BT to launch sport joint venture with Discovery
BT has entered exclusive discussions with Discovery on a deal to create a new sport and entertainment offering for customers in the UK.
The new business would be a 50/50 joint venture, bringing together BT Sport with Eurosport UK.
The new combined business would remain committed to retaining BT Sport’s existing major sports broadcast rights while BT Sport customers would get access to Discovery’s sport and entertainment content, including the discovery+ app.
It would hold rights including Premier League, Champions League, Olympics, cycling grand tour, tennis grand slams, and more.
BT said it is aiming to conclude the exclusive discussions with Discovery early in the first quarter for the new company to be operational later this year, subject to completion of the deal and approval by the relevant competition authorities.
Marc Allera, CEO BT Consumer, said: “The proposed joint venture with Discovery Inc. would create an exciting new sports broadcasting entity for the UK and would act as a perfect home for our BT Sport business.
“With a shared ambition for growth, as well as the combination of our world class sports assets along with Discovery’s premium sports and entertainment content, our customers will benefit from even more content in more places.”
BT has also reached agreement in principle with Sky for a new longer-term reciprocal channel supply deal to beyond 2030.
BT had been expected to sell its sports business to streaming platform DAZN which has been expanding across Europe but DAZN chairman Kevin Mayer claimed that a deal became ‘uneconomical’.
The deal with Discovery will be a blow to DAZN, which launched in the UK in December 2020 and has largely focused on boxing content to date. Mr Mayer signalled that the company is still looking to expand in the UK, despite this setback.
“We remain fully committed to growing our business and investing in the UK, as you will see in the near future.
“On this occasion, however, the deal for BT Sport became uneconomical for DAZN. However, we respect that BT chose a different strategic path and wish BT, BT Sport and Discovery all the best for the future.”
In a trading update for the nine months to 31 December, BT said faced revenue challenges due to delayed Covid-19 recovery and supply chain issues.
Revenue came in 2% lower at £15.7bn, primarily in Global and Enterprise and partly offset by growth in Openreach.
Adjusted EBITDA was up 2% to £5.7bn, driven by tight cost management, lower indirect commissions and higher revenue from ethernet and fibre-enabled products, partly offset by declining revenue in Global and Enterprise.
Reported profit before tax was £1.54bn, down 3%, primarily due to higher finance expenses and depreciation and amortisation, partly offset by increased EBITDA.
John Moore, senior investment manager at Brewin Dolphin, said: “BT remains a business in transition, caught between needing to invest in various parts of its business.
“The deal with Discovery brings some clarity in terms of direction, while there is also progress with its 5G and full fibre commitments.
“However, revenues and profits continue to decline and shareholders – who have suffered material underperformance relative to the FTSE 100, despite the recent bounce in share price – need to see clarity and positive momentum being delivered in the next few statements.”
Russ Mould, investment director at AJ Bell, says: “Having made a big pitch for a slice of the football pie some years ago, battling out with Sky for rights to Premier League and Champions League football, BT now wants to find a partner to share the huge costs involved.
“Eurosport-owner Discovery looks to be ready to step in and this would be a positive development for BT even if it would represent an admission of at least partial failure for the bold sporting rights strategy launched a decade ago. Though if you were feeling kind, you could say it did the job of stemming the loss of broadband customers to Sky.
“BT’s uneasy truce with its big rival was reflected in an extension in the reciprocal sharing of content across its platforms out to 2030.
“The company’s business-to-business operation endured a tricky quarter, which contributed to the negative market reaction to this latest update.
“Telecoms magnate Patrick Drahi’s presence on the shareholder register is likely to keep up the pressure on BT management, with speculation of a possible bid or break up of the business unlikely to go away soon.”