BT hopes play on football will pay off The share prices of BT and BSkyB dropped sharply on Thursday as investors digested just how much the pair had to pay after a bidding war for rights to broadcast Premier League football. For BSkyB, which picked up the majority of the matches, such aggressive bidding was necessary given its declared desire to be the home of football on TV, but the involvement of BT was more surprising. The telecoms group acquired 38 games for three seasons for £246m a season, a price more than 40 per cent higher than three years ago. A football-themed interactive sports channel will be used to attract customers to its BT Vision pay-television service that is offered over its high speed fibre network. Analysts have interpreted the move as a turning point for BT, which has spent several years following a safety-first strategy based on cost cutting and returning cash to shareholders. This is, analysts say, a gamble that spending money on TV rights - and in turn, reducing earnings before interest, tax, depreciation and amortisation by £100m and free cash flow by £200m in 2013 - will pay off with a sharp increase in customers for a service that has struggled to match the lofty ambitions expressed at its 2007 launch. Just 700,000 customers have signed up to BT Vision compared with an initial target of 3m customers by 2010. However, subscriber numbers rose 23 per cent last financial year as more customers moved to higher speed broadband packages. Ian Livingston, BT's chief executive, says that previous Premier League rights holders such as ESPN gained more than a million customers. "Some people had our cash flow going down in later years and that is not how we see it," he says. Analysts at Citi estimate that BT would need 2.5m TV subscribers to break even, assuming a monthly price of £10. However, BT also hopes the move will drive up its overall customer numbers. "Assuming each incremental broadband customer yields an extra £25 per month excluding VAT at a 60 per cent margin, [it] would imply a break-even level of only 820,000 subscribers," say Citi analysts. BT has committed to a £2.5bn investment in making superfast broadband available to two-thirds of homes in the UK. Superfast fibre networks are seen as the future for revenue growth, by offering customers higher-priced services such as high definition television and video-on-demand over the internet. Mr Livingston says BT Vision customers will be able to interact more fully with games, while appealing to the occasional football fan unwilling to buy into a BSkyB package. "People want to see football but not spend £40-£50 a month," he says. The rights could also be useful when discussing the arrangement under which BT sells BSkyB-owned games over BT Vision. If BSkyB wants BT's games, then they might need to be more forthcoming with their own in future. BT, however, will not be bidding for other sports as aggressively. Mr Livingston says: "We will look at other platforms and will absolutely talk to Sky and other people. Will we look at other bolt-ons - yes - but nothing of this magnitude ... It's a football focused channel. That will be the core of it. Deutsche Bank points out that other attempts to create football channels have disappointed and BT is inexperienced in this area. It adds that buying the TV rights may trigger a response from other broadband providers such as BSkyB. But it believes this constitutes a way for BT to use its broadband infrastructure more effectively. Citi also highlights the possible rewards from the strategy, saying: "BT can offer content at low margin to improve take-up of broadband, the mirror-image of Sky's strategy."