Standing room only for BSkyB/BT update
I’m not quite sure what the collective noun might be for a crowded full room of financial analysts, perhaps a ‘pack’ (with apologies to the Hyenas and dogs) might do, but whatever the term, there was standing room only at Morgan Stanley’s TMT conference on this week when BSkyB’s CEO Jeremy Darroch responded to questions.
The headline statement was to repeat that the Champions League is now less important to Sky because of the wealth of other sports now available to subscribers, but that its negotiating door is open to a wholesale deal with new rights-owner BT Sport, “but would need reciprocity”.
Indeed, Darroch said that its sports fans also consumed “typically much more entertainment content than they do sports.” There could be a clue here, and perhaps a recognition that while sport clearly is important, it was not all-important. Morgan Stanley’s comment was: “Sky appeared to be suggesting that if necessary Sky could envisage a life even without the majority of the Premier League rights. Partially we feel this is a tactical message to sports rights owners with Sky making it clear that it will not just pay any price for sports rights.”
Other than this Darroch stressed to the pack that that it would increase prices and felt that it had headroom given that it had only raised prices 4 per cent over the past 3 years while general inflation had risen 10 per cent in the wider market. Darroch saw some encouraging signs in the economy but the consumer remains under pressure outside the South-East as household bills rise. BSkyB had to be grounded about this but at the same time it is confident in the value of its offering.
Darroch told the analysts that there were some 7 million UK homes which do not take triple pay – and that penetration can go a “long way north of 36 per cent”… and that 6 million do not take HD. Morgan Stanley, in a note to clients, said: “For Sky, adding a communications customer is accretive to margins with the infrastructure now largely all in place. BSkyB is upbeat on connected services looking to up-sell to higher value TV packages and increase customer retention by encouraging greater consumption of content on a broader EPG. It has added 40-50 per cent more movies onto Sky Store. 13 million households do not take pay TV in the UK. The Now TV offering is highly complementary and will open up new sources of demand. The £9.99 box offer is off to a good start. On fibre, 65-75 per cent of customers still choose DSL product at point of sale. BSkyB will be led by customer demand.”
Jumping to another presentation, this time from BT’s CEO Gavin Patterson, which again was delivered to a packed room, He underlined BT’s continuing determination to compete aggressively in the UK triple-play market by focusing on its TV offering. “It is highly focused on expanding its customer base. The CEO is optimistic that the roll off of fibre capex, the impact of other cost savings programmes and the constructive attitude of the pension fund trustees should provide the company with optionality over the next few years to maximise returns on its fibre investments,” said the bank’s note.
However, the room was clearly waiting for comments on BT Sport’s intentions as to the upcoming English Premier League negotiations (which will start being discussed in early 2015). “Its own research highlighted that the combination of a Premier League and Champions’ League football offering makes for a compelling proposition to sports fans – adding that it believes that the addition of the Champions’ League will cement wholesale and advertising revenues for its channels, and put the company in a better position to challenge for the Premier League rights next time around. The CEO stated that BT could seek to obtain a similar or an expanded package of broadcast rights next time around,” said Morgan Stanley.