Analysts: U.K.'s BBC, Pay TV Firm BSkyB Will Both Benefit from Olympics Deals

"The London Olympics promise to be a major success for both the free-to-air broadcast licensees and the leading pay TV platforms as a result of co-operative deals," Enders Analysis says.

LONDON - For U.K. TV networks and pay TV operators, particularly satellite TV giant BSkyB, controlled by Rupert Murdoch's News Corp., the Summer Olympics here are shaping up to be a win-win situation, media industry research firm Enders Analysis said Monday.

Given that this year marks the first occasion in modern times when the Olympics broadcast licensee in the host country is a public broadcaster, some observers originally thought BSkyB and cable giant Virgin Media might see negative effects. Some forecast possible pressure on their sports tiers subscriptions and consumer image at a time when the debate about pay TV cord cutting continues.

Early this month though, two deals with Olympics implications were struck as the BBC unveiled a deal to bring 2,500 hours of Olympics coverage to 10 million homes of BSkyB, and Eurosport struck a second deal with BSkyB to showcase more than 100 hours of 3D content on a 3D channel during the Olympics. Enders suggested Monday that Virgin Media could soon reach similar deals.

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"The London Olympics promise to be a major success for both the free-to-air broadcast licensees and the leading pay TV platforms as a result of co-operative deals being forged between them," Enders analysts said in a report on Monday. "Recent distribution agreements with Sky provide the BBC and Eurosport with a massively bigger window to showcase their credentials in in-depth sports coverage and new technologies, especially 3D."

The benefits for the pay TV operators are also clear, it added. "For Sky, and assuming Virgin Media in due course, there exist a number of potential indirect commercial benefits as the message is sent out loud and clear that there is no better place to go for London Olympics free-to-air coverage than the pay TV platforms."
That should help offset concerns about negative effects of the Olympics on pay TV players.

"On the contrary, recent developments suggest quite the reverse," Enders said. "The BBC coverage could provide very encouraging news for the two leading pay TV platforms. The effect of the deal with the BBC is that it has almost reserved the negative of not handling the Olympics televised coverage by making Sky’s satellite platform the best port of call for anyone wanting in-depth or specialized coverage plus additional timeshift recording options."

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Put another way, Enders said: "Indeed, the London Olympics could not be coming at a better time for the leading pay TV platforms, as the squeeze on consumer disposable incomes and fears over employment have stalled net subscriber growth. But that and any uplift in subscriber numbers they get as a result is on the condition that they offer best in class distribution."

There is also an advertising opportunity, Enders suggested. "Sky stands to benefit over the likes of ITV, Channel 4 and Five in terms of being the best environment for supporting and extending sponsor engagement with spot advertising," it said in its report without providing an estimate on how much revenue this could add for the company.

Overall, the London Olympics will provide groundbreaking coverage U.K., Enders also highlighted. The amount of content will be about four times the volume produced for the Beijing Olympics, including much 3D programming, it said.