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Following months of speculation and negotiations, BT and Warner Bros Discovery have formally agreed to merge their sports broadcasting operations in the UK and Ireland, bringing BT Sport and Eurosport UK into a single organisation.
The new entity will hold the rights to some of the most valuable sports properties in the market, including Uefa Champions League and Premier League soccer, the Olympic Games, and Eurosport staples like winter sports world cups, cycling grand tours, and tennis Grand Slams.
But what will the new service look like and what does it mean for the UK market? SportsPro answers the big questions.
Why did BT want to sell?
When BT Sport arrived on the scene a decade ago, it was clear that it had the financial power and motivation to challenge Sky for a sustained period of time in a way that ESPN or Setanta Sports would or could not.
For BT, the acquisition of Premier League soccer rights was partly a defensive move. At a time when the UK communications market was trending towards combined packages of multiple services, Sky’s offer of free broadband to its television customers was a threat to BT’s business.
BT, which had so far failed to crack the television market after numerous attempts, recognised the value of sport and decided to establish its own sports broadcasting service, which was initially offered for free with any broadband subscription – a hugely disruptive move.
Sport was essentially a loss leader for BT in its battle for broadband customers, and the company doubled down with moves for Premiership Rugby, MotoGP and, most notably, the Uefa Champions League.
But the escalating costs of sports rights coupled with the existential threat of streaming services led to a thawing in relations between Sky and BT, both of which seemed content with the status quo by the late 2010s.
Meanwhile, shareholders were increasingly sceptical of the value of investing in content when BT needed capital for its rollout of full fibre and 5G infrastructure. Under new chief executive Philip Jansen, the decision was made to exit the market or find a partner to take on some of the burden.
⚽️ Champions League, Premier League, Europa League
🥇 Olympic Games
🎾 Grand Slams
🚴♂️ Grand Tours
🏉 Premiership Rugby
🤩 …and more
Warner Bros. Discovery and BT have agreed to form a 50:50 joint venture company to create a new premium sports offering for the UK & Ireland 🤝
— Eurosport (@eurosport) May 12, 2022
Why was Discovery interested?
The initial frontrunner was widely believed to be sports streaming service DAZN, which was keen to find an entry route into its home market. However, negotiations are understood to have fallen through after neither side was able to provide the guarantees that the other wanted – BT wanted DAZN to commit to retaining a certain rights portfolio, while DAZN wanted protection against any potential subscriber losses post-transaction.
This made an alternative offer of a joint venture with Discovery more attractive. Even though BT wouldn’t get the clean break it desired, it would be able to offload some of the costs and the burden of running a sports broadcaster.
For Discovery, the motivation is simple – it believes sport can drive subscriptions to its Discovery+ streaming service and BT Sport has the customers and rights portfolio to strengthen its overall entertainment proposition. Although Eurosport’s coverage of the Olympic Games, tennis, cycling, and other sports has a committed fanbase, the addition of premium soccer allows it to move from the periphery into the mainstream of sports broadcasting.
Both companies have a 50 per cent stake in the joint venture but Discovery would appear to be the senior partner. It has paid BT UK£93 million (US$113.4 million) now and will part with up to UK£540 million (US$658.8 million) if certain conditions are met. Warner Bros Discovery will be able to buy BT out of the joint venture at various points over the next four years, after which BT will be free to sell its stake or launch an initial public offering (IPO).
“This deal ultimately feels like a marriage of convenience for both companies,” Paolo Pescatore, an analyst with PP Foresight, tells SportsPro. “This allows BT Sport to effectively exit the market. And it allows Warner Bros Discovery to strengthen its own position in sports as Eurosport represents a small share of viewing in the UK.”
This deal ultimately feels like a marriage of convenience for both companies.
Paolo Pescatore, Analyst, PP Foresight
What happens now?
In the immediate future, viewers will not notice anything. BT Sport and Eurosport will continue as separate entities while the deal goes through regulatory approval, a process that neither party has any concerns about. Once competition authorities have given the transaction their blessing, the assets of both operations will be combined into a single operation. Eventually, the services will be combined under a new brand.
“We’ve agreed to put the BT Sport business and the Eurosport UK business into a 50:50 joint venture where all the rights and revenues will sit,” says Andrew Georgiou, president of sports at Warner Bros Discovery. “That means all the great content from BT Sport and Eurosport will be available through one vehicle.
“We have to go through regulatory approval so this is just phase one and we’re at the start line.
“In the short term, the rights are going to remain where they are. But from the day of completion, we will give viewers access to the content where it sits. BT Sport subscribers and BT TV subscribers will get Discovery+ and Eurosport from day one.
“But ultimately, over time, we want to bring that content into a single destination, a single digital product that has all of Eurosport and BT Sport in one place, as well as all of Discovery and Warner Bros’ entertainment content.
“The ultimate vision is a single destination that combines all the content from our combined platforms.”
What will the new service be called and will ESPN content still be included?
Although it’s fun to speculate, there is no clear indication what the combined service will be called.
It could be something as simple as BT Eurosport, which will be used for the purposes of this article, but it would be a surprise if this was anything other than a working title. BT might not be involved in a few years and although Eurosport is well known across the continent, it isn’t associated with premium content in the UK market. Meanwhile, Discovery has been eager to stress in recent times that Discovery Sport was more than just Eurosport.
“We’ve got no fixed timeline on the brand,” confirms Georgiou. “We’ve got time to think about what that brand will be and what it represents to British and Irish consumers. It’s going to be important for us to develop because the proposition has to be the best of what both BT Sport and Eurosport do.”
One thing that has been confirmed is that the ESPN brand will be phased out. BT Sport has operated an ESPN channel ever since it acquired the Disney-owned broadcaster’s UK TV operations in 2013, but this will be rebranded in the near future.
“We will still have a relationship with ESPN and have ESPN content on BT Sport, but it won’t be an ESPN-branded channel,” says BT Sport chief operating officer Jamie Hindhaugh. “It will be BT Sport 4.”
What rights will BT Eurosport go after?
The joint venture already has a wide range of rights and the focus is likely to be on integration and maximising the portfolio rather than aggressively pursuing new properties. The most important rights in the UK are Premier League soccer and although BT Sport has a less attractive package than Sky, it has a seat at the table and last year extended its deal through to 2025.
When combined with its exclusive rights to the Champions League and Europa League, the joint venture has a formidable soccer proposition to offer subscribers.
The two parties have refused to speculate on which rights they might seek to acquire as a combined entity, only that they plan to pool their resources to maximise the value of their existing portfolio through new content types and distribution models. But inevitably, a larger organisation will have more resources.
Could this mean a push for more Premier League games or a more attractive package during the next auction? The joint venture certainly has plenty of time to complete the process of consolidation and establish its proposition on the market before making such a move.
🗣️ Tim Henman: “He’s still 𝐰𝐢𝐧𝐧𝐢𝐧𝐠 and that’s always a good sign” 🇬🇷
— Eurosport (@eurosport) May 26, 2022
What will happen from a technological standpoint?
One of the things that has differentiated BT Sport since its inception is technology. Its application helped normalise the idea of streaming in the UK and it has since experimented with virtual reality (VR), social viewing, and interactive timelines. Behind the scenes, the channel has used all of the BT Group’s available resources to make use of remote production, 5G broadcasting, and 8k transmission.
Eurosport has also innovated with its Cube virtual studio technology and an operation that allowed it process huge amounts of content from the Olympics for multiple markets in many different languages.
All involved say the new organisation will be just as innovative, but the focus will be on how technology can deliver the content more effectively rather than for technology’s sake. The aim is to combine the technologies and processes from both organisations and the wider Warner Bros Discovery group.
Essentially, the message is that any technology will be used to improve the content for consumers rather than as a technical experiment.
“The last thing we want to do is stop any of that innovation,” says Scott Young, senior vice president of content and production at Warner Bros Discovery. “And I don’t mean just technological innovation but how we [innovate] in terms of the rights we acquire, how we deliver those rights to various platforms, and how we bring all this content together into one sports ecosystem. We want to build a sports platform that is premium for our audience.”
“I’m proud of our reputation of championing innovation but we won’t do it for the sake of it,” adds Hindhaugh. “The core of what we’re going to do is look at how we engage our audiences and give them the right experiences that take them to the ‘heart of sport’.
“It’s my favourite phrase but [that ethos] will continue and we’re all on the same page with that.”
One area of uncertainty is the fate of BT Sport Studios, a vast facility at the former International Broadcast Centre (IBC) in London’s Olympic Park. The studio has allowed BT Sport to innovate significantly in terms of programme presentation, with WWE UK even filming its events there.
“The decision on the studios hasn’t been made [yet],” says Georgiou. “We’ve got to get through CMA clearance and we’re obviously assessing and planning for all options that are in the best interest of the business. Quite candidly, we can’t make any decisions on that [yet].
“In terms of staff, we’re pulling people from both teams together to become one team and that’s our vision.”
The upcoming Uefa Champions League rights auction could be critical
Can BT Eurosport challenge Sky Sports?
At face value, this is the strongest test Sky will have ever faced in the UK market. But that doesn’t necessarily mean it will be worried. The fact that it has extended its carriage deal with the joint venture until 2030 indicates that cooperation is the order of the day.
Meanwhile, there is no suggestion that BT Eurosport plans on reigniting the bidding wars of the early 2010s if it can help it. A more serious threat could be DAZN, which may see the upcoming tender for Uefa’s club competitions as its last chance to break into the UK market for several years.
“I think the first real test will be the Uefa Champions League and Uefa Europa League rights renewal later this year,” adds Pescatore. “BT Sport spent heavily to be the exclusive broadcaster last time and I think DAZN will be interested. They probably need to at least maintain their current position given how well British clubs have been doing in Europe.”
Longer term, DAZN and Disney could be eager to add some spice to the Premier League auction in 2024, challenging both Sky and the joint venture’s current position.
But the biggest threat to Sky from Warner Bros Discovery may not be sport in isolation. Sky’s bouquet of premium entertainment, movies and sport has hitherto been unmatched in the UK, despite the rise of more affordable services from Netflix and Amazon. With BT Eurosport in its programming portfolio, Warner Bros Discovery has premium sport to lure customers to a wider streaming service.
Sky’s exclusive deal with Warner Bros Discovery’s HBO has provided a steady supply of premium content for its entertainment channels and the Now TV streaming platform. The arrangement is due to expire in 2024, meaning HBO’s shows would be free to join a Warner Bros Discovery platform in the UK that would also include Discovery’s programming, Warner Bros’ movies, and premium sport.
This would be a highly attractive streaming service for a household that wants multiple types of entertainment, challenging Sky’s stranglehold on the market.
“There’s a lot of fragmentation [in the market] so what we’re saying to the consumer is that this is one product where you can get a lot of great content in once place,” Georgiou states. “That’s a winning formula and a really compelling consumer proposition.”