© Value Partners 2009. This document is confidential and intended solely for the use and information of the addressee
REPORT
LISTED EVENTS: MARKET IMPACT POTENTIAL
London, 15th July 2009
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1 Executive summary 2 1.1 Introduction 2 1.2 Context: sports rights and TV 2 1.3 Historical impact of Listed Events 3 1.4 Future impact of Listed Events 3
2 Introduction 5
3 The regulation of Listed Events 6 3.1 Summary 6 3.2 Introduction 6 3.3 Legislation 6 3.4 Current UK listed events 7 3.5 Review process 8
4 Overview of sports rights markets 9 4.1 Summary 9 4.2 Introduction 10 4.3 The demand for sport 10 4.4 UK sports rights market 12 4.5 The importance of sport to broadcasters 15 4.6 Characteristics of sports broadcasting markets 18 4.7 How do sports rights holders decide how to sell their rights? 25
5 Evidence of impact to date 31 5.1 Summary 31 5.2 Introduction 31 5.3 Impact on the broadcasting market 32 5.4 Impact on the sports rights market 33 5.5 Conclusion 34
6 Market evolution 36 6.1 Summary 36 6.2 Introduction 36 6.3 Broadcasting market trends 37 6.4 Sports rights market trends 41 6.5 Conclusion: market evolution 46
7 Potential for future impact 47 7.1 Summary 47 7.2 Introduction 47 7.3 Impact of trends in the broadcasting market 47 7.4 Impact of changes to listed events on the broadcasting market 48 7.5 Impact of trends in the sports rights market 49 7.6 Impact of changes to listed events on the sports rights market 49 7.7 Conclusion 50
8 Appendix 51 8.1 New entrants in the UK 51
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1 Executive summary
1.1 Introduction
The Department of Culture, Media and Sport (DCMS) is currently reviewing its approach to Listed Events,
looking at the benefits of a listed events regime, the principles used to determine the list and whether the
events on the list should be changed. As part of the review process, DCMS has invited submissions by
interested parties. To help inform its submission, the BBC Trust has asked Value Partners to assess whether
the current listed events regime has had a significant market impact in the UK and whether it is likely to have
one in the future.
Listed events were established in the UK in 1956 and similar lists have since been established across Europe.
Their purpose is to ensure that events considered to be of particular national importance (primarily sport) can
be watched by as many people as possible for free. In the UK, only qualifying channels with 95% free-to-air
reach can exclusively show listed events; currently these channels are BBC One and Two, ITV, Channel 4
and Five. The listed events regime was last reviewed in 1998, when the List was divided into two: a Group A
for which live coverage is protected and a Group B where only the highlights are protected for free-to-air
broadcast. There are currently ten sports events on the Group A list1.
This report examines the impact of listed events on the two markets directly affected by listing: the broadcast
market and the sports rights market.
1.2 Context: sports rights and TV
An assessment of the potential market impact of listed events must be based on an appreciation of the
relationship between sport and television.
Sport is one of the most popular TV genres, able to create a unique shared experience for millions of viewers.
Football is the most popular sport but a wide range of other sports also attract large audiences. For example,
the audience for Manchester United v Chelsea in the 2008 Champions League Final peaked at 14.6 million for
ITV and more than 41 million people watched the BBC’s coverage of the 2008 Beijing Olympics. In addition, a
large proportion of the population are willing to pay premium prices of over £10 per month to watch live sport
on pay-TV. Analysts estimate that over 6m households subscribe to Sky Sports channels2, out of a total
subscriber base of 8.7m Sky households3.
Consequently, major sports events are highly-prized broadcasting assets and are used by both free and pay
broadcasters to draw new viewers and subscribers, and to differentiate themselves from their competitors. As
a result, sports rights can be amongst the most expensive programming investments that broadcasters make
(e.g. sports rights make up 54% of Sky’s total programming budget4). Generally, the greater the competition
between broadcasters for a particular sports right, the higher the price will be – which means that rights
holders try to attract bids from as many broadcasters as possible.
Whether a sports property is more likely to be broadcast on a pay or free channel depends on the nature of
the event. Pay-TV particularly values long-running sports properties which extend across large parts of the
year and provide the many hours of broadcast coverage required for dedicated sports channels (e.g. live
Premier League). By acquiring such rights, they can create a strong subscription proposition. For these
sports, free-to-air broadcasters are unlikely to be able to match the value that can be generated through
subscriptions with a comparable amount of advertising income. By comparison, for one-off or shorter events,
or those that do not happen each year (e.g. the Rugby World Cup), commercial free-to-air broadcasters may
1 Those sports events are the Olympic Games, the FIFA World Cup tournament, FA Cup Final, Scottish FA Cup Final, the Grand National, the
Derby, the Wimbledon Tennis Finals, the European Football Championship Finals Tournament, the Rugby League Challenge Cup Final and the Rugby World Cup Final 2 Source: TV Sports Markets
3 Source: Screendigest
4 In 2008, Sky’s total programming costs were £1,713m, of which £929m (54%) were spent on sports (Source: Sky annual report)
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be better positioned as they can more easily find the space required in their schedules and can attract one-off,
large scale audiences which can be monetised with advertising.
When sports rights holders determine to whom to sell their broadcast rights, maximising rights value is often
only one consideration. Other objectives, such as promoting their sport to the widest possible audience or
maximising reach to generate sponsorship income, can also be factors. In addition, long standing
partnerships can create strong brand or corporate affinities between rights holders and broadcasters, and
rights holders may value the production expertise of particular channels. The importance of these factors
relative to rights value varies by sports property.
1.3 Historical impact of Listed Events
Sky is by far the biggest sports broadcaster in the UK. At the core of its dedicated sports channels are its
Premier League rights (since 1992) and a broad range of other rights including rugby union’s Premiership,
rugby league’s Super League, domestic Test cricket, US Open Tennis, and Ryder Cup Golf. Two new
entrants have tried to enter the pay-TV sports market in the last ten years, but neither ITV Digital (failed in
2002) nor Setanta (failed in 2009) have been successful.
Historically, the listing of events does not appear to have affected the success of Sky. It has built what many
regard as the world’s most successful pay-TV business under the existing listed events regime and continued
to grow their subscriber base after the last change to listed events in 19985. Sky has been able to acquire a
critical mass of rights, which means the inability to bid for a limited number of Listed Events does not have a
major impact. Indeed, because of this scale and influence, Ofcom is seeking to impose wholesale must-offer
regulation on Sky’s sports channels and the European Commission has agreed with the Premier League that
it will not sell all its live rights exclusively to one broadcaster (since the 2007/08 season6).
There is also no evidence that the Listed Events regime was a factor in the failure of new entrants ITV Digital
and Setanta. Success in pay-TV sports requires deep financial resources to bid for a broad portfolio of
exclusive rights while a customer base is being built, experience in knowing how to bid and monetise those
rights and the ability to secure favourable distribution deals. Event listing did not stop ITV Digital or Setanta
from acquiring a broad portfolio of rights. If anything, listing events may have helped these new entrants by
ensuring Sky could not create an even more powerful sporting proposition.
By comparison, the listing of events has probably decreased value for some sports rights holders; English
cricket, for example, has achieved much higher prices since delisting by selling its rights to Sky. However, it is
impossible to quantify what income has been lost to rights holders due to listing, given the other factors that
influence sports rights valuations; it will depend on the nature of the event and the commercial structure of the
sport (e.g. events with more sponsorship are less likely to have been affected). It is possible that an initial
increase in rights fees due to delisting may prove temporary if a sports property were to lose its relevance to a
free-to-air (FTA) audience and failed to create any competition for its rights within the pay-TV sector, but this
remains to be seen in practice.
1.4 Future impact of Listed Events
Both the broadcast and the sports rights markets are changing, with consequent implications for the impact of
listing events.
In the broadcast market, Digital Switch Over (DSO) will increase the number of qualifying channels with 95%
reach and will give public service broadcasters (PSBs) more capacity to show listed events across their digital
portfolio of free-to-air channels. Audience fragmentation, increased use of personal video recorders and,
eventually, on-demand will increase the value of “appointment to view” programming such as sport which
attract large audiences who watch the show live. For PSBs with a commitment to sport, sports rights are likely
5 At the last change in listing in 1998, when the European Football Championship Finals Tournament, Rugby League Challenge Cup Final
and Rugby World Cup Final were added to the A list, and Test match cricket and the Commonwealth Games were removed 6 The Premier League sells its live rights in six separate packages, with no broadcaster allowed to win more than five packages.
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to take a growing share of their increasingly pressurised programme budgets. As a result, there is likely to be
greater competition amongst FTA broadcasters for listed events which may well support the level of listed
events rights fees in the future.
In the sports rights market, falling production costs and innovations in production technology are enabling
sports rights holders to create more hours from a single event. As an example, the Olympics Games more
than doubled the number of hours produced between Seoul (1988) and Beijing (2008), while the Winter
Olympics saw a threefold increase between 1992 and 20067. Regulatory pressure and competitive dynamics
may increasingly drive rights holders to break their rights into smaller packages targeted at both FTA and pay-
TV to increase competition.
In the future, as historically, Listed Events are unlikely to have a significant impact on the dynamics of the
broadcast market. Adding new events to the list is unlikely to change this, unless the most valuable properties
are listed or a substantial volume of other important events is listed. The Premier League is the most valuable
property and any significant intervention here would be likely to have an impact8. The listing of a significant
number of second-tier (in terms of value) events would, ultimately, damage Sky’s proposition but such a
substantial increase in listings appears very unlikely to occur. A major increase in the number of listed events
would affect smaller sports channels (e.g. new entrants) before it had an impact on Sky, particularly if the
newly-listed events were those most suitable for pay-TV scheduling (i.e. frequent and long-
running).Conversely, it is possible that significant delisting could also harm a new entrant; if Sky were able to
acquire events such as the FIFA World Cup or the Olympic Games, the scale of the challenge facing a new
entrant to attract subscribers might seem much greater.
The listing of events is likely to continue to have some adverse impact on the revenues of rights holders
because they are unable to maximise competition among pay-TV and free-to-air (FTA) broadcasters.
However, there are so many different factors which affect price, it is almost impossible to quantify the specific
impact of listing. Digital Switch Over (DSO) raises the prospect of increased competition between a larger
number of qualifying broadcasters, which may partially mitigate this impact.
7 Source: IOC, EBU
8 Ofcom state in the pay-TV market review that “FAPL is the most important competition” but that “Sky Sports broadcasts a range of valuable
content which is valued by subscribers”. (Section 4.80-2) Ofcom come to the conclusion that “in order to materially undermine Sky’s wholesale position Sky would need to lose the majority of FAPL rights (Section 5.47) (Source: Ofcom Pay TV phase three document).
