The cost of watching Premiership football matches is set to plunge for sports fans willing to sign up with BT, but will rise for customers of Sky after the satellite broadcaster tried to wrongfoot its rival today by increasing its prices. The move means BT is likely to make a loss on providing sports coverage.
Tomorrow BT will announce the prices it will charge customers of its broadband TV service BT Vision for Sky's main sports channels. The head of its retail business, Gavin Patterson, previously pledged that it would offer Sky Sports 1 and 2 – plus rival ESPN – for under £20 a month, well below the £26 a month which satellite users must fork out.
BT's new prices are based on a deal struck with regulator Ofcom back in March, which ended years of wrangling between the company, Sky and Virgin Media and introduced reduced wholesale prices for Sky Sports 1 and 2. Ofcom demanded that Sky drop its prices by more than 20%. But it also linked the wholesale price it must charge its rivals for Sky Sports 1 and 2 with the price the broadcaster charges its own customers. Sky's rivals assumed that was designed to protect the satellite company from being undercut by other broadcasters. But in a dramatic move Sky revealed that it would actually increase its retail prices, which means its wholesale prices will increase accordingly.
BT was taken utterly unawares and the move is likely to mean that it will lose money on every customer it signs up to sports packages on BT Vision. BT said: "We are proceeding as planned and will deal with the issue of Sky's wholesale pricing in due course. It's surprising that Sky are raising prices for their customers just when we're about to enter the market. This will only make our prices more attractive and so could drive customers to our door," he added.
Rival Virgin Media is understood to be unaffected, as it has already signed a separate deal with Sky.
Sky is increasing the retail price of Sky Sports 1 and Sky Sports 2 by £3. Under the complicated wholesale pricing mechanism set out in Ofcom's ruling, this means that the wholesale price of Sky Sports 1 increases from £10.63 a month to £13.42, Sky Sports 2 rises from £10.63 to £13.34 and both channels together rise from £17.14 to £19.07 per month.
For Sky's retail customers, meanwhile, it means that from 1 September the cost of a basic subscription plus Sky Sports 1 or 2 will increase from £26 a month to £29 a month. The cost of a basic subscription plus all its sports channels will increase from £35 to £38 and the cost of all its sports plus its six entertainment bundles will rise from £41 to £44 per month. The cost of its top-end package – including movies – will increase from £48.50 to £51.50.
Sky had originally intended to inform customers of the price increase in letters to be sent out from 23 July. But as BT had decided to make such a fuss about its new prices, it is understood to have brought its plans forwards. The reason for the price increase is that Sky will be offering more games come the next Premiership season, which starts in mid-August.
The regulator's review of the UK's pay-TV market dragged on so long that one of the original complainants – Setanta – went bust during the process. The Premiership games it acquired were picked up by ESPN, but under the deal Setanta originally struck it lost one package of matches from next season. Those matches were picked up by Sky and it now has 115 games, compared with the 92 it showed last season. That is roughly five out of every six games to be played next season.
A spokesman for Ofcom said the regulator had always recognised "that retail prices would change in the future".
"That is why we set a fixed margin between Sky's retail prices and wholesale prices," the spokesman said. "This means that if Sky's retail prices change, then its wholesale prices will move by a fixed amount. Our decisions will therefore deliver competition, choice and innovation in the pay TV market, regardless of changes to Sky's retail prices."
The above is taken from The Guardian - _http://www.guardian.co.uk/media/2010/jun/30/sky-raises-prices
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