Warner Bros. Discovery, BT Strike Deal for U.K. Sports Joint Venture
Warner Bros. Discovery and British telecom giant BT Group have wrapped deal talks and will merge their sports media units BT Sport and Eurosport in the U.K. and Ireland in a 50/50 joint venture.
JB Perrette, CEO and president, global streaming and interactive at Warner Bros. Discovery, signaled that a long-running HBO content output relationship with U.K. pay TV giant Sky would not continue in its current form when it expires, just like many experts have been predicting. After that “long and important relationship” ends in its current form in a few years, the Discovery+ and HBO Max streaming services will come together in the British market just like management has previously said it plans to do in general.
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He said the firm’s streaming service would be tiered in the U.K. then, “given the premium nature of sports in this portfolio.”
How will the joint venture immediately fit into Warner Bros. Discovery’s broader streaming strategy? “Particularly given what’s happened in the industry in the last few weeks,” including Netflix’s first-quarter subscriber decline and increased Wall Street focus on sustainable and profitable streaming business, “we like our hand,” Perrette said. “We are not a one-product, one-content type story. We are a multi-product,” including general entertainment, kids, news, unscripted, sports and other content. That makes Warner Bros. Discovery’s combined streaming offerings “incredibly compelling for consumers and differentiated.”
Perrette also mentioned that pay TV was going through a period of “reinvention of the bundle.”
Some players would re-aggregate such a traditional bundle offering over time, he suggested.
When the two parties unveiled exclusive discussions about a deal in February, Discovery, before the completion of its merger with WarnerMedia, said that the venture “would bring together BT Sport and Eurosport U.K., which have extensive portfolios of premium sports rights, including the Olympic Games, the Premier League, UEFA Champions League, UEFA Europa League, cycling Grand Tours, tennis Grand Slams, the winter sport World Cup season and Premiership Rugby.”
The JV, owned equally by Warner Bros. Discovery and BT, will retain the BT Sport and Eurosport brands in the U.K. and Ireland. In the announcement, the companies revealed BT Sport’s losses in the year to March 31 were $271 million (£222 million) while its assets are $413 million (£339 million). Additionally, the value of the assets of Eurosport U.K.’s rights and distribution agreements contributed directly to the JV was $14.6 million (£12 million) and it had an operating profit for the year of $19.5 million (£16 million).
The companies announced that customers who access BT Sport through BT directly, and the majority of BT TV customers are set to receive the streaming service Discovery+ home to access Eurosport’s live and on-demand streaming offer in the U.K. and Ireland, as part of existing subscriptions.
Warner Bros. Discovery and BT also revealed the terms of the JV agreement. Both Warner Bros. Discovery and BT will each directly contribute, sub-license or deliver the benefit of their respective sports rights and distribution agreements for the U.K. and Ireland to the JV. The operating businesses of BT Sport will be transferred to Warner Bros. Discovery. BT is set to receive $114 million (£93 million) from Warner Bros. Discovery and up to approximately $659 million (£540 million) by way of an earn-out from the JV, subject to certain conditions being met. And BT plc will retain a 50% interest in the JV, and Warner Bros. Discovery will be granted a call option over BT’s interest in the JV, exercisable at specified points in the first four years of the JV.
BT, which has rights deals for the likes of English Premier League soccer, English Premiership Rugby and cricket, said last spring that it wanted to focus on its core telecommunications business and was in negotiations with potential partners over the future of loss-making BT Sport. Sports streamer DAZN, whose chairman is former Walt Disney Co. top executive Kevin Mayer and whose parent company is Len Blavatnik’s Access Industries, was widely seen as a potential buyer of BT Sport. Reports previously also said that Disney, Amazon and U.K. TV giant ITV were among other potential suitors.