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2 Introduction
Major sporting events have great social and cultural significance. The most important of them are protected
under legislation, as “Listed events”9. Listed events are selected on the basis of their special significance for
the UK or the nations. They are unique in their ability to bring the nation together and promote a sense of
national identity. The UK safeguards these events so that they can be seen by as many people as possible, to
maximise their positive effects on society. These listed events have to be broadcast by qualifying services,
which currently comprise BBC 1, BBC 2, ITV, Channel 4 and Five. Pay-TV channels or lower-reach FTA
channels can only broadcast these events exclusively with Ofcom’s permission. Currently the UK list includes
twenty sports events, ranging from single races (such as the Derby, which lasts only a few minutes) to final
matches of a larger competition (such as the FA Cup Final) to entire tournaments (such as the European
Football Championship Finals) comprising hundreds of hours of sport over several weeks.
The listing of events effectively reduces the number of broadcasters who may acquire the rights and, through
this reduction in competition, the price of the rights may be lowered – with consequences for the sporting body
that owns the rights. It can also lead to a potential distortion in the broadcast market by creating a distinction
between those broadcasters who can and cannot acquire and show some of the UK’s most popular events.
However, whether, and in what cases, such impact might arise in practice, and the impact on market values,
are less clear and subject to much debate.
The Department of Culture, Media and Sport (DCMS) is currently reviewing which events should be listed and
has invited submissions by interested parties. When considering changes to listed events, it is important to
understand the potential for changes to have significant market impact as part of the debate on the public
value case. The BBC Trust has therefore asked Value Partners to prepare a report to aid understanding of the
market impact consequences of restricting the types of broadcasters who can acquire and broadcast some
sports rights.
There are potential consequences for two connected markets: the UK broadcasting market and the UK sports
rights market. The organisations that would, primarily, be adversely affected by such impacts would be non-
qualifying broadcasters and sports rights holders respectively.
This report therefore looks at the potential impact of listed events on these two markets in a number of ways:
has there been significant market impact historically, or at present, and, anticipating the way in which both
markets are evolving, are there likely to be impacts in the future? The report’s is structured as follows:
• Chapter 3 considers the background to listed events
• Chapter 4 reviews the dynamics in the sports rights market to set the context for the listing of sports
events, looking at how sports rights are valued, why broadcasters buy sports and what the benefits of
selling to different broadcasters are for sports rights holders
• Chapter 5 considers what the market impact of “listing” events has been historically on sports rights
holders and broadcasters
• Chapter 6 looks at the trends in the broadcasting and sports rights markets since the last review in 1998,
eleven year ago
• Chapter 7 concludes by looking at the likelihood of market impacts from listed events in the future
• Chapter 8 is an appendix looking at the success of new entrants in the UK market
9 Listed events need not be sports-related, and other European countries do list non-sporting events, such as the Vienna Opera Ball n Austria
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3 The regulation of Listed Events
3.1 Summary
• Listed events were established in the UK in 1956 and similar lists been established since across
Europe. The aim of listing is to ensure that sports events of national importance are available to
be watched by as many people as possible, for free
• The listed events regime was last reviewed in 1998, when the List was divided into two: a Group A
for which live coverage is protected and a Group B where only the highlights are protected, for
free-to-air broadcast. There are currently ten sports events on the Group A list
• Only qualifying channels which reach 95% of households free-to-air can show listed events;
currently these channels are BBC One and Two, ITV, Channel 4 and Five
• The listed events regime is now being reviewed – with the review panel looking at the benefits of
having a listed events regime at all, what principles should be used to determine it, and whether
the events on the list should be changed
3.2 Introduction
The history of “listing” sports events has evolved over fifty years in the UK. Currently, certain major events are
listed by the Secretary of State under the Broadcasting Act of 1996 and safeguarded for free-to-air (FTA)
television. As such, these rights cannot be sold exclusively to pay-TV channels, where access would be
limited to households willing and able to pay a ‘premium’ sports subscription. This chapter looks at the
legislation enabling this regime, the sports that are listed and the review process.
3.3 Legislation
3.3.1 EU law
The concept of listing major events is not unique to the UK. The European Union (EU) allows Member States
to create listed events under the Audio-Visual Media Services Directive to “ensure that broadcasters under
[their] jurisdiction do not broadcast on an exclusive basis events… of major importance for society”10
.
Any event can be listed, not just sporting events, and a number of European countries also list cultural events
– for example, Austria lists the Vienna Philharmonic Orchestra’s New Year Concert11
. Listing can be applied to
full live coverage or “deferred coverage”, i.e. highlights and near-live coverage. The choice of the creation of a
list, the events on it, and the reach a broadcaster must have to bid for a listed event is at the discretion of each
Member State. The UK has the highest required reach, at 95%. Denmark and Italy require only 90% reach
and Germany has the lowest reach requirement, at 67% of households.
Once a list has been created, it must be submitted to the European Commission (EC). The EC has up to three
months to raise any issues it has with the list.
3.3.2 UK law
In the UK, the law which allows for listed events is the Broadcasting Act (1996). This law defines two groups of
broadcasters: qualifying broadcasters, whose channels are available to at least 95% of the population and do
10 Audiovisual Media Services Directive, Article 3j. Source: DCMS Free-to-air review consultation, Annex A
11 Source: DCMS Free-to-air Events Review Consultation, Appendix 3
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not require any additional payment over the normal licence fee, and non-qualifying broadcasters (i.e. any other
broadcaster).
The Act says that any listed event must be shown by both of these types of broadcaster12
, unless Ofcom gives
its consent. In order to show a listed event exclusively, both “qualifying” and “non-qualifying” broadcasters
must ask permission from Ofcom. As an example, the BBC applied for permission in 2005 to show Wimbledon
exclusively live from 2005-09 on BBC1 or BBC 2. Ofcom typically permits FTA channels to show listed events
live if other broadcasters have had the chance to bid for the events at a fair price, as with Wimbledon.
The Communications Act (2003) enshrined two different types of Listed Event in legislation, an A list and a B
list, created by the 1998 review. The live showing of events on the A list must be offered to both “qualifying”
and “non-qualifying” broadcasters. Any broadcaster can show an event on the B list exclusively as long as a
qualifying broadcaster has the highlight rights13
. Thus for B-list events, the live rights can be sold directly to a
pay-TV broadcaster as long as a qualifying broadcaster has bought the highlights.
This law is enforced by Ofcom under the Code of Conduct on Sports and Other Listed and Designated Events,
published in 2002. This defines Ofcom’s interpretation of, and approach to, the laws, including Ofcom’s view
on what a “live” event is and when Ofcom will allow broadcasters to show listed events exclusively. To allow a
broadcaster exclusively to show a live event, Ofcom requires that other broadcasters must have a “genuine
opportunity to acquire the rights on fair and reasonable terms”14
and been given “a reasonable time to do so”.
“Fair and reasonable” are not precisely defined in terms of cost or duration respectively but Ofcom provides a
list of criteria which it uses to determine whether other broadcasters have been offered a genuine opportunity.
3.4 Current UK listed events
3.4.1 Listed events
The UK has had listed events since 1956, when a list was agreed between the BBC and the Independent
Television Authority. Initially, listed events were limited to the FA Cup Final, Wimbledon, cricket Test Matches,
the Derby, the Grand National, the Boat Race, the Olympics and Commonwealth Games (when it is held in
the UK). This list has been extended in subsequent reviews. At the latest review, in 1998, the distinction
between a “Group A” and a “Group B” list was added. Of the events already protected for live viewing, Test
match cricket and the Commonwealth games were downgraded to Group B events, whilst the European
Football Championship Finals Tournament, Rugby League Challenge Cup final and Rugby World Cup final,
were added to the Group A list.
The current list of protected events is:
Event Sport
Group A
Olympic Games Various
FIFA World Cup Tournament Football
12 Broadcasting Act (1996) states in section 101 that “a television programme provider providing a service falling within either of the categories
set out in subsection (1) of section 98 (“the first service”) for reception in the United Kingdom or in any area of the United Kingdom shall not, without the previous consent of Ofcom, include in that service live coverage of the whole or any part of a listed event unless (a) another person, who is providing a service falling within the other category set out in that subsection (“the second service”), has acquired the right to include in the second service live coverage of the whole of the event or of that part of the event and (b) the area for which the second service is provided consists of or includes the whole, or substantially the whole, of the area for which the first service is provided” 13
The Act states that Ofcom will automatically approve a broadcaster in one category (either A or B) showing the live events as long as a broadcaster in the other category has the highlight rights. Thus technically, in order for an FTA broadcaster to show the event live, they require permission from Ofcom unless a non-qualifying broadcaster has the highlight rights. 14
Ofcom Code on Sports and other listed and designated events, Section 1.14
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Event Sport
FA Cup Final Football
Scottish FA Cup Final15
Football
The Grand National Horseracing
The Derby Horseracing
The Wimbledon Tennis Finals Tennis
The European Football Championship Finals Tournament Football
The Rugby League Challenge Cup Final Rugby League
The Rugby World Cup Final Rugby Union
Group B
Cricket Test Matches played in England Cricket
Non-finals play in Wimbledon Tennis
All other matches in the Rugby World Cup Finals Tournament Rugby Union
Six Nations Rugby Tournament matches involving Home Countries Rugby Union
The Commonwealth Games Various
The World Athletics Championship Athletics
The Cricket World Cup – the Finals, Semi-finals and Matches involving Home Nations teams
Cricket
The Ryder Cup Golf
The Open Golf Championship Golf
3.4.2 Qualifying broadcasters
Currently, the qualifying broadcasters in the UK are BBC1 and BBC2, ITV1, Channel 4 and Five. All of these
are available free-to-air. Five was the last to be added, in early 2008, once it could prove that it reached over
95% of the population16
. Other broadcasters could be added to this list by Ofcom once they reach 95% of the
population, as long as they are free. This is likely to be the case for more FTA channels on Digital Terrestrial
Television as digital switch-over (DSO) comes closer.
3.5 Review process
Since the list of events was created in 1956, the events and the principle underlying the list have been
periodically reviewed (in 1984, 1989, 1991 and 1998). The latest review was announced by Andy Burnham,
then Secretary of State for Culture, Media and Sport, in a speech to the Royal Television Society in
September 2008. He stated that its aims were to “weigh the public interest with the demands and discipline of
the market and the implications for the funding and development of individual sports”17
.
On 10th
December 2008, David Davies was appointed as the Chairman of the Advisory Panel. The terms of
reference of the Panel are to review: the principle of having a list; the criteria against which events may be
listed and the content of any list.
The Advisory Panel released a “Free-to-air Events Review Consultation” in April 2009, inviting comments from
interested parties before the 3rd
July 2009. The panel will report to the Secretary of State in the second half of
2009, who will draft provisional conclusions and then consult with the broadcasting authorities and affected
rights holders, in line with the requirements of the 1996 Broadcasting Act, before announcing a final list.
