By Paul O'Sullivan
News broke recently that the UK telecoms regulator, Ofcom, on foot of a complaint by Virgin Media, is to investigate the selling of audio-visual TV rights for Premier League (PL) games (see Ofcom statement here). Virgin’s argument is that the collective selling of PL TV rights is anti-competitive as it restricts the number of games available for live broadcast, leading to less choice and higher prices for consumers.
The Premier League’s argument for collective selling of TV rights is that it allows a more equal distribution of TV rights revenue across clubs than would individual selling, whereby the bigger clubs would be able to sell rights to their own games at a much higher price. While this may be a laudable goal, it is not clear why this should be the way to minimise any revenue imbalances. Other sports use measures like sharing gate-revenue and salary caps. Also, in principle, all clubs could share individual TV rights revenue. As well as this, the number of games broadcast live is restricted and no game can be shown at the traditional Saturday 3.00pm slot for fear that it may impact attendances at other PL games and those in lower Leagues.
Up to 2007, all live PL matches were shown exclusively by Sky. Following a European Commission investigation, from 2007 the PL divided games into packages and no one TV company could purchase all packages. Currently, Sky has exclusive rights to 116 games, with BT having the remaining 38. While there was an increase in the number of TV companies providing live TV coverage of PL games, what effectively happened was that one monopoly was replaced by two, as both Sky and BT has exclusive rights to individual games. It could be argued that this greater ‘competition’ made some consumers worse off. Fans with Sky subscriptions now had to purchase two TV sports packages to watch the same number of games as before, or had to find some other way of accessing BT games. Robbie Butler outlined his experience of this issue in a previous post.
One major effect of the entry of BT into the market is that the value of domestic TV rights increased by over 70% to £3.02bn, providing a huge windfall for the monopoly that is the PL. As expected, greater competition for TV rights for a fixed number of games increased the price of those games. The PL’s revenue increased due to competition for the market but not within.
Where the Premier League’s selling of TV rights is anti-consumer is not in its collective selling per se, but rather in its granting of exclusive rights to individual games to one particular TV company. Consumers have no choice but to consume a particular TV station if they wish to watch a specific game. This paper by Harbord and Szymanski outlines how the pay-TV market could be made more competitive. Their main recommendation is that “… not only must the rights not be sold exclusively to a single broadcaster, but the same rights should licensed nonexclusively to multiple broadcasters…” Only then will there be effective competition in the TV market as TV companies compete to sell the same game to consumers. While there are other issues that are raised by such a proposal, I will not discuss them here.
It is likely that the PL would be against any such outcome on the basis that it is not in the interests of the game as a whole, nor for the PL’s bank balance. Similarly, the pay-TV companies would also likely oppose this outcome as the benefit of lower prices for TV rights could be more than offset by a reduced number of subscriptions, especially if free-to-air channels manage to acquire rights, but also in reduced subscription fees if in direct competition with each other. Whether Ofcom’s investigation will benefit TV viewers remains to be seen.
News broke recently that the UK telecoms regulator, Ofcom, on foot of a complaint by Virgin Media, is to investigate the selling of audio-visual TV rights for Premier League (PL) games (see Ofcom statement here). Virgin’s argument is that the collective selling of PL TV rights is anti-competitive as it restricts the number of games available for live broadcast, leading to less choice and higher prices for consumers.
The Premier League’s argument for collective selling of TV rights is that it allows a more equal distribution of TV rights revenue across clubs than would individual selling, whereby the bigger clubs would be able to sell rights to their own games at a much higher price. While this may be a laudable goal, it is not clear why this should be the way to minimise any revenue imbalances. Other sports use measures like sharing gate-revenue and salary caps. Also, in principle, all clubs could share individual TV rights revenue. As well as this, the number of games broadcast live is restricted and no game can be shown at the traditional Saturday 3.00pm slot for fear that it may impact attendances at other PL games and those in lower Leagues.
Up to 2007, all live PL matches were shown exclusively by Sky. Following a European Commission investigation, from 2007 the PL divided games into packages and no one TV company could purchase all packages. Currently, Sky has exclusive rights to 116 games, with BT having the remaining 38. While there was an increase in the number of TV companies providing live TV coverage of PL games, what effectively happened was that one monopoly was replaced by two, as both Sky and BT has exclusive rights to individual games. It could be argued that this greater ‘competition’ made some consumers worse off. Fans with Sky subscriptions now had to purchase two TV sports packages to watch the same number of games as before, or had to find some other way of accessing BT games. Robbie Butler outlined his experience of this issue in a previous post.
One major effect of the entry of BT into the market is that the value of domestic TV rights increased by over 70% to £3.02bn, providing a huge windfall for the monopoly that is the PL. As expected, greater competition for TV rights for a fixed number of games increased the price of those games. The PL’s revenue increased due to competition for the market but not within.
Where the Premier League’s selling of TV rights is anti-consumer is not in its collective selling per se, but rather in its granting of exclusive rights to individual games to one particular TV company. Consumers have no choice but to consume a particular TV station if they wish to watch a specific game. This paper by Harbord and Szymanski outlines how the pay-TV market could be made more competitive. Their main recommendation is that “… not only must the rights not be sold exclusively to a single broadcaster, but the same rights should licensed nonexclusively to multiple broadcasters…” Only then will there be effective competition in the TV market as TV companies compete to sell the same game to consumers. While there are other issues that are raised by such a proposal, I will not discuss them here.
It is likely that the PL would be against any such outcome on the basis that it is not in the interests of the game as a whole, nor for the PL’s bank balance. Similarly, the pay-TV companies would also likely oppose this outcome as the benefit of lower prices for TV rights could be more than offset by a reduced number of subscriptions, especially if free-to-air channels manage to acquire rights, but also in reduced subscription fees if in direct competition with each other. Whether Ofcom’s investigation will benefit TV viewers remains to be seen.
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