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Monopoly Prices & The Future of EPL Broadcasting

9/12/2015

3 Comments

 
By Robbie Butler

A number of months ago I examined Premier League broadcasting rights and the costs that consumers face when watching live football. For those unfamiliar with the piece, I questioned whether consumers were better off following an agreement between the Premier League and European Commission a decade ago to end Sky Sports’ monopoly coverage of all live English Premier League matches.

The Guardian recently reported on a related issue of broadcaster Virgin Media querying the current Premier League broadcasting rights deal with UK media regulator Ofcom. Virgin Media are unhappy with the current allocation of rights, where the Premier League sells six broadcasting packages to the highest bidder. They believe the Premier League are limiting supply, and therefore, creating an artificially high price for consumers.

Virgin Media want to make all 380 Premier League games available live on television, and have lobbied for a removal of the traditional 3pm blackout in England, wanting the US-style “regional blackouts”. This would mean that fans based in North London for example, would not be able to watch Arsenal or Tottenham live on TV but could watch Manchester United or Liverpool.

Virgin Media’s stance is interesting but I wonder will it solve the problem for customers?

As mentioned previously, UK customers now pay more in total, and on average, to watch all live games available each season, despite the fact that Sky Sports’ monopoly ended in 2007. Setanta, ESPN, and most recently BT Sport have done little to push prices down for the consumer.

Why has competition not worked?

The problem lies in the fact that broadcasters compete to buy each of the six broadcast packages but do not compete on the broadcasting rights of individual matches, once they secure the rights. Imagine if both Sky Sports and BT Sport were broadcasting the same live matches. Customers could choose to purchase the rights from the company that was the cheapest, provided the best analysis, overall value, offered best punditry etc. Selling the rights off in tranches of six does little for the consumers. Smaller monopolies are emerging. The current scenario is very much in the interests of the sellers. How much would a TV company pay for a broadcast package if it were not an exclusive right to screen those games? A fraction of what they are now paying.

There are a plethora of unintended consequences that could emerge if Virign Media's proposals are adopted. Lower league clubs should continue to fight to retain the 3pm blackout and need only look at attendances in the the League of Ireland since the late 1970s and early 1980s onwards to see the damaging impact televised football can have. Daire Whelan's Who Stole Our Game plots the remarkable decline in attendance at domestic Irish football matches following the arrival of live broadcasts. The Irish 'blackout' was overcome by technology. Technology is again threatening to end the blackout in England. Smaller clubs beware.
3 Comments
Pat Massey link
14/12/2015 12:51:43 pm

Virgin Media's challenge to the current broadcast arrangements certainly raises some interesting issues. Certainly a topic that merits further analysis.

Reply
Pat Massey link
15/12/2015 10:49:26 am

Is it not a situation which has gone from a bilateral monopoly - the FAPL being a monopoly seller of broadcast rights and Sky a monopoly buyer of those rights - to one where there is a monopoly seller and 2 competing buyers for what is in some sense an essential input?

Looking at Table 2 in your previous note on broadcast rights, in 2012-13 you indicated that at a cost of £350 per seaon for Sky, the cost per match was €2.54 but this was based on 138 matches and Sky did not show 138 matches. It showed 116 with a further 32 on ESPN. With 116 matches the cost per match on Sky was €3.02. You add a cost of approx €25 per month for BT giving an overall cost per season of €600 for 168 matches which comes out at €3.57 per match which is still a significant increase. The estimated overall cost of €600 per season seems to assume that Sky's charges remained unchanged. The real problem would appear to be that a charge of €250 per seaons for BT with just 38 matches works out at a whopping €6.58 per match. Unless BT clearly has a far superior selection of matches - the obvious question would appear to be why would any football fan in the UK choose to subscribe to BT when they are charging more than twice as much per match as Sky?

As I understand it, the EU Commission decision permitting collective selling which required the FAPL to split rights into 6 packages, provides that individual clubs have the right to sell any unexploited rights, i.e. to do an individual deal for a match not sold as part of the collective package. I think the FAPL and broadcasters cover that with Sky's deferred broadcasts so that on Saturday evening you can choose to watch any of the matches played during the course of that day. There is a parallel here with the US NCAA antitrust case. Basically a university challenged the NCAA TV deal and secured the right for colleges to do individual broadcast rights for their football matches if they were not being broadcast under the NCAA's collective broadcast agreement. The result, as you would expect, was a big increase in the number of US college football matches broadcast and a drop in price. Unlike the professional leagues, college sports does not enjoy an antitrust exemption in the US. Particularly in light of the Virgin media complaint this is a topic that might be worth considering for Gijon next year?

Reply
Robbie
6/1/2016 04:28:09 pm

Hi Pat,

Thanks for the comments. I divide by 138 (rather than 116) because the ESPN games were available to Sky Sports subscribers. This was in essence still a single provider, despite two channels showing games, both were available Sky Sports customers.

On the BT questions, my analysis doesn't include access to Champions League games, Europa League, and of course other sports e.g. Champions Cup.

Robbie

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