15 This is a listed event in Scotland only
16 Ofcom website, http://www.ofcom.org.uk/tv/ifi/channel5/. Five currently reaches 96% of the population. This includes those who receive
Five via cable. Five is regarded as a “free” service on cable, even though cable subscribers have to pay for at least a basic subscription; that is, the charge that cable subscribers pay is not for reception of the Five service. 17
Andy Burnham's speech to the Royal Television Society, 26 September 2008, http://www.culture.gov.uk/reference_library/minister_speeches/5483.aspx/
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4 Overview of sports rights markets
4.1 Summary
• Sport is one of the most popular television genres, able to create a unique shared experience for
millions of viewers. Football is the most popular but a wide range of other sports are also attract
large audiences. For example, the audience for Manchester United v Chelsea in the 2008
Champions League final peaked at 14.6 million for ITV and more than 41 million people watched
the BBC’s coverage of the 2008 Beijing Olympics. In addition, a large proportion of the population
are willing to pay over £10 per month to watch live sport. Analysts estimate that over 6m
households subscribe to Sky Sports channels18
19
.
• Major sports events are highly-prized broadcasting assets and are used by both free and pay
broadcasters to attract new viewers and subscribers, and to differentiate themselves from
competitors. As a result, sports rights can be amongst the most expensive programming
investments that broadcasters make (e.g. sports rights make up 54% of Sky’s total programming
budget20
). The greater the competition between broadcasters for a sports right, the higher the
price – which means rights holders try to attract bids from as many broadcasters as possible.
• The nature of a sports event will impact on whether it is more attractive to a pay or free channel.
Pay-TV particularly values long-running sports properties, which extend across large parts of the
year and provide many hours of coverage (e.g. live Premier League). These rights help create a
strong subscription proposition. For these sports, FTA broadcasters are unlikely to be able to
match the value that can be generated through subscriptions with a comparable amount of
advertising income. By comparison, for one-off or shorter events, or those that do not happen
each year (e.g. the Rugby World Cup), commercial FTA broadcasters may be better positioned as
they can more easily find the limited space required in their schedules and can attract one-off,
large scale audiences which can be monetised with advertising.
• The critical mass of a large subscriber base allows a sports broadcaster like Sky to consolidate a
large volume of rights. Although this does not prevent new channels entering, it does make it
more difficult for them to survive in the market unless they have deep pockets and the ability to
secure favourable carriage or platform access deals. To become viable, they will require a strong
portfolio, consisting of a number of key sports events with supporting content around it.
• This question of whether Sky is able to exercise undue market power has been considered by
both national and European regulators. As a result, Ofcom is seeking to impose wholesale must-
offer regulation on Sky and the EC has agreed with the Premier League that it must sell its live
rights in six separate packages from 2007/08 onwards, with no broadcaster allowed to win more
than five packages.
• When sports rights holders determine to whom to sell their broadcast rights, maximising rights
value is often only one consideration. Other objectives, such as promoting their sport to the
widest possible audience or maximising reach to generate sponsorship income, can also be
factors. In addition, long standing partnerships can create strong brand and corporate affinities
between rights holders and broadcasters, and rights holders may value the production expertise
of particular channels. The importance of these factors relative to rights value varies by sports
property.
18 Source: TV Sports Markets
19 Source: Screendigest
20 In 2008, Sky’s total programming costs were £1,713m, of which £929m (54%) were spent on sports (Source: Sky annual report)
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4.2 Introduction
This chapter reviews dynamics in the sports rights market to set the context for the listing of sports events. It
looks at the demand for sport in the UK is, how sports rights are valued, why broadcasters license (i.e.
acquire) sports rights, and what the benefits of selling to different broadcasters are for sports rights holders.
The report focuses on free-to-air and on subscription services for pay-TV and not on pay-per-view (PPV) as a
means of selling content to customers. While there are some examples of PPV being used for single sports
events (notably boxing), PPV is not considered a particularly effective means of creating value from sport.
4.3 The demand for sport
There is a widespread interest in watching sport in the UK. Sport is the most important TV genre for the vast
majority of people who say good content is a “must have” on TV21
. Sporting events rank in the top 10 rated
programmes each year (along with soap operas and the finals of reality TV shows22
). As examples, the
audience for Manchester United v Chelsea in the 2008 Champions League final peaked at 14.6 million for ITV
and more than 41 million people watched the BBC’s 2008 Beijing Olympics coverage. Ofcom’s willingness to
pay analysis suggests that sports are more highly valued than movies23
and that consumers taking the “basic
plus sports” package are less price-sensitive than the “basic plus movies” package.24
Consumers demand sport in different ways. Fans of a particular team or sport are likely to be willing to pay
more to see their chosen team or competition. Other consumers may not have a strong preference for a
particular sport or sport in general but will participate in watching big ticket events such as the Olympics or a
cup final. However, for all consumers TV is the most important method of accessing premium sport; Ipsos
MORI research indicates that 75% of people watch sport on TV compared to 48% who listen on radio and
36% on the internet25
.
BBC / Ipsos MORI research has shown that almost three-quarters of all adults are interested in sport26
. This is
backed up by Ofcom survey data suggesting that over 60% of UK adults “have an interest in sport”27
. The
Ipsos MORI research has divided those divided into two groups, “Sports Fans” and “Main Eventers”, a division
which is backed up by the Ofcom research’s division into those who “are passionate about sport” or “follow
sport closely” against those who “have an interest in sport but did not follow it closely”.. “Sports fans” are
adults who make an effort to watch, listen to, or read about sport most days of the week, whilst “main
eventers” only follow events in which they are specifically interested.
21 Ofcom market research in December 2007 showed that 87% of Free-to-air and 88% of Pay_TV households surveyed said that content was
a must have element for their TV service. Of this, 12% of Free-to-air viewers and 25% of pay-TV subscribers said that sport was the must have genre on TV, against 10% and 11% respectively who said that children’s TV was the must have genre (Source: Ofcom consumer research on pay TV, Annex 10 to second pay TV market consultation) 22
Source: Eurodata, TV Sports Marketts 23
Source: Ofcom, Annex 10 to the pay TV market investigation consultation, Section 8.11 24
Source: Ofcom, Annex 10 to the pay TV market investigation consultation, Section 8.12 25
Source: BBC Sport Listed Events, May 2009, Ipsos MORI, 7th-12th May 2009, 2,543 UK adults aged 16+ 26
Source: BBC Sport Listed Events, May 2009, Ipsos MORI, 7th-12th May 2009, 2,543 UK adults aged 16+ 27
Ofcom market research in 2007 showed that, of adults (15+) who were the main decider for purchasing TV services in their household, 10% were “passionate about sport”, 17% “followed sport closely”, 35% “had an interest in sport but did not follow it closely” and 38% “had no interest in sport” (Source: Ofcom consumer research on pay TV, Annex 10 to second pay TV market consultation)
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Exhibit 1: Segmentation of sports audience
Ipsos MORI survey on UK interest in sportIpsos MORI survey on UK interest in sport
Rejector
s
27% Sports
fans
39%
Main
eventers
34%
Source: Ipsos MORI, 7th-12th May 2009, 2,543 UK adults aged 16+, Ofcom Annex 10 to second pay TV market consultation
Source: Ipsos MORI, 7th-12th May 2009, 2,543 UK adults aged 16+, Ofcom Annex 10 to second pay TV market consultation
Ofcom survey on UK interest in sportOfcom survey on UK interest in sport
Have no
interest
in sport
31%
Have an
interest
in sport
39%
Passion
ate about
sport
11% Follow
sport
closely
19%
Not interested in sport
Interested in sport
Not interested in sport
Interested in sport
In the UK the sport that most viewers are interested in is football; 40% of all adults28
said that they were
interested in football, more than 10% more than the next closest sports. For subscription services the Premier
League is key in driving take up (in this case to Sky Sports).
Exhibit 2: Most important sports in subscribing to Sky Sports
6%
10%
10%
10%
15%
26%
45%
70%
Scottish / European leagues
Six Nations
WWE Wrestling
Football League
Test match cricket
FA Cup
UEFA Champions League
Premier League
Note:Source:
Figure shown is sum of first, second and third “most important” responsesOfcom willingness to pay omnibus research, fieldwork April-July 2008
Note:Source:
Figure shown is sum of first, second and third “most important” responsesOfcom willingness to pay omnibus research, fieldwork April-July 2008
All other sports
Football
However, after football, viewers are interested in a broad range of different sporting properties. Fewer than
one-quarter of Sky Sports subscribers said that having any one non-football sport in their package was
“extremely important” (marked as 7 on 1-7 scale).
28 In 2008, 40% of a base of adults 15+ said they were interested in sport, more than 10% more than the 29.95 who said they were interested
in swimming (Source: Mintel Sports and the media, Leisure Intelligence, Feb 2009)
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Exhibit 3: Importance of sports within a Sky Sports subscription
Note:Source:
% of Sky Sports subscribers ranking given sport as “extremely important” to have in subscriptionOfcom pay TV research phase 3
Note:Source:
% of Sky Sports subscribers ranking given sport as “extremely important” to have in subscriptionOfcom pay TV research phase 3
63% 57% 55% 54%
35%24% 21% 21% 19% 19% 17%
Pre
mie
r
Le
ague
UE
FA
Cham
ptio
ns
Lea
gue
Int'l
ma
tche
s
FA
Cup
Fo
otb
all
league
Rugby
Unio
n
Eng
land
Test M
atc
h
Moto
rsport
s
One
day
int'l
s / W
C
Wim
ble
don
Ryde
r C
up
All other sports
Football
More than one-third of viewers say that interest in a “range of sports and teams” rather than a specific sport or
team is their reason for watching sports. This is supported by Ofcom data showing that 47% of pay-TV
subscribers find both football and at least one of cricket, golf and rugby “very important” to have as a part of
their package29
, and that “subscribers tend to value two or more sports”30
. This suggests that the best way to
attract an audience is to focus on top-flight football and a broad range of other sports. Sky offers exactly this,
with Sky Sports showing Premier League and a portfolio of other sport.
Exhibit 4: Main reasons for watching sports on TV
2%
19%
29%
34%
37%
Interactive services
Specif ic competition or event
Specif ic team's games
Specif ic sport or sports
Range of sports and teams
Source: Ofcom pay TV research phase 3Source: Ofcom pay TV research phase 3
4.4 UK sports rights market
Most broadcasters in the UK broadcast at least some sports. The biggest sports broadcasters are, in pay-TV,
Sky, and in FTA, the BBC. The other major sports pay-TV broadcaster, Setanta31
, has gone into
administration. Its Premier League rights have been re-sold to ESPN, which already broadcasts ESPN Classic
29 Source: Ofcom Pay TV phase three document, Section 4.97
30 Source: Ofcom Pay TV phase three document, Section 4.114-5
31 Setanta is discussed in more detail in the Appendix, in section 9.1, New entrants in the UK
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in the UK. In FTA, ITV has significant football rights, particularly Champions League and England home
internationals.
Sports are available on three platforms; terrestrial (either analogue or digital), satellite, or cable. Free-to-air
broadcasters are available on all three platforms, whilst Sky Sports is available only on satellite and cable.
