June 16th saw BT Sport announce a major new and non-sport channel, AMC, which in the US is responsible for producing smash-hit successes such as Breaking Bad and Mad Men, and the Breaking Bad spin-off Better Call Saul.
AMC was originally designed as American Movie Classics, but the all-movie focus changed with Mad Men’s introduction in late-2007, and followed by Breaking Bad the following season.
AMC will debut in the UK this coming September, and according to Ian Whittaker, lead media analyst at Liberum, will form a “clear threat to Sky”.
“The agreement yesterday is important as it would suggest that BT is ramping up a strategy of pursuing non-sports content to widen its appeal. We do not think BT will look to acquire the major movie studio contracts (Sky has these locked up for several years anyway) but instead will look to sign selective deals on the more general programming front,” said Whittaker.
“At the moment,” says Whitaker, “BT does not look to be making an aggressive push to take Sky household customers, although its offering to pubs and clubs (which we estimate make up c. 20 per cent of Sky’s UK profits) does look more of a play to hive off Sky’s pub customers. However, by increasing the range of content it has (and following on its Champions League announcement) and making it free on BT TV, it increases the appeal of sticking with BT to its broadband customers who – in the past – have been the main source of Sky’s broadband growth. By limiting BT’s churn therefore, Sky’s growth is also impacted.”
Liberum’s note says that a side-effect of this deal may also be to increase prices for more general content over time, which would again put pressure on Sky’s programming cost base.
Liberum’s advice to clients is to “SELL” Sky stock, and gives a target price for Sky shares at just 530p.