BT still has a long way to go
BT must be disappointed that, despite a huge marketing campaign for its TV sports offering, it has only signed-up 23,000 new subscribers – but at least ITV is smiling. By Raymond Snoddy.
Television advertising must work. How else do you account for the combined $35 billion value of Omnicom and Publicis. Forget for a moment whether such a gigantic merger makes sense – probably not – it is still a tribute to how much financial clout you can create by just selling the stuff, and maybe a little bit more besides.
Yet deciding which ads work and which don’t and across what sort of time scale, or weight of campaign has always been a tricky business, as BT would be happy to testify.
Can there have been a more noticeable campaign than the one announcing that BT was now a serious player in the pay-TV sports business? You are about to miss top pick games in the Premiership if you don’t sign up to BT – and by the way the footy is entirely free as long as you sign up for BT broadband. It sounds like a great deal; proper football fans are fanatical about their teams and there seemed absolutely nothing wrong with the execution of the campaign.
BT’s ad splurge and BSkyB’s fighting reaction helped to boost ITV’s advertising revenues by 12 per cent this month with 20 per cent to look forward to in August.
But how do you even begin to explain the fact that despite the multi-million commotion about the football BT managed to sign up only 23,000 new TV subscribers in the three months to the end of June? This compares with 40,000 in the first quarter and, to rub salt in the wound, while BT was spending that fancy advertising budget rival TalkTalk signed up 160,000 new subscribers.
BT is able to say that 500,000 households have signed up to BT Sport, although the telecoms group admits that most of these are existing customers who have re-signed to get the free football package. So at least you can say the defensive part of BT’s proposition is working.
It is, of course, far too early to dismiss BT’s £1 billion investment in television sports or indeed the power of its advertising campaign.
BT’s sports channels don’t even launch until August 1 and the first Premier League ball doesn’t get kicked until August 17 and it is notoriously difficult to sell something that doesn’t actually exist. The early advertising can be seen as raising awareness and warming up the market.
It may be that BT may even have damaged itself in the short term by emphasising so strongly the Premier League. It may seem an incredible thing to contemplate but there is a large “laity” out there who simply don’t get football and might be turned off by such sport-specific advertising. BT needs to be careful about swamping its overall television message.
Still, by any standards, 23,000 must still be a disappointing number and evidence that the BT story has still to be sold to the public – something that ought to mean lots more lovely lolly for ITV going forward.
The telecoms group must be hoping that Sky Sports subscribers are capable of behaving in a rational way, which would be to hold on to their Sky Sports while moving over to BT broadband to get their 38 “missing” games for “free.”
There is another, less benign, outcome which BT must be aware of, although it has not been behaving as if it had. Its Saturday football window is absolutely ideal for watching in the pub. So naturally BT is doing everything it can to spread availability of its service with a serious discounting of Sky’s pub charges – making the service available at an average cost to pubs of around 20 per cent of Sky charges.
But what if Sky subscribers, partly out of inertia, hold on to their present packages and toddle down to the pub to catch the limited number of games they might be missing that involve their team?
Then the battleground becomes a more limited one – BT has to attract new broadband customers who are also interested in sport and football in particular if the Great Leap Forward is to work.
The company has enormous economic muscle and is clearly in television sports for the long term, but BT executives will still be holding their breaths to see what happens next. The second half of the year will be crucial in finding out whether 38 Premiership games a season are enough to make a difference.
The only certainty is that BT and Sky will remain very good customers of ITV for the foreseeable future as will TalkTalk as it continues to pursue budget pay-TV customers.
In fact, ITV also provides a very good example to BT about the importance of setting a medium-term strategy and sticking to it in a dogged, unshowy way.
When ITV shares were languishing at Death Valley-style levels of around 30p, not many were forecasting the gradual implementation of a coherent plan. At the moment things are looking so good for ITV that the share price has now surpassed the 130p a share offered by Greg Dyke for the company in 2006.
ITV rather grandly turned down the offer as undervaluing the company, and Dyke was of course very lucky, but those who believed in the long-term future of network television, and ITV in particular, have been vindicated.
Online, pay and interactive revenues are heading in the right direction with growth of 19 per cent in the first half to £56 million and overall ITV said that adjusted pre-tax was up by 16 per cent for the first six months of the year to £270 million.
Clearly still a long way to go but if there are potential predators out there for ITV it wouldn’t do to wait until the end of Crozier’s five year plan, by then too much of the value could already be in the share price as the penny drops in the City that network TV has a long-term future.
Further evidence for that came this week in a survey conducted for TiVo that – guess what – reported the latest bogey man, OTT operators such as Netflix, are having little effect on traditional viewing patterns.