Setanta was available across all three platforms, and ESPN have indicated that their new subscription channel
showing Premier League rights will be available across a number of platforms32
.
32 Source: BroadbandTVnews, http://www.broadbandtvnews.com/2009/06/22/espn-secures-premier-league-rights/
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Exhibit 5: Main channels broadcasting sport, 2008/09
Notes:
Source:
(1) ITV showed the Rugby World Cup 2007
TV Sports Markets, Value Partners analysis
Notes:
Source:
(1) ITV showed the Rugby World Cup 2007
TV Sports Markets, Value Partners analysis
• England home matches
• FA Cup• Champions
League
• EuropaLeague
• Football League
• World Cup• Super
League
Rugby League
• US PGA tour• Ryder Cup
• US Open• US PGA
• British Open
• US Masters• Ryder Cup
highlights
Golf
• World and European champs.
• London
Marathon
Athletics
• US Open• ATP Masters
• Wimbledon• Australian
and French
Open
Tennis
• Indian Premier League
• Domestic Tests
• Domestic
leagues/ cups
• Domestic Test highlights
Cricket
Other
Rugby Union
Football (h’lights)
Football
(live)
Pay-TVFree-to-air
• MagnersLeague
• Premier
League• England
national matches
• FA Cup• World Cup
away qualifiers
• Scottish PL• Europa
League
• England Autumn int’ls
• Premiership• Challenge
Cup
• Premier
League• Home
nations nat’lteam home matches
• Football
League• League Cup
• Horseracing• Tour de France
• (1)
• NBA• NHL• NFL
• Olympics• Formula One • Superbowl
• Grand National
• Ascot• Derby
• Six Nations• Anglo-Welsh
Cup
• Premier League
• Europa
League
• World Cup
• Euro 2008
BBC
• England home matches
• FA Cup• Champions
League
• EuropaLeague
• Football League
• World Cup• Super
League
Rugby League
• US PGA tour• Ryder Cup
• US Open• US PGA
• British Open
• US Masters• Ryder Cup
highlights
Golf
• World and European champs.
• London
Marathon
Athletics
• US Open• ATP Masters
• Wimbledon• Australian
and French
Open
Tennis
• Indian Premier League
• Domestic Tests
• Domestic
leagues/ cups
• Domestic Test highlights
Cricket
Other
Rugby Union
Football (h’lights)
Football
(live)
Pay-TVFree-to-air
• MagnersLeague
• Premier
League• England
national matches
• FA Cup• World Cup
away qualifiers
• Scottish PL• Europa
League
• England Autumn int’ls
• Premiership• Challenge
Cup
• Premier
League• Home
nations nat’lteam home matches
• Football
League• League Cup
• Horseracing• Tour de France
• (1)
• NBA• NHL• NFL
• Olympics• Formula One • Superbowl
• Grand National
• Ascot• Derby
• Six Nations• Anglo-Welsh
Cup
• Premier League
• Europa
League
• World Cup
• Euro 2008
BBC
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A number of other channels in the UK also broadcast sport. These include:
• Attheraces and RacingUK, two dedicated channels which exclusively show live horse racing
• British Eurosport and British Eurosport 2, which are included in Sky’s “News and Events” package. Sports
shown live include the French and Australian Tennis Opens, World Superbikes and Le Mans 24 hour
• ESPN Classic, which shows archive sports, including vintage Match of the Day, FA Cup and England
matches, vintage Rugby Union and cricket coverage. ESPN has also acquired the two Premier League
packages that Setanta has previously for the remainder of the 2009/10 season and their one three-year
package from 2010/11 to 2012/13. ESPN has stated its intention to launch a new subscription channel on
Sky and other distribution platforms to broadcast the Premier League and other sports33
.
• Extreme Sport, which shows “extreme sports” such as surfing, snowboarding, and BMX biking, as well as
associated lifestyle programming
• A number of top football clubs have their own TV channels, including Manchester United (MUTV),
Chelsea (Chelsea TV) and Real Madrid (Real Madrid TV), showing their own first-team matches
(generally non-live), reserve matches, archive matches, magazine-style programming and club news
4.5 The importance of sport to broadcasters
4.5.1 Overview: the value of sport
Sports rights are very valuable. The top ten UK sports rights properties are together worth over £1.3bn per
season34
, with the Premier League accounting for over half of that value (£669m per year; six times more than
the second most valuable property, the FIFA World Cup 201035
, and twelve times more than all English cricket
matches). Football accounts for 85% of the total value of the top ten sports events. The English Premier
League alone will cost Sky on average £438m p.a. over the next three years36
, 47% of Sky’s total sports rights
programming budget37
. Sport has a broad base of interest in the UK, with the BBC/ Ipsos MORI data in
section 4.3 showing that almost three-quarters of all UK adults are interested in sport38
, and that 75% of sports
followers watch sport on TV.
Access to substantial amounts of premium sports is one of the main reasons why people subscribe to pay-TV
and is critical to the success of pay-TV players such as Sky39
. Premium subscribers pay over £200 per year
for both Sky Sports channels40
in addition to their basic pay-TV subscriptions41
. Value Partners estimates that
Sky’s premium sports channels account for over one quarter of Sky’s total retail subscription revenues of
£3.8m in 200842
. Pay-TV is able to monetise sport very effectively through the sale of long-running
subscriptions.
33 Source: http://www.guardian.co.uk/media/2009/jun/22/espn-wins-premier-league-rights
34 Source: Ofcom, Annex 10 to the pay TV market investigation consultation
35 The FIFA World Cup’s right sold for a total of £110m per full property; the entirety of English Cricket, including Tests in England, One Day
Internationals and Twenty20 internationals, sold for £52m 36
Source: TV Sports Markets 37
Sky Sports channels’ total programming costs were £929m in 2008. The cost of Premier League rights was £438 per annum on average over the next three years, 47% of total costs 38
Source: BBC Sport Listed Events, May 2009, Ipsos MORI, 7th-12th May 2009, 2,543 UK adults aged 16+ 39
Ofcom have commented in the Pay-TV market review that “sports and films are the genres which stand out as the most valued genres by consumers, and also having a high degree of exclusivity to pay-TV”, and “the statements Sky in particular has made both in public and in private illustrate how important premium content, and in particular premium sports content, is in assembling a pay-TV business” (Source: Ofcom, Pay TV phase three document) 40
Based on a subscriber who takes 1 – 6 entertainment packs adding Sky Sports to their package (Source: Sky Sports website) 41
Source: Sky Sports website 42
Sky’s retail subscription revenues in 2008 were £3.8bn (Source: Sky annual report). The Sky Sports package costs £10-11 / month for either Sky Sports 1 or Sky Sports 2 and £19 / month for both (Source: Sky Website), and analysts have estimated that Sky has ~ 6 million subscribers to Sky sports (Source: TV Sports Markets). Ofcom ‘s research has show that 41% of subscribers take the Sky Sports Mix against 5% who take only Sky Sports 1 and 1% who take only Sky Sports 2 (Source: Ofcom Annex 10 to the second pay TV market investigation).
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Public service broadcasters (PSBs) also attach great significance to sport, for its potential to deliver high reach
and viewing share. For example, England v Sweden in the 2006 football World Cup, shown on ITV, had
18.5m viewers. However, as sports rights have increased in value43
, PSBs have found it increasingly difficult
to afford attractive sports properties due to competition from pay-TV. Over the last decade, total TV Net
Advertising Revenues have grown slowly44
, and the amount of advertising revenue going to the PSBs has
fallen. As a result, Channel 4 has lost domestic Test cricket, outbid by Sky, and ITV has given up Formula
One rights to free up enough cash to win the “1st choice Wednesday match” package from the 09/10 – 11/12
Champions League rights auction. The overall amount of sport shown in daytime on PSBs has fallen from
2,193 hours in 2002 to 1,687 in 200745
, an average year-on-year decline of 5%46
.
As an indication of the difference in financial power to acquire sport, ITV’s total revenues in 2008 were £2bn,
just over twice what Sky Sports alone spent on programming (mainly sports rights fees).
Sport generates value for commercial FTA and pay-TV broadcasters in different ways. For FTA broadcasters,
sports properties can generate advertising revenues by attracting millions of viewers, particularly in valuable,
hard-to-reach demographics like older, more affluent men. Sport can also be used to raise the profile of the
channel for viewers, as part of a general marketing strategy. Sport is generally considered to be able to
create “strategic value” in this way, which is one reason broadcasters pay so much to win the rights.
Sport has been a significant driver of pay-TV subscription. In order to view sports, fans have typically had to
subscribe not only to sports channels but also to a platform (either cable or satellite) with a range of other
channels. They are very valuable customers for a pay platform to have. As an example, the majority of Sky’s
revenues (76% in 200847
) are from subscription48
, and over two-thirds of Sky subscribers take a Sky sports
package49
.
For pay-TV, particularly important are long-running tournaments which have one to two events per week,
cover most of the year, and build narratives that ensure subscribers renew their subscriptions50
. The exhibit
below shows how different sporting events perform against these criteria (a year-round schedule of events,
and a large number of hours per week). The events in the top right quadrant are best suited to pay-TV whilst
those in the bottom left are one-offs (e.g. the Boat Race) that are less likely to drive subscriptions.
This implies that 87% of those who take any sports package take both. Assuming no net churn amongst subscribers in any given year, total premium sport TV revenues are £1.3m, 34% of total revenues 43
From 1997-2006 a basket of selected sports rights has risen at 15.2% CAGR (Source: Ofcom, Summary of UK sports rights Annex 10 to pay TV market investigation consultation) 44
Total TV NAR 1997-2006 rose from £2,560m to in 1997 (Source: Zenith) to £3,469 in 2006 (Source: Ofcom Communications market 2008) , a CAGR (average growth rate) of 3.4% 45
Source Ofcom Communications Market 2008 46
i.e. a Constant Annual Growth Rate of -5% 47
Source: Sky Annual Report, Value Partners analysis 48
Sky’s packages cost from £16.50 to £46 per month for the Sky World package, including all six variety packs, Sky Movies and Sky Sports. (Source: Sky website), http://www.sky.com/portal/site/skycom/skyproducts/skytv/pricesandpackages/tvpackages 49
Sky currently has 8.7m subscribers (Source: Screendigest), and over 6m subscribers to Sky Sports (Source: TV Sports Markets) 50
This is in line with Ofcom’s comments that “regularity [of a sports event] is particularly important for building and sustaining a subscription pay-TV offering” (Source: Ofcom Pay TV phase three document)
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Exhibit 6: Illustrative suitability of sports for broadcasters
Hours of coverage
(per active week)
Few Many
Source: TV Sports Markets, Value Partners analysisSource: TV Sports Markets, Value Partners analysis
Horse racing has an ideal profile but lacks broad
public support
Calendar
duration
(average
weeks
per year)
Full year
Part of one
day
Calendar
duration
(average
weeks
per year)
Full year
Part of one
day
Premier League football
Cricket Test match series
Olympics
PGA Tour
Formula One
Rugby
Super League
Multi-track horse racing
Rugby
Six Nations
PDC Darts
The Boat Race
Pay TV likely to be a better
economic model for exploitation
FTA likely to have a better
economic model Wimbledon
London Marathon
Potentially attractive to
both free and pay-TV
Pay-TV broadcasters do not need to win every sporting event. In theory, once they have a schedule that
matches consumer demand51
, i.e. is balanced across the year, across the week and comprises a broad mix of
different sports to maintain subscription levels, additional rights only generate incremental value to the
platform if they deliver enough new subscribers to offset their cost and/or they allow the platform to increase
the subscription rates. Of course, the possibility also exists that depriving an actual or potential rival of a
particular sport event may represent a strong strategic rationale for acquiring that event. Also, a broadcaster
may try to push up the amount that a rival has to pay for an event by appearing to be bidding strongly to win it
51 See section 4.3, the consumer demand for sport, for more details
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itself. A broadcaster may hope to force a rival to pay so much for one event that their ability to bid for other
events is weakened, thereby reducing the price the first broadcaster will have to pay for them.
