. Indycar racing. Last week it was also pushed aside by ITV Plc for rights to the FA Cup knock-out soccer competition. BT said it was “hugely disappointed.”

Jansen could cut BT’s soccer spending by sharing more of the rights with free-to-air broadcasters such as ITV or allowing Sky to take a bigger slice of the future action. BT’s viewers could still watch games that end up with Sky once it activates a cross-supply deal signed by the two companies in 2017. 

Reversing Patterson’s sporting legacy and abandoning all of its exclusive rights to the Champions League would be a far more radical move, whose potential impact is hard to gauge.

Richard Broughton of industry consultants Ampere Analysis said the Champions League rights are BT’s crown jewels and if it lost them, “there wouldn’t be very much left.” However, Macquarie’s Peddy said the Sky cross-selling deal means that BT losing those rights “is no longer the terminal challenge that it could have been.”

While they wait for Jansen’s next move, investors won’t have missed his use of the past tense when describing BT’s sporting accomplishments to analysts on his first results call since taking the reins as CEO. 

BT Sport has “been successful in what it was aiming to do. No question about it,” he said. “Are we going to expand it? No.”

To contact the editor responsible for this story: Thomas Pfeiffer at Rebecca Penty

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