Sky is bracing itself for a battle with BT as the telecoms giant tries to tempt Sky customers towards its new broadband television service, BT Vision.
The prospect of a battle between the two intensified as BT revealed details of its long-awaited broadband TV service, including a sports channel, BT Vision Sports, and a partnership with Warner Bros.
The sports option, which will be made available from mid-2007, hands BT Vision the rights to 46 live Premiership games through its partnership with Setanta.
Lorna Tilbian, a media analyst at Numis, said BT Vision would "take customers away from Sky in the short term", but she questioned if selling premium content at a discount in the long term "was a viable option".
At the launch of BT Vision this week, Gavin Patterson, the managing director of consumer at BT, argued that the company had opened up a "third way" between more expensive services, such as Sky and cable, and the free-to-air-service, Freeview.
BT Vision customers, who will receive the service via a set-top box called the V-box, will have access to a library of on-demand content via their broadband connection, as well as more than 40 Freeview channels through their aerial.
BT is attempting to undercut the pay-TV services of Sky and ntl and high-street rental shops such as Blockbuster in the home film market through agreements with film content providers such as Warner Bros. BT Vision will charge less than £3 for the latest films.
However, David Wright, an analyst at JPMorgan, said Sky should not be overly worried by BT's attempts to stake a claim on its territory. "With Sky Sports priced at £11 per month, Vision would need to be at a material discount in our view," he said.
Ian Livingstone, the chief executive of BT Retail, said BT Vision would be profitable in three to four years, and was targeting two million to three million customers by 2010.
Wright said: "It should help BT to reduce customer churn following the strong challenge established by Sky and the Carphone Warehouse."
It is not clear how BT's Vision's ad model will work, but Dan Marks, its chief executive, said it would be similar to the "usual hybrid revenue model based on cost per thousand".
BT Vision will offer advertisers interactive opportunities including targeted advertising and user-generated content tie-ups.
The interactive services will roll out throughout 2007, with the majority set to launch in the second half of the year.
Options include viewer participation based on quiz show formats and video telephony and instant messenger, allowing BT Vision customers to communicate with each other during broadcasts.
There will also be opportunities for advertisers to buy DALs (dedicated advertiser locations), special interest programming and retail and gambling services.
BT Vision is also venturing into the area of user-generated content, with the launch of the BT PodShow.
"The speed of processing inside the V-box means the download time for an interactive page is faster than we've seen before. Users will not have to wait for the page to download," Antony Carbonari, the director of interactive and commercial media at BT Television Services, said.
Serious about sport
BT has also struck a deal with the Irish pay-TV sports broadcaster Setanta to show 46 live Premiership football matches next season.
The agreement forms the backbone of a special sports division - BT Vision Sport. This will be offering Setanta's new sports channel, Setanta Sports, from next season.
The deal means BT Vision customers can watch three- quarters of all next season's Premiership matches in full.
The Setanta tie-up is one of 25 content deals negotiated by BT. Other partners include Dreamworks and Disney.
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