Originally Posted by GeorgeS:
“BT despite their bluster, have taken a huge gamble. remember that on top of the rights, they will have to pay for a huge promo and advertising campaign as very few people are even aware that they have sports rights at all. In the Global Services debacle they priced below cost to take share off others and it took years to clean up the financial mess. That memory is still very alive in the boardroom at BT”
Fair points.
But is the downside that great? BT is (at the moment) spending £300m per year on sports rights. OK, to that you have to add:
- Production costs - unknown
- Promotion costs - unknown (but will be joint promotion with other services)
Profit before tax and Free cash flow are both in the region of £2,000m per year. So even if the whole BT Sports exercise was a 100% write-off (ie literally zero incremental revenue generation) it's not that significant. And realistically it's not going to be a 100% write-off.
Not saying they want to throw away £300m to £400m per year - obviously they don't want to reduce profits by 20% just for fun. But it's not that substantial in the overall scheme of things.