U.K.'s BSkyB to Raise Prices of Sky Sports Networks, ESPN

BSkyB Satellite - Sign - 2010
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The pay TV giant, which had frozen its prices for two years, highlighted that it has increased its content spending by more than $600 million per year.

LONDON - British pay TV giant BSkyB is raising its prices for its Sky Sports 1 and Sky Sports 2 networks, ESPN and an entertainment content package as of September after a two-year price freeze.

U.K. media regulator Ofcom disclosed the increases on Friday, and BSkyB published an advisory on its web site, highlighting it has spent more than $600 million more per year on content. Rupert Murdoch's News Corp. controls a 39 percent stake in BSkyB.

Each of the two Sky Sports channels will cost an additional 50 pence per month (78 cents), and the price of Walt Disney's ESPN will rise by £1 ($1.56) a month. The company's Sky Entertainment packages will cost an extra £1.50 ($2.34) per month, but pricing for Sky Movies and other offers will remain unchanged, the company said.

A BSkyB spokesman said the price hikes come amid continued service improvements that have meant big content investments.

“Having held our prices for 24 months, this September there will be a small price increase to some of our TV packages," he said. "We’re committed to investing for our customers, and over the last two years this has led to Sky investing nearly £400 million ($624 million) more in content per year, the launch of two new channels [in a Formula 1 channel and Sky Atlantic, which features HBO content] and award-winning products, including [mobile service] Sky Go and Sky Anytime+." The company also recently agreed to raise its spending on the English Premier League soccer rights.

The spokesman added: "A small increase in our prices means that we can continue to reinvest in the best content for our customers, alongside market-leading innovation to make their experience even better."

BSkyB is in the process of writing to all of its 10.5 million subscribers to advise them of what the price changes mean for them.

The change also effects other pay TV operators that have the right to carry the sports networks, including telecom giant BT and cable firm Virgin Media. The rate they pay to wholesale Sky Sports channels is linked to their retail price.

When BSkyB raises its prices, "it raises the cost for BT and Virgin Media," said Jefferies & Co. analyst Will Smith. "They will either have to eat it or raise prices as well. Sky is in the driver's seat here."

Ofcom sets the wholesale prices for Sky Sports 1 and 2 based on a formula that uses a fixed margin between BSkyB’s retail and wholesale prices for those channels.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai