US media giant Discovery is in talks with BT Sports over a potential partnership deal that would derail months of talks with sports streaming service DAZN over a £600m outright sale.
As talks between DAZN and the telecoms group have become mired over commercial details, Discovery has entered the mix with an alternative offer for the future of its sports broadcasting arm to create a joint venture, the Telegraph first reported.
Under the reported plans, the two parties would pool their sports broadcasting assets to create a powerful joint body.
BT Sports currently owns the rights to screen English Premier League and Europe’s Champions League football mathces in the UK, while Discovery which owns Eurosport and rights to the Olympic Games.
According to the reports, the partners would aim to make cost savings over time in a deal that would see BT sell out at some point.
BT bosses are said to have begun considering Discovery’s proposal as a “Plan B” over the last couple of months, after the group got bogged down in the nitty gritty details of its deal with DAZN.
A spokesperson for BT told City AM: “BT can confirm that discussions are being held with a number of select strategic partners, to explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth. These discussions are confidential.”
Meanwhile, Dazn declined to comment. Discovery did not respond to request for comment.
BT’s sports service is part of its customers’ broadband subscription, which has prompted DAZN to seek long-term assurances that BT would cover the loss of revenues if its sports customers cancelled their subscriptions – a request the telecoms giant is said to have rejected.
Meanwhile, BT has reportedly sought guarantees that its subscribers will be able to have continued access to DAZN’s services, and that they will not encounter streaming blackouts.
An alternative transaction offers BT a buffer if the DAZN deal collapses, after its largest shareholder, French billionaire Patrick Drahi, has dialled up the pressure.
Speculation that he may be eyeing a takeover has gathered pace, ahead of the deadline for his six-month lock up agreement – which prevents him from increasing his 12 per cent stake in BT and launching a bid – expires this coming week.
“Discovery, about to merge with Warner, is one of the most powerful content operators in the world, so if it were to increase substantially its commitment to the UK sports TV market, it would look like a long-term, credible commitment. By contrast DAZN’s prospects are more fuzzy,” said said Francois Godard, senior media and telecoms analyst at Enders Analysis.
While Godard predicts the potential joint venture would not push sports rights costs up, owing to Eurosport and JV’s historically cautious approach to rights, he argues that the deal would “confirm the fragmentation trend where consumers need to subscribe to a range of services to watch their favourite sports – Sky, BT Sport, Amazon, Eurosport.”
“It rises the value of aggregation by operators likes Sky or Virgin, telling viewers “you find everything here in one place”.