Let me entertain you: BT’s deal-maker shows his cards

In an earlier life he clinched deals for Richard Desmond, as the Northern &
Shell owner’s legal adviser. It was Watson who put together the contract for
OK! magazine’s exclusive coverage of the David and Victoria Beckham’s
wedding. “It turned into the biggest single run in UK magazine history,” he
notes.

Before that, as a young criminal barrister, he won his first jury trial,
defending a woman charged with stealing a bottle of sherry from a
supermarket. As he cross-examined her, the woman collapsed. “The accused had
an asthma attack on the stand and she was acquitted,” he recalls, admitting
that the drama “had more to do with the result than my advocacy”.

So when Watson took up the role of chief executive of BT Vision at the start
of this month he did so with the anticipation of success. This is in spite
of suggestions that BT Vision, a broadband-based digital television service
that rivals BSkyB and Virgin Media, has lost its way. His predecessor, Dan
Marks, quit earlier this summer, citing “frustration” at the “dominance of
Sky over live Premiership football rights”. Watson, though, feels
differently. “I wouldn’t say we were frustrated at all, quite the opposite,
I’m very optimistic about the future.”

Since Marks’s departure, Ofcom, the broadcasting regulator, has concluded its
review of the pay-TV market and suggested Sky should share its sports and
film content with other platforms, such as BT Vision. Although Sky has
reacted angrily to the proposition, Watson is convinced he can do a deal.

He is operating on familiar territory. Another of his previous roles was as a
director of the media broker Reel Enterprises, for whom he was the chief
rights negotiator for the Football League and the Scottish Premier League.
“It’s a market I know very well,” he says.

So he is also familiar with his opposite numbers at Sky. “We have a great deal
of respect for them in terms of their corporation and their executives; we
have very good personal relationships there. What we need is a grown-up,
commercial, sensible relationship with them, going forward, in which we can
sell their products, make them and ourselves some money too.”

Despite the widespread expectation in the television industry that BSkyB will
fight through the courts any attempt to undermine the value of its sports
and film packages – the key drivers in building its nine million customer
base – Watson anticipates being able to provide the full Premier League
offering by this time next year. “I would hope to have them by the beginning
of season 2010-11. It would be one of the things that would give us a step
change in terms of our proposition. Lots of our customers ask about it and
we’d like to be able to offer it to them.”

If Ofcom orders a major reduction in the wholesale price for Sky Sports, BT
Vision could offer packages for as little as £15 a month, which would force
BSkyB to greatly reduce the £35.50 it quotes to new customers.

Ofcom has deferred its final decision pending a further consultation until
September and Watson appeals to the regulator to stick to its guns. “They’ve
done a very detailed and comprehensive review and have left no stone
unturned,” he says. “We think that’s a very good step forward and what we
would say to them is that they need to hold their nerve and act swiftly to
get that framework in place.”

BT argues that its own wholesale of broadband to other providers has shown the
benefits of removing exclusivity. “Since BT started to wholesale broadband
the market has exploded and BT’s business has grown as a result. We will see
exactly the same benefits in pay TV, and Sky will benefit from that,” says
Watson, who is a non-executive director of the leading independent
production company Shed Media.

BT Vision had just 423,000 customers in the last quarter, only 10% of BT’s
broadband consumer base and well short of its target of two to three million
by 2011. “This is pretty reasonable growth in a challenging market place,”
Watson claims, while admitting more has to be done to convert to BT Vision
those who already take other BT services.

He denies the venture is in need of a re-brand but agrees the marketing
strategy in its first two years has not been good. “General awareness has
been an issue for us and we’ve got to address that.”

BT’s Vision Box has advantages over Sky+ in that, as a broadband service, it
offers high-quality access to “watch again” services such as the BBC’s iPlayer.
“Our customers don’t have to wait for content to download, it’s immediate.
You press the button and it plays, and the quality is guaranteed.
Effectively we pay for a bus lane through the broadband network.”

Though he is interested in taking the Sky Movies package following Ofcom’s
intervention, Watson says BT Vision’s own PictureBox film offering performs
well, with relatively recent blockbusters generating extra revenue through
the on-demand viewing option. The platform also offers the “only major kids
[television] service that has no advertising around it”, although Watson
concedes that “I can’t promise that will be the case forever”.

He is confident that Project Canvas, BT’s joint venture with the BBC and ITV
to bring internet and on-demand content to the television screen, will be in
place by early next year, increasing the proliferation of Vision Boxes
around the country. “I think Project Canvas will do to TV what the iPhone
has done to the mobile market, it’s that good.”

Watson talks a good game. The question is whether he can close the deal.
“Frankly, over the next two or three years, I don’t think we’ve got any
excuse to fail,” he says.

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