4.5.2 How are prices for sports rights determined?
It is worth understanding how the price of exclusive sports rights is, generally, determined by the market. A
broadcaster will value the rights at net incremental revenues plus “strategic value”, as noted above, and will be
willing to bid up to that amount to secure the rights.
A broadcaster will also typically try to estimate how highly other bidders are likely to value the rights in
question. In a competitive market, a bidder will have to bid up to their full valuation for the rights to ensure that
they win it from their rivals. However, where markets are less competitive, and one broadcaster values the
rights significantly more than others, it may well bid under their total value, just above the value that they think
the broadcaster with the next highest valuation will pay for it. In other words, in less competitive markets, the
broadcaster does not bid its maximum value, but just enough to beat the next best bid. This will, however,
increase the risk that the it loses the rights to a rival broadcaster. Because the value of sports rights is set by
auction, the price in this case is determined by the competition between the bidders.
4.6 Characteristics of sports broadcasting markets
4.6.1 Pay-TV values sports highly, using it to drive subscriptions
a) Major sports events drive consumer’s purchasing decisions
Major sporting properties are one of the main reasons why consumers choose to subscribe to pay-TV. Where
important sports are available on FTA, consumers are less likely to subscribe to pay-TV. Markets where pay-
TV has greatest penetration, such as the UK, France and Italy, are those where live matches are available
only on pay-TV and FTA has only limited highlights package. Where at least one top-flight domestic football
match is shown on FTA television or there is the tradition of a strong highlights package, as in Germany,
premium pay-TV has been less successful.
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Exhibit 7: European pay-TV penetration & football rights situation
16%
19%
25%
26%
37%
50%
Germany
Holland
Spain
Italy
France
UK
Source: Screendigest, TV Sports Markets, RapidTV, Value Partners analysis.Source: Screendigest, TV Sports Markets, RapidTV, Value Partners analysis.
Pay-TV penetrationPay-TV penetration FTA football rights
• All live Premier League matches shown on pay-TV (Sky / Setanta)
• Highlights later that evening on FTA (BBC)
• All live matches and highlights shown on pay (Canal+
/Orange IPTV)
• Canal+ will show some highlights unscrambled after complaints about lack of FTA Ligue 1 coverage
• La Liga rights sold to primarily to Sogecable (pay-TV)• By law, at least one live match per week must be shown on
FTA TV - currently shown by La Sexta.
• Complex situation with rights currently owned by Premiere
• Strong Bundesliga highlights package broadcast by ARD at
6.30pm, 2 hrs after live coverage
• Live matches shared between Mediaset, Telecom Italia and
Sky Italia (pay-TV operators)• Highlights shown by Mediaset at 6pm Sunday, but Rai FTA
provides a real-time updates program on Sunday afternoon
• Football league Eredivisie launched its own live channel for 2008/09+ after rejecting broadcasters’ offers. It is obliged to
broadcast a FTA highlights show of at least 40 minutes
between 8 and 9pm on Sunday and after every match
Pay-TV penetration is not just a function of sports. For example, in both Germany and the Netherlands,
extensive basic “utility” cable television, a basic cable package included in the rental bills for apartments, has
made the benefits of upgrading to premium pay-TV less apparent. There are also cultural factors based
around the interest in football. Even with these caveats, though, it can be seen that whether pay-TV
exclusively shows live football is related to the overall penetration of pay-TV in the country. The German
example also illustrates that even a free-to-air highlights packages can lessen the appeal of live football, if
those highlights packages have to be shown a short time after the live matches themselves.52
b) A portfolio of smaller sports rights also creates value by providing a breadth of
sports coverage
Pay-TV providers require a volume of events to create a full schedule for their pay-TV channels. This is
important because consumers expect their pay-TV package to provide good value for money on a month-by-
month basis. As explored in the consumer demand section53
above, one of the main reasons for viewing sport
on TV (reported by over one-third of sports viewers) is to see a range of sports and teams, and this is
52 The 2006/07 - 08/09 rights were initially won by Arena, owned by cable operator Unity Media, despite submitting a lower bid than satellite
platform / cable channel operator Premiere. However, Premiere had made their offer conditional on moving the Sportschau highlights program from 6.30pm to 10pm on Saturday evenings and the Bundesliga were unwilling to move the highlights package as it ensures that they receive some of the highest sponsorship revenues across Europe. Premiere were only able to pick up the package after Arena ran into trouble. 53
See section 4.3, The demand for sport, for more details
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supported by Ofcom data showing that 47% of pay-TV subscribers find both football and at least one of
cricket, golf and rugby “very important” to have as a part of their package54
.
If this range were no longer available, consumers could well cancel their subscriptions when they did not feel
that the sports package offered good value for money; for example, in the summer when there is no League
football. This has happened, for example, in Greece, where the main draw is Super League football and the
Nova pay-TV platform suffered significant seasonal churn as consumers churned off in the summer months55
.
However, as examined in the demand section, the range of sports that are substitutable within the pay-TV
package seems to be reasonably broad. Although a portfolio of “other” sports is important, consumers do not
seem to be overly concerned about which sports they are; less than 15% of subscribers selected any one
event other than football as important in subscribing to Sky Sports56
. However, if the main elements of a
number of smaller sports were removed from pay-TV, consumers might start to reconsider their pay-TV
subscription.
4.6.2 Market forces mean that sports rights often consolidate in the hands
of one “incumbent” pay-TV provider
In most markets, there is competition for sports rights between one or more pay-TV broadcasters and several
FTA operators – in the UK, for example, major pay-TV broadcasters and Public Service Broadcasters are all in
competition for sports rights. Nonetheless we often see key sports rights, especially football, concentrating in
the hands of a limited number of broadcasters, often the main pay-TV broadcasters. Examples of this include:
• UK: Sky owns the rights to the Premier League, Football league, Rugby League World Cup and Super
League, Rugby Union Premiership, Tennis US Open and ATP Masters, domestic Test cricket, and the
Ryder Cup
• France: Pay-TV broadcaster Canal+ is the dominant player in the pay-TV system. It owns live rights to
top-flight football events including Ligue 157
, the Champions League, Europa Cup and the Super Cup, as
well as the English Premier League, Spanish La Liga, Italian Serie A and German Bundesliga. They also
own rights to show Top 14 and D2 rugby
• Germany: Satellite broadcaster Premiere owns live rights to the German Bundesliga, which is “the main
subscription driver”58
, Champions League, Europa League, 2010 World Cup, and key motorsports
properties such as Formula One, GP2, and Formula 3 Euro
• Italy: Satellite broadcaster Sky Italia has a number of sports properties, including, for Serie A, satellite
rights to the home matches of AC Milan, Atalanta, Chievo, Fiorentina, Genoa, Inter Milan, Juventus,
Lazio, Napoli, Reggina, Roma, Sampdoria, Torino and Udinese. However, because of Italian regulation,
rights are currently sold individually by each club59
and also separately by platform. Mediaset has thus
been able to create a successful challenger on pre-pay pay-DTT, owning the live rights for 10 clubs, all of
which overlap with the live rights that Sky Italia owns60
.
• Spain: Previously, Sogecable had controlled the majority of major sports rights, showing domestic football
(La Liga), Champions League, and Euro 2008. However, a new entrant, Mediapro, has recently entered
the market with significant financial backing and purchased 12 of the 42 clubs for the 2008/09 season.
54 Source: Ofcom Pay TV phase three document, Section 4.97
55 Naspers, AGM 2006, http://www.naspers.co.za/index.cfm?content=2679
56 Ofcom willingness to pay research, fieldwork April-July 2008
57 Note that Canal+ lost one of three 2008/09 season Ligue 1 rights packages to Orange, which offers its channel over its ADSL platform
58 Source: TV Sports Markets European TV and Sports Rights 2008
59 A law imposing collective selling, i.e. the sale of all Serie A rights together, was passed in 2007 and will come into effect for the 2010/11
season (Source: TV Sports Markets European TV and Sports Rights 2008) 60
Source: Sportcal
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Mediapro show their matches on the La Sexta free-to-air channel. They own the rights to 39 of the 42
clubs for the 2009/10 season.
Concentration of sports rights is driven by the workings of the auction market and the economics of pay-TV
operators. FTA broadcasters tend to have limitations on the amount they are willing and able to bid for sports
rights61
, and to be focused on certain sporting events. This means that effective competition for a significant
proportion of rights mainly comes from pay-TV broadcasters, who have a steady income stream from their
existing subscribers. Where there are a number of competing pay-TV operators, they often compete fiercely
for sports rights due to their importance for subscribers. Sports rights increase in price (often significantly) as a
result, as in the Canal+ / TPS example below. The amount that pay-TV operators have to spend often makes
their business unsustainable, with operators either going bankrupt or merging as a result. Rights thus end up
concentrated in the hands of one major pay-TV operator.
An example of this is the competition between TPS and Canal+ in France from 2000 to 2004. The value of live
rights for Ligue 1 top flight football rose from €113m in 00/01 to €375m for the 04/05 season, a CAGR62
of
49%, as both Canal+ and TPS sought to win sports rights. Canal+ won the majority of the rights. This rights
inflation reached its high when Canal+ bid an average of €600m / season for the sports rights63
.
One solution to this, which TPS and Canal+ adopted, is to merge. This eliminates the price competition
between the two broadcasters and hence allows the (merged) broadcaster to get the same rights for a much
lower price. TPS was sold to Canal+ in 2006 for €1bn64
and Canal+ stated at the time that they were hoping to
use their power as a single buyer to achieve a reduction in premium content rights. However, although in the
bidding for the 2008/09 rights, Canal+ did manage to slow the growth in sports rights seen in the auction for
05/06 rights, Orange entered the market and bought up three of the twelve packages for €203m, leaving
Canal+ paying less (€460m) for fewer packages65
rather than winning all the rights for a reduced sum.
