BT, Sky clash on Sky Sports pricing
Thursday, July 1 2010, 09:10 BST
By Andrew Laughlin,

BT has started offering cut-price Sky Sports 1 and Sky Sports 2 to its customers, but Sky has reacted by raising its own prices meaning that BT stands to lose money from the move.

From today, BT Vision customers can add the two sports channels to their package for the combined price of 16.99 per month, or they can add either channel individually for 11.99.

Customers taking a bundled deal of broadband, landline and BT Vision can access a 'total sports package', priced at 6.99 per month, featuring Sky Sports 1, ESPN and BT Vision's on-demand sport. Alternatively, they can pay 11.99 for Sky Sports 1 and 2, ESPN and on-demand content.

According to BT, the latter bundle works out 205 cheaper than Sky's current equivalent deal and 281 cheaper than an equivalent Virgin Media package over a 12-month period.

"Football fans will be cheering our new prices, which mark an end to paying for basic channels when you only want the sport," said BT Retail chief executive Gavin Patterson.

"We expect that entry prices as low as 6.99 will welcome in a huge number of extra customers who'd love to enjoy these channels, but thought they were too expensive.

"A more competitive market will ensure that customers continue to get the best sport for the sharpest prices and this opening of the market will be in the best interests of customers."

BT's bullish pricing for Sky Sports 1 and 2 follows Sky's interim agreement in April to enable Ofcom's wholesale pricing model for the premium sport channels to come into force.

In March, the regulator ruled that Sky must offer Sky Sports 1 and 2 to rival operators at 23.4% below the current price of 13.88 to just 10.63 per subscriber per month. As most consumers currently purchase packages including both channels, the wholesale price for service bundles was also reduced by 10.5% from 19.15 to 17.14.

Crucially, though, the media regulator said that Sky must link its wholesale prices for Sky Sports 1 and 2 with the retail prices it charges its own customers.

In a drastic move overnight, Sky said that it will increase its own retail prices for the sport channels, which will mean that the wholesale prices will increase accordingly.

From September 1, the price Sky charges its customers for Sky Sports 1 and 2 will increase by 3, which will return wholesale prices for the channels - both standalone and bundled - roughly back to where they were before Ofcom's price reduction came into force.

The move will mean that BT stands to lose money on its Sky Sports offers, but it may also use the channels as a 'loss leader' to attract new customers to BT Vision.

Speaking today to BBC Breakfast, Patterson confirmed that BT would be forging ahead with its Sky Sports pricing regardless of Sky's move.

He said that BT believes that the "wholesale price is too high" for the channels and it will be challenging Ofcom's wholesale model in the courts.

In terms of Sky's price increase, Patterson said: "It seems a bizarre move as they will also be increasing the prices for their own customers. I'm glad that they see us as such a threat."

An Ofcom spokesman told The Guardian that the regulator had always known that retail prices "would change in the future".

He added: "That is why we set a fixed margin between Sky's retail prices and wholesale prices. 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."

Virgin Media is not thought to be affected by Sky's retail price increases as it has a separate carriage agreement with the satellite broadcaster.