BT Group PLC (LON:BT.A) has agreed a deal to market and sell Now TV, the video streaming service of its rival Sky PLC (LON:SKY).
The companies have been long-time competitors to securing the broadcasting rights to Premier League and Champions League football but they have decided to join forces after on-and-off negotiations over a number of years.
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Under the agreement, Now TV - which streams Sky Sports, Sky Cinema and Sky Atlantic – will be available on BT TV’s set top box. BT will sell sUBScriptions to NOW TV’s passes to its customers.
Sky will also sell BT Sports channels, which include Premier League and UEFA Champions League, to its satellite customers.
BT shares rose 1.3% to 277p and Sky climbed 0.86% to 998p in morning trading.
Deal broadens content offering, says BT
“This is an important day for BT and for our customers, who will be able to enjoy a whole range of Sky’s sport and entertainment programming on their BT TV boxes,” said BT’s chief executive Gavin Patterson.
“This is the next logical step for our TV and content strategy. Having built up an outstanding portfolio of exclusive sports rights and a loyal base of customers, we feel that now is the right time to broaden the ways in which we distribute BT Sport.”
The deal will take effect from early 2019.
BT TV customers can currently only buy Sky Sports Main Event as a bolt-on to their TV service for £27.50 per month.
The agreement with Sky will allow BT customers to take all 11 Sky Sports channels, as well as a NOW TV Entertainment pass offering Sky Living, Sky One and Sky Atlantic channels.
The deal comes amid concerns about BT’s rising costs of securing sports right and investing in customer services. In its latest trading update, the company blamed investment in sports rights for a 4% decline in adjusted underlying earnings to £1.18bn in the second quarter.
The rise of Netflix and Amazon
Competition for video streaming has been heating up with Netflix and Amazon investing heavily in their own content and Walt Disney Co.(NYSE:DIS) preparing to launch its own service in 2019.
Ahead of launching its video streaming service, Disney on Thursday announced a US$52.4bn deal to buy most of 21st Century Fox Inc’s (NASDAQ:FOX) assets, including its 39% stake in Sky.
READ: Walt Disney confirms deal to buy most of 21st Century Fox's assets
“This morning’s announcement by BT Group and Sky is an interesting development in light of Disney’s intended acquisition of the brand,” said Michael Hewson, chief market analyst at CMC Markets.
Hewson added that the pair may have an eye on the next round of bidding rights on Premier League and Champions League, which starts next February.
“The costs of these are not insubstantial amounts of money, and getting a return on this sort of investment is becoming much more challenging,” he said.
"At a time when content is all important and brands like Amazon and Netflix are proving such disruptors this tie-up could suggest a more collaborative approach when it comes to bidding next year. “