By contrast, in Germany, the value of Bundesliga rights stagnated from the 2002/03 season to the 2005/06
season at around €300m66
. One of the reasons for this was that Kirch Media, a major broadcasting group,
went bankrupt in 2002 and competition in the market dramatically diminished, with satellite broadcaster
Premiere the only serious bidder for the rights
4.6.3 New pay-TV entrants need a portfolio of less-expensive sports
New entrants have often struggled to compete with existing pay-TV providers. Entrants such as Setanta in the
UK67
, Arena in Germany, Tele2 in the Netherlands (launched in 2005) and Belgacom in Belgium (launched in
200568
) have all faced difficulties, often caused by overpaying for major sports rights. To be able to compete,
new pay-TV entrants need to be able to build a reasonably-priced package of events, including some major
events. These rights need to be suited to pay-TV (i.e. long-running regular tournaments), and at the same time
be affordable for a new entrant.
61 As examples, ITV 1’s ‘07 sports budget was estimated at £130m (Source: JP Morgan broker’s report), and the BBC’s sports budget in 2004
(the latest date for which data is available) has been estimated at £250m (Source: The Independent, http://www.independent.co.uk/news/media/how-to-win-at-tv-sports-547043.html). This can be compared to a 2007 multichannel sports budget of £896m (Source: Ofcom Communications Market 2008) 62
Constant Annual Growth Rate, the average year on year price increase 63
Source: Sportcal 64
Source: DigitalTV Europe, http://www.digitaltveurope.net/feature/03_sept_08/sogecable_posts_strong_digital_plus_results64 (note that the webpage is inaccurately titled) 65
Source: Sportcal 66
Source: TV Sports Markets 67
See appendix for details 68
Source: Frost and Sullivan, IPTV spreading throughout the world, http://www.frost.com/prod/servlet/market-insight-top.pag?docid=90343916
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As a case in point, when Setanta secured two of six packages of Premiership rights, it also had a number of
other sports properties, including home nations qualifiers, Indian Premier League cricket, the US PGA Tour
and Rugby Union Magners League. Securing these rights allowed it to create a full calendar of live events
around the Premier League rights, without which it would arguably have found it even more difficult to gain pay
subscribers across the whole year69
.
Exhibit 8: Illustrative Setanta live events (week commencing 18th
May 09)
WeekendWeekday
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
S2S1
Sun
S2S1
Sat
S2S1
Fri
S2S1
Thurs
S2S1
Mon
S2S1
Tues
S1
Weds
S2
WeekendWeekday
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
S2S1
Sun
S2S1
Sat
S2S1
Fri
S2S1
Thurs
S2S1
Mon
S2S1
Tues
S1
Weds
S2
Pre
mie
r L
ea
gu
e
Source: LivesportonTV.com, Setanta, TV Sports Markets, Value Partners analysisSource: LivesportonTV.com, Setanta, TV Sports Markets, Value Partners analysis
Football
RugbyCricketOther
Pri
meti
me
Full calendar of events around the Premier League rights
Ind
ian
Pre
mie
r L
ea
gu
e
Ind
ian
Pre
mie
r L
ea
gu
e
Ind
ian
Pre
mie
r L
eag
ue
Ind
ian
Pre
mie
r
Lea
gu
e
Ind
ian
Pre
mie
r L
eag
ue
Ind
ian
Pre
mie
r
Lea
gu
e
Ind
ian
Pre
mie
r
Le
ag
ue
Ind
ian
Pre
mie
r
Le
ag
ue
Ind
ian
Pre
mie
r L
eag
ue
GP
2m
oto
rsp
ort
Nati
on
al
Ru
gb
y
Lea
gu
e
Na
t’l
Ru
gb
y
Le
ag
ue
FA
Yo
uth
C
up
Sc
ott
ish
Pre
mL
ea
gu
eP
GA
To
ur
GP
2L
igu
e1
Sc
ott
ish
Pre
mL
ea
gu
e
Sc
ott
ish
Pre
m
Le
ag
ue
Sc
ott
ish
P
rem
Le
ag
ue
PG
A T
ou
rP
rem
Leag
ue
New entrants are most likely to need smaller events which are suited to pay-TV where:
• rights are sold in large, aggregated bundles, as this makes it harder for new entrants to buy parts of major
sports events; and /or
• existing sports rights are concentrated in the hands of a single broadcaster, as this makes it harder for a
new entrant to purchase other rights.
69 However, is cannot be known what demand would have looked like in the absence of these rights
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Obtaining this portfolio of smaller events is important as new entrants often face difficulties at launch and
beyond, because they need deep pockets to be able to finance themselves as they roll-out70
and also find it
hard to judge how much they should pay for rights (lacking the experience and customer knowledge of an
incumbent).
4.6.4 PSBs value sports highly but are unlikely to acquire substantial
volumes of sport
While pay-TV platforms are driven by subscription revenues, commercial FTA broadcasters are driven by
advertising revenues. To give an idea of the relative scale of the two broadcaster groups, total TV Net
Advertising Revenue in the UK in 2008 was £3.2bn71
, 70% of total pay-TV revenues of £4.6bn72
across only
five pay-TV platforms (including Setanta)73
. The BBC’s total spend on TV from the licence fee was £2.3bn in
2008/09.
Exhibit 9: Subscription and advertising revenues in the UK, 2008
4.63.2
2.3
Total UK subscription
revenues
Total UK TV NAR BBC spend on TV from
licence fee
470* 5Number of
broadcasters
Note:Source:
*2007 Figure for the total number of channels in the UKOfcom Communications Market 2008, Zenith, Screendigest, BBC Annual report, Value Partners analysis
Note:Source:
*2007 Figure for the total number of channels in the UKOfcom Communications Market 2008, Zenith, Screendigest, BBC Annual report, Value Partners analysis
Total revenues
(£bn)
- 30%
1
Sport has a substantial value to Public Service Broadcasters, with top sporting events drawing audiences
comparable with the most-viewed programmes across all genres; in 2007, the Rugby World Cup got 13.1m
viewers whilst the most viewed TV show, Eastenders on Christmas Day, got 14.3m74
. This was three or four
times the viewership of top pay-TV events:
70 Ofcom have stated that there “are significant barriers to entry in acquiring live FAPL rights. Sky’s established subscriber base, coupled with
other factors such as its vertical integration and brand strength, meant it could afford to bid a higher amount than any other bidder” (Sourec: Ofcom Pay TV phase three document Section 5.19) 71
Source: Zenith Global Adspend Forecasts to 2011 March 2009 72
Source: Screendigest 73
Pay-TV broadcasters are Sky, Virgin Media, BT Vision, Tiscali, Top Up Tv and Setanta 74
Source: Eurodata
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Exhibit 10: Audience figures for top FTA and pay-TV sporting events, 2007
13.1 12.410.8 10.1 9.7
2.9 2.6 2.6 2.5 2.4
Rugby
World Cup
final -
England
vs.S. Af
Euro 2008,
qlfy,
England
vs.
Croatia
World Cup
Semi,
England
vs. Russia
Euro 2008,
qlfy,
England
vs. Russia
FA Cup
fnl,
Chelsea
vs. M an
Utd
Prem
League
Arsenal
vs. M an
Utd
League
Cup,
Arsenal
vs.
Chelsea
Champ
League S-
f, AC
M ilan vs
M an Utd
Prem
League
Arsenal
vs.
Chelsea
Euro 2008
qlfy
Estonia vs
England
Free to air terrestrial (m) Pay-TV (m)
Average viewership
of top 5events
11.2 2.6
Notes:Source:
Qlfy = qualifier, fnl = final, S. Af = South Africa, Prem League = Premier LeagueEurodata, TV Sports Markets Value Partners analysis
Notes:Source:
Qlfy = qualifier, fnl = final, S. Af = South Africa, Prem League = Premier LeagueEurodata, TV Sports Markets Value Partners analysis
However, while PSBs they would be very enthusiastic to acquire a portfolio of all top-flight sports properties,
they are constrained by channel capacity, budget and, for the BBC, its remit. Firstly, pay-TV operators tend to
have larger sports budgets and a stronger incentive to keep major sports in order to maintain subscription
levels. Secondly, FTA broadcasters have limited space on their main broadcast channel and are obliged to
provide a mixture of content. They therefore cannot devote the channel space to sports that a package of
dedicated pay-TV channels is able to; Sky, with Sky Sports One, Two, Three, Extra and News, is able to show
840 hours of sporting-related content per week. One of the BBC’s “public purposes” is creativity and cultural
excellence75
, which includes “covering a wide range of cultural activities” and “provid[ing] a wide range of
enjoyable and entertaining content”. This limits the BBC’s ability to show too much of one genre, such as sport
programming.
The events they do show tend to fall into one of four categories:
a) Regulated properties
Regulation, including listed events legislation, can require certain sports properties to be shown on FTA
television
b) Properties which PSBs are better able to monetise than pay-TV
FTA broadcasters are better able to create revenues from certain types of sports properties than pay-TV
broadcasters are. In particular, one-off events that draw large audiences (such as the Boat Race) are likely to
be less valuable for pay-TV channels. A single event on its own is less likely to persuade subscribers to pay
for a full month’s worth of sports. For commercial PSBs, on the other hand, large one-off sporting events are
75 Source: BBC website, “About the BBC”, http://www.bbc.co.uk/info/purpose/public_purposes/creativity.shtml
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very good at drawing in viewers and hence advertising revenues, as can be seen from the average audience
figures above.
c) Properties which gain a lot of revenues from sponsorship
Some sports are particularly dependent on sponsorship for their revenues. Sponsorship is driven by exposure
of the sponsor’s brand across media, a large part of which is dependent on broad TV coverage. Because pay-
TV audiences are typically lower, even for top-flight events, moving to pay-TV could cause a sport to lose its
sponsors and cause a decrease in the sport’s revenues. It would require a very large offer from pay-TV to
move a sport away from FTA. Formula One, where sponsors provide over 80% of the sport’s revenues, has
consistently sold its rights to FTA television.
The German Bundesliga is another example where sponsorship has been one of the reasons for maintaining
FTA programming (as highlights) even though this has reduced the value of live (pay-TV) rights. The
Bundesliga has the highest shirt sponsorship in Europe for the 2008/09 season76
, 20% more than the English
Premier League. This, combined with public pressure, has driven the Bundesliga’s decision to continue with
the FTA highlights program Sportschau in its 6.30pm slot despite a negative impact on value of the live rights.
As a consequence, in 2005, Arena, a media company founded by one of the cable operators, was able to win
the rights against a bid from the Premiere satellite platform, despite making a bid that was 20% lower. This
was because Premiere had insisted that Sportschau be moved to 10pm.
d) The greater reach of FTA helps to fulfil other aims for the rights holder
Some sports remain on FTA TV to fulfil other, non-monetary, objectives. For example, Wimbledon has been
sold to the BBC because it allows them to maximise reach and drive participation77
, despite the fact that
selling to a pay-TV broadcaster could generate greater revenues for the rights holder.
