Jake Humphrey welcomes the press to BT's new TV announcement. Image: SEENIT
Jake Humphrey welcomes the press to BT’s new TV announcement. Image: SEENIT
Two years ago BT summoned an army of sports, entertainment and technology journalists to what was then a building site in the middle of the Olympic park to confirm that, yes the rumours were true, and it really was going to give away Premier League games to anyone buying even the cheapest of its broadband packages.

A good number of those in the room thought the firm’s bosses were mad.

Analysts lined up to pour cold water on the plan, arguing that BT’s pick of games wouldn’t be good enough to deliver enough customers to make the giveaway pay off.

One leading firm even insisted that BT Sport was “not a game changer”.

But the strategy which so many mocked and queried has been an unqualified success.

In the past two years, BT’s consumer division has enjoyed renewed growth and profitability, repeatedly signing up more broadband customers than its rivals and around 70% of all fibre broadband sign-ups.

So, unsurprisingly, there was a plenty of confidence and swagger on show from bosses when we returned to the BT Sport studios this week to discover how the firm planned to monetise its exclusive Champions League rights.

Most – including me – expected the games to be made available via an add-on channel costing around £5 a month. Some expected them to cost more.

But none of us had expected that BT Sport Europe, along with BT Sport 1, 2, Extra and ESPN, would be given away free to anyone taking a BT TV subscription.

There’s a small sting in the tail for broadband customers watching on Sky or via BT’s app who will now only receive BT Sport 1 and BT Sport Extra unless they pay £5 for the full pack of channels.

But those unhappy at being asked to pay can easily avoid the charge by paying a one-off £35 activation fee on a £0 (free!) per month TV tariff and watching the games on their TV.

While BT has undoubtedly taken something away from existing customers, it’s taken less than some expected – some thought the channels might stop being free in any form and that fans may have to pay as much as £15 per month – and provided an easy get-out which offers a better viewing experience.

While the first phase of BT Sport was about shoring up a declining broadband business, the second is about accelerating growth in an increasingly mature TV platform.

The past couple of years have seen the YouView platform BT co-owns iron out early teething troubles, extend its capabilities, add support for red button services and additional content providers such as Netflix.

The last of these BT uses to plug a gap in its entertainment offering, the red button capability it’ll use to allow football fans to seamlessly switch between concurrent games and stay up to date with goals, penalties and player substitutions.

And BT has also been busy adding new features to its on demand store, such as the ability to buy films and TV boxsets which can be watched both on the family TV and on tablets and via web browsers.

With shows such as Game of Thrones, True Detective and The Blacklist now available, the firm has closed both the content and feature gap between its TV service and the more established Sky and Virgin Media platforms.

And of course BT TV will be the only place to watch BT Sport Europe in 4K UltraHD, giving it a key USP over its rivals.

Publicity for the TV service, which has long been uninspiring and sporadic, recently got a major boost with the launch of a Ewan McGregor fronted TV ad campaign which will ramp up as the start of the new football season approaches.

What does all this focus on extra content, exclusive 4K and interactive features mean for the business and its rivals?

BT is currently the UK’s fourth biggest – out of four – pay-TV operators with 1.14m direct subscribers.

By contrast Sky has more than 11m+ subscribers, Virgin Media approx. 3.8m and fellow YouView shareholder TalkTalk currently boasts more than 1.4m.

Contrast BT’s limited success in shipping out set top boxes with the 5.2m homes which receive its sport channels and you can see there’s plenty of scope to finally deliver growth in the TV business.

Deducting the 1.14m BT TV customers and around 1.8m Virgin Media customers who get BT Sport as part of their XL TV package leaves around 2.3m homes who watch the channels either via apps on tablets and smartphones, a Sky box (a mix of free with BT broadband, reduced price with Plusnet and full-price subs) and a handful of Virgin Media customers on lower tier packages who pay for the channels as an add-on.

Plusnet is a BT subsidiary and BT’s already making money from Sky customers who prefer to pay full price for the channels rather than switch broadband providers, and it gets cash from Virgin Media in return for letting it sell the channels.

Stripping these out still leaves something in the ballpark of 1.8m to 2m BT broadband customers, many of whom might be persuaded to pay that one-off £35 box charge rather than £5 per month.

Even some of those BT broadband customers who currently watch on a Sky box might prefer to add a second box under their TV to get the full suite of channels on their big screen rather than be reduced to just BT Sport 1 and Extra or pay the new £5pm charge.

The fact that BT are committing to keeping the Premier League and Aviva Rugby on the still free BT Sport 1 for one more season will be enough to keep many happy.

So let’s be cautious and guess that around half of our estimated 2m BT broadband customers add a BT set top box to their bill, this could take BT’s TV customer base to around 2.2m within 12 months.

But there are more areas of potential growth than simply converting app watchers to BT set top box owners.

Within 12 months BT will gain millions of new customers through its purchase of EE. Of course, some of these overlap with its own existing broadband base and many will have TV from Sky and Virgin Media.

But EE clearly thought there were enough price sensitive customers interested in pay-TV to develop its own platform which, in content terms, is far behind BT’s.

BT will gain all the current EE TV customers plus have the ability to offer millions more low priced bundles. And it’s impossible that it won’t see some Sky and Virgin Media households either switching wholesale or moving broadband to BT so they can watch in 4K.

Take all these potential pots of growth together and it starts to become possible that BT ends its current Champions League rights deal with something close to 3m TV subscribers.

From that benchmark an assault on Virgin Media’s spot as the UK’s second biggest pay-TV provider would look both credible and inevitable.