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BSkyB ‘sell’ note on OTT threat

December 10, 2012

By Chris Forrester

Sarah Simon, media analyst at Berenberg Bank, is advising clients to “sell” their BSkyB shares. Her rationale is that there are rising competitive pressures on BSkyB from established telcos such as BT and TalkTalk as well as from new players such as Amazon, Netflix and grocery retailer Tesco, all building up their OTT offerings in the UK.

She says that in the past week there have been a number of developments which reinforce her opinion. “BT Vision added three more channels to its soon-to-launch service: SyFy, Universal Channel and E! Entertainment,” she says. “Channels already signed include Discovery, Animal Planet, FX, British Eurosport, National Geographic, Gold, Watch and Alibi. Further channels will be announced shortly, according to management. Pricing and bundling of the bouquet has not yet been announced, but we expect it to be very competitive, particularly for fibre customers. As highlighted previously, this ‘mini-pay’ model could squeeze the c.£2bn gross profit that BSkyB generates on basic programming.”

Additionally, she points out that Blinkbox has added a slew of kids programming to its roster, previously seen as a weak spot in its OTT offerings.

The bank’s report says the exclusive ‘first-run’ deal announced last week in the USA by Netflix with Disney for ‘super premium’ content could spill over into the UK.

Sarah Simon also suggests that a recent Oliver & Ohlbaum survey shows that UK pay-TV subscribers are increasingly likely to change pay services in 2013 (at 10 percent, compared with 5 percent in the previous study).  “Meanwhile, 45% of Netflix and Lovefilm customers have reduced their pay-tv bills, suggesting that “cord-shaving” is starting to take effect in the UK,” she states.

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