For other sports it is often worth keeping an element of the sport on FTA television to provide a broad base of
current and future support. The International Olympics Committee has recently sold rights for the 2014/16 to
pay-TV broadcasters such as Sky Italia and Fox Turkey78
. It has required Sky Italia to resell a core of 200
hours of the Summer Olympics to FTA to ensure that reach is maximised for the most important sports79
.
4.7 How do sports rights holders decide how to sell their rights?
Sports rights holders tend to auction the broadcast rights in a number of “packages”. Typically these are
divided into a number of live and non-live packages, which each cover different windows. Live windows allow
broadcast simultaneous with the match itself, whilst there are a number of types of non-live window, including:
• near-live, where the owner of the rights is allowed to broadcast the match in full a few hours after play;
• highlights, where the rights owner is allowed to show a certain amount of the match after play;
• clips, allowing the rights owner to produce short-form clips, either for use in news / analysis programming,
for use online or to download on mobiles
76 Germany’s 18 clubs received a total of £88m for shirt sponsorship, 20% more than second-placed England with £73m.The top kit
sponsorship deal was Bayern Munich’s deal with T-Home for £17m per yearSource: SPORT+MARKTEuropean Jersey Report 2008/09 as reported in the Times, http://extras.timesonline.co.uk/pdfs/sport/shirtsponsorship.pdf 77
The All England Lawn Tennis Club (AELTC), which sells Wimbledon, has said that it sells to the BBC because of “the Club’s appreciation of the production effort that the BBC brings and the audience it delivers to the championships every year” (Source: AELTC website). The Wimbledon tennis finals are a Group A listed event, i.e. they can only be shown exclusively on FTA television. Non finals play is a Group B listed event, so the live coverage could be sold exclusively to a pay-TV broadcaster 78
Source: TV Sports Markets 79
Sky Italia have accomplished this by selling the FTA rights to Italian FTA broadcaster RAI
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• archive, which covers all use of the sports occasion after the exhaustion of the other rights windows.
Sports rights holders have a number of objectives when selling their rights. One aim is to maximise the
revenues they receive from the rights auction, allowing more money to be put back into sport. However, there
are a number of other objectives, including maximising of other revenues streams, such as sponsorship and
the promotion of the sports at all levels – potentially involving grassroots support as well as broader media
coverage. In addition, sports rights holders may choose to stay with their existing broadcaster because of the
relationships and trust that have been built up, the technical skills and production values that they possess,
and the audience’s affinity with the sport on a particular channel. Sports rights holders are increasingly
sophisticated about the need to balance rights value with sponsorship value and wide public accessibility and
looking how to use the benefits that both pay-TV operators and PSBs provide.
4.7.1 Pay-TV delivers significant revenues to many sports rights holders
a) Direct pay-TV revenues
Pay-TV, with its ability to generate significant value from its premium sports subscriptions, can be a significant
source of revenue for some sports rights holders. As the IOC’s move to pay-TV has shown80
, pay-TV is
typically able to generate more money for sports rights holders than FTA television, in particular for sports that
are well suited to being shown on pay-TV. Further examples of this include cricket, where the ECB sold all live
cricket to Sky for £220m for 2006-2009, and £300m for 2010-2013, against the £135m that Sky and Channel 4
jointly bid for the 2003-05 rights. This is an increase of 8% per year on average from 2003 – 2010. The 2006-
09 rights auction itself demonstrated the revenue difference that pay-TV exclusivity offers, with a joint C4 / Sky
bid for all four years of £117m 47% lower than the Sky-only bid of £220m (although Channel 4’s lower bid than
in the previous rights auction may indicate it had lost interest). Rugby Union’s move to pay-TV has also
increased its total revenues. Before 1997, Rugby Union sold its rights to the Five Nations to the BBC for £4m
per year (1994-97) and other minor rights for £2.3m per year81
. When Sky seriously entered the market in
1997 it paid £13m for a package of all England home matches in 1997, including the Five / Six Nations (Italy
joined in 2000). This represented growth of 106% from contract to contract.
Pay-TV revenues may allow sports rights holders to return cash to the teams whose rights they sell and to
invest in the game. For example, the ECB has been able to sustain an increase in grassroots funding at a
local level since it sold its sports rights to Sky in 2006 without materially growing the proportion of its total
revenues spent on such activities82
:
80 The IOC has been able to sell rights in Turkey for €23m per year, reportedly three times more than the state broadcaster TRT paid. Source:
TV Sports Markets. Note that this is only one example. 81
Kagan Europea TV Sports Databook 1995 82
OF course, there may be other effects of moving to Sky, such as lowering the visibility of cricket
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Exhibit 11: ECB revenues and grassroots funding
75.1 78.8 77.1
93.0 94.5
5.3 8.7 9.0 10.2 12.0
2004 2005 2006 2007 2008
Sky dealC4 deal
Note:Source:
Revenues decreased in the first year of the Sky deal (2006) before increasing for 07 - 08ECB Annual reports
Note:Source:
Revenues decreased in the first year of the Sky deal (2006) before increasing for 07 - 08ECB Annual reports
Grassroots investment as % revenues
7% 11% 12% 11% 13%
Total ECB revenues
Grassroots funding
Total ECB revenues
Grassroots funding
b) Creation of competition for sports rights
In addition to direct revenues, pay-TV also provides a competitor to free-to-air TV in rights auctions. Thus, for
any open auctions, even ones which are won by FTA broadcasters, there could be a positive impact on rights
value from having pay-TV broadcasters involved in the process. Listing events would remove these
broadcasters from the competition and could depress rights values.
The growth in the value of Six Nations rights per year may be one example of this:
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Exhibit 12: Six Nations rights per annum (£m)
6 4
12 12
21
30
13
13
64
21
40
30
13(1,2)
40
25
12(3)
91 94 97-99 00-01 02 03 - 05 06-09 10-13
Italy joins to form
Six Nations
Sky does not
contest rights
Overlapping rights periods: Sky and RFU 1997-2001, BBC and Six Nations Committee 2000-2002
BBC
Sky
BBC
Sky
Notes:
Source:
(1) The BBC showed some live games in the period 1997-1999, although it is unclear how much it paid for these rights (2) Sky’s 5 year deal with the English RFU included all England home matches, including Six Nations, Test matches, Autumn internationals, as well as English domestic league rugby (3) This figure is an estimate. It is likey that, as Sky’s deal with the RFU was not renewed, the BBC paid an extra amount on top
of their existing deal to take live rights to all live games that season. However, this has not been includedSNL Kagan / Kagan Research, TV Sports Markets “European TV and Sports Rights 2006”, Press reports, Value Partners analysis
Notes:
Source:
(1) The BBC showed some live games in the period 1997-1999, although it is unclear how much it paid for these rights (2) Sky’s 5 year deal with the English RFU included all England home matches, including Six Nations, Test matches, Autumn internationals, as well as English domestic league rugby (3) This figure is an estimate. It is likey that, as Sky’s deal with the RFU was not renewed, the BBC paid an extra amount on top
of their existing deal to take live rights to all live games that season. However, this has not been includedSNL Kagan / Kagan Research, TV Sports Markets “European TV and Sports Rights 2006”, Press reports, Value Partners analysis
In this case, the value of rights escalated sharply when Sky entered the market for Six Nations games in 1997,
doing a deal with the Rugby Football Union for England home games, including all Six Nations fixtures. In
2000, England reverted to selling its rights collectively through the Six Nations Committee and the BBC won
the rights, initially for a lower sum than Sky was paying (£12m for the BBC vs. £13m for Sky). However, since
the end of the BBC’s first rights deal in 2000-02, the value of rights has escalated sharply, almost doubling
from 03-05 to 10-13. This suggests that the price rise may have been due to the increase in competitive
pressure that Sky applied through winning the rights in 1997-2001. Of course, this price rise may also been
caused by other factors, for example England’s victory in the 2003 Rugby World Cup83
, or the increase in
support due to the reach and exposure from PSB broadcast.
It cannot be assumed that competition between FTA broadcasters will sustain existing market values for listed
events. FTA broadcasters often have limited budgets for sport and are forced to focus on certain events. This
could lead to a situation where there is only one “real” competitor for a given event. An example of this may be
ITV’s bid for the UEFA Champions League rights 09/10 – 11/12. In order to be able to fund this, ITV appears
to have decided that it needed to give up its rights to Formula One, which were then acquired by the BBC. If
correct, this example illustrates the effect of constraints on the budgets of FTA sports broadcasters. FTA
broadcasters also have better-understood preferences for certain sporting events (e.g. ITV has concentrated
83 Source: BBC News, http://news.bbc.co.uk/sport1/hi/rugby_union/international/3228728.stm
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on live football, whilst the BBC has a much broader portfolio with almost no live football), which they tend to
focus on. It can be much harder to switch which sports properties they show as the timing of the “rights
windows” for sports do not necessarily line up (i.e. the broadcaster would face a period with no sports
properties or too many sports commitments).
In a market such as that for sports rights, where there are only a few real buyers with the scale and reserves
to buy key sporting properties, pay-TV competition can help sports rights holders to realise the full value of
their rights by competing at auction even when they do not ultimately buy the rights.
4.7.2 PSBs are able to deliver audience size and reach
a) Increase in audiences drives participation in the sport
Showing a sport on FTA television can increase interest and participation in that sport. This is one of the
reasons that the All England Lawn Tennis Club (AELTC) has kept Wimbledon on the BBC; “to make tennis as
accessible as possible for people, from both a playing as well as a viewing perspective"84
. As a further
example of this, the Premier League’s highlights are not listed but highlights have been sold to FTA television
- either the BBC (Match of the Day) or ITV (The Premiership) - for over 15 years.
However, pay-TV can also be used to build a broader demand for sports, although in the short term the move
from FTA television can erode reach. An example is Rugby League. Between 1991 and 1993, professional
Rugby League clubs lost £8.8m and, of 31 clubs, 17 were technically insolvent85
. In 1996 Sky negotiated a
five-year £87m contract with Rugby League to create the Super League, a new summer competition, which it
renegotiated to reduce the rights value by 48% in 1999. In the short term this affected both average viewing
figures, which fell from c. 3m 1992-1995 on the BBC to 0.14m in 1997 for Sky’s matches86
. However Rugby
League as a whole has since benefited significantly – as an example, 2007 saw the highest average
attendance at season games, a new record for most supporters at a single round of fixtures. 2006 saw the
highest TV audiences across the season since the creation of the Super League. Of course, the move to a
summer event itself may have been at least partly responsible for the increase in popularity
b) A broad reach can maximise other revenue streams
For a number of sports, broadcast on FTA is the best way to ensure overall revenue maximisation. These tend
to be sports where sponsorship is key – for example, Formula One. Sponsors fund the F1 Group, which
creates the tournament, as well as the tracks and the teams themselves, where 80-85% of revenues come
from sponsorship. Thus, although F1’s current deal with the BBC is fairly low (£30m per year for a five year
deal87
), a pay-TV broadcaster would need to bid substantially higher to replace the lost sponsorship revenues
from a smaller audience. It would also require a wholesale change to the funding and structure of the sport.
c) Long-term brand associations and production capabilities
Where a sports rights holder is already selling its rights to a FTA broadcaster, there are a number of benefits it
gains from that relationship. The existing FTA broadcaster will have the staffing, technical skill and production
to cover the sport well. In other cases, as with Wimbledon, audiences are accustomed to watching certain
84 Quoted in the Telegraph, Wimbledon demands centre stage on BBC, 06 April 2009
85 DCMS, Culture, Media and Sport Second Report, Appendix 5,
http://www.publications.parliament.uk/pa/cm199900/cmselect/cmcumeds/99/99ap06.htm 86
DCMS, Culture, Media and Sport Second Report, Appendix 5, http://www.publications.parliament.uk/pa/cm199900/cmselect/cmcumeds/99/99ap06.htm 87
Telegraph, BBC win back Formula One television rights, http://www.telegraph.co.uk/sport/columnists/andrewbaker/2295046/BBC-win-back-Formula-One-television-rights.html
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sports on certain types of broadcaster, and to move to a pay-TV broadcaster could not only lose viewers but
cause public outcry.
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5 Evidence of impact to date
5.1 Summary
• Event Listing does not appear to have impacted Sky – having built what many regard as the
world’s most successful pay-TV business under a listed events regime. At the last change in
listing in 1998, when the European Football Championship Finals Tournament, Rugby League
Challenge Cup Final and Rugby World Cup Final were added to the A list, and Test match cricket
and the Commonwealth Games were removed, Sky’s subscriber growth increased. There are
many more factors than sports rights that govern Sky’s performance but it is difficult to find any
correlation with event listing.
• In the last ten years, two major new entrants into the subscription sports market have failed. The
requirement to commit large sums to sports rights, several years in advance of broadcast and of
having the customer base to recoup the investment makes entering this market very challenging.
ITV Digital (which failed in 2002) and Setanta (2009) arguably lacked experience and the financial
resources to survive an economic downturn. There is no evidence that listed events had any
bearing. If anything, listing events may help new entrants by ensuring Sky cannot create an even
more powerful sporting proposition
• By comparison, the listing of events has probably decreased value for some sports rights
holders; English cricket, for example, has achieved much higher prices since delisting by selling
its rights to Sky. However, it is impossible to quantify what income has been lost to rights
holders due to listing, given the other factors that influence sports rights valuations; it will depend
on the nature of the event and the commercial structure of the sport (e.g. events with more
sponsorship are less likely to have been affected). It is possible that an initial increase in rights
fees due to delisting may prove temporary if a sports property were to lose its relevance to a free-
to-air (FTA) audience and failed to create any competition for its rights within the pay-TV sector
but this remains to be seen in practice.
5.2 Introduction
This chapter considers the historical evidence of the impact of listing events on both the broadcast and sports
markets.
Sport is one of, if not the most, essential components of successful pay-TV. Most major pay-TV broadcasters
use sport as a key driver of their consumer proposition. New pay-TV sports entrants also need to attractive
sports rights to be credible. This means that the potential for significant market impact is most likely to arise in
the case of the listing of either: a major sporting property that suits the commercial characteristics of pay-TV
(i.e. long-running, with several hours of content each active week), or a large number of sports events (which,
cumulatively, take on the characteristics described above).
In the sports rights market, listing events could reduce the revenues that rights holders receive. The
magnitude of the impact dependent on whether pay-TV currently broadcasts the rights, the number of bidders
for the rights and their financial position and how far the sport would benefit from being broadcast on FTA.
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5.3 Impact on the broadcasting market
5.3.1 Impact on Sky
With 8.7m (66% of all UK pay-TV homes88
) Sky is the UK’s largest pay-TV provider. It has a market
capitalisation of £8bn89
and according to Ofcom has been able to produce aggregate returns of over 20%90
. It
has increasingly used its resources and power to sell a converged triple play proposition (including tiered
basic and premium channel packages, functionality such as Sky+ and HD, and bundled broadband and
telephony. Since entering the entered the broadband market in 200691
with a ‘free broadband’ offer for Sky
subscribers it has become the #4 broadband provider in the UK with 10% market share.
Sky wholesales its premium channels, including Sky Sports, to the Sky platform and Virgin Media cable. It
does not release subscriber numbers for its premium sports channels (although analysts estimate that,
approximately 70% of the Sky platform’s customers (6m) take premium sports packages)92
. Given this
popularity of Sky Sports for Sky subscribers, and the importance of Sky Sports to the overall Sky platform and
its economics93
, this report has used subscribers to the Sky platform as a proxy to examine the impact on the
Sky Sports channels.
Exhibit 13: Sky subscribers (m)
Source: ScreendigestSource: Screendigest
3.4 3.6 3.5 3.94.9
5.56.3
6.9 7.3 7.7 8.0 8.3 8.7
96 97 98 99 00 01 02 03 04 05 06 07 08
Sky starts conversion to digital
Sky turns off
analogue signal
1998 listed
events review
0.8
14%
0.6
10%
0.4
5%
0.4
6%
0.3
4%
0.3
4%
0.4
4%
0.4
12%
- 0.1
-3%
0.1
4%
0.6
12%
1.0
27%
Gross
adds (m)
Y.o.ygrowth (%)
0.8
14%
0.6
10%
0.4
5%
0.4
6%
0.3
4%
0.3
4%
0.4
4%
0.4
12%
- 0.1
-3%
0.1
4%
0.6
12%
1.0
27%
Gross
adds (m)
Y.o.ygrowth (%)
88 End 2008. Source: Screendigest
89 Source: Guardian 28
th June 2009, http://www.guardian.co.uk/business/2009/jun/28/sentant-bskyb-football
90 Source: Ofcom Pay TV phase three document
91 Source: Guardian 1
st July 2006, BSkyB poised for bold entry to broadband market with aggressive 'triple-play' deals,
http://www.guardian.co.uk/technology/2006/jul/01/news.rupertmurdoch 92
Source: TV Sports Markets European TV and Sports Rights 2008 93
In the latest Ofcom pay-TV review, Ofcom, in consulting on the view that “Sky is acting on the incentive to restrict supply of Core Premium channels to other retailers”, points out that Sky “does not have an incentive to retail its content as effectively on other platforms as on DSat, because if its Core Premium channels are purchased elsewhere it loses the revenues that it can earn by bundling them with other content and services.” (Source: Ofcom Pay TV phase three document, 1.29)
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Sky enjoyed accelerated subscriber growth post the 1998 listed events review rather than any drop off in
subscriptions, despite the fact that European Football Championship Finals Tournament, Rugby League
Challenge Cup final and Rugby World Cup final were all added as Group A listed events94
. However, in this
period, Sky was migrating its customer base from analogue to digital and actively marketing its digital
proposition, which increased the number of Sky channels from 120 in 1998 on Sky analogue95
to 370 on Sky
Digital in 200296
. It is therefore impossible to disaggregate the impact of listing events. However, it is clear
that the addition of new listed events did not prevent Sky’s continued subscriber growth. Even Setanta’s
acquisition of two of the six live Premier League packages in the 2007/08-09/10 rights auction does not seem
to have slowed subscriber growth significantly.
This suggests that Sky’s growth over the last nine years has not been held back by the listing of events. It is
theoretically possible that Sky would have grown more rapidly had certain events not been protected; but the
magnitude of this is very difficult to judge97
. It is worth noting that Sky do not claim in their submission98
to
DCMS that listed events have impacted their growth. Indeed, despite listed events, Ofcom are of the view that
Sky has market power in the wholesale market for premium sports and are consulting on whether they have
power in the market for the retail of Core Premium Sports99
. Sky has a significant portfolio of existing sports
events that gives them the volume to retain subscribers.
5.3.2 Impact on new entrants
The listing of events could, in theory, prevent a new entrant from being able to buy the package of rights they
need. However, there is no evidence that an inability to access listed events has played a significant factor in
the success or failure of Eurosport, ITV Digital or Setanta in the UK. There are a wide range of sports rights
available to pay-TV in the UK and the major issue that both ITV Digital and Setanta faced was overpaying for
their core football rights, which would not have been avoided by having listed events available for purchase100
.
Indeed, it could be argued that listed events actually helped new entrants by preventing Sky from acquiring an
all-encompassing proposition and preventing a new entrant competing.
5.4 Impact on the sports rights market
The sports rights market is the other market that could be affected by listing. Once again, this is complicated
by the number of variables that affect the price of sports rights. One of the most important of these is the fact
that the price is determined in the downstream broadcasting market through competition for broadcasting
rights.
One proxy to determine the potential impact is the views of sports rights holders themselves. If sports rights
holders were negatively affected, then they would be unwilling to have their events listed, and might even try
to challenge the listing of those events. This is what can be observed; at the time of last review in 1998, a
number of broadcasters, including both the ECB and the Lawn Tennis Association argued against their listing,
whilst both FIFA and UEFA have undertaken legal challenges to the listing of the FIFA World Cup and
94 In the 1998 review Test match cricket and the Commonwealth games were downgraded to Group B events, with highlights only protected
95 Source: Sky website http://hd.sky.com/what-is-hd/analogue-vs-digital-television/
96 Source: Screen Digest (2004
97 Reinforcing this, Ofcom have also said that “current listed events are not available on a regular basis and would therefore be unlikely to
drive subscriptions to pay TV” (Source: Ofcom Pay TV phase three document, section 4.73) However, note that nonetheless listed events could provide an additional sports portfolio which could form a part of a pay-TV provider’s offer. Given Sky’s large existing portfolio of sports, it is unlikely that the limited number of listed events has had a material impact. 98
Free-to-air listed events review, Submission from BSkyB, May 2009, http://media.sky.com/documents/pdf/press_releases/Sky_Listed_Events_Submission 99
Source: Ofcom Pay TV phase three document 100
Ofcom have stated that “current listed events are not available on a regular basis and would therefore be unlikely to drive subscriptions to pay TV” (Source: Ofcom Pay TV phase three document, section 4.73)
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European Football Championship Finals respectively101
. This legal challenge is currently underway before the
European Court of First Instance and the statements from all stakeholders are confidential.
Examination of sports properties that were delisted in the 1998 review, such as English cricket rights, indicates
the impact of listing on sports rights values. Cricket rights are sold by the ECB as a package of all live rights,
covering all international domestic cricket. Before 1998, the entirety of this live package (as it contained
England test matches) had to be sold to a FTA broadcaster. After 1998, when Sky was able to compete for
rights, a joint bid by Channel 4 and Sky successfully won the rights from the BBC, increasing rights values by
73%, from £15m for 95-98 to £26m per year in 99-02. Further evidence comes from the 2006-09 rights,
auction, where the C4 / Sky joint bid of £29m per season was outbid by a Sky-only bid of £52m per season:
Exhibit 14: English cricket rights value per annum (£m) 102
2915
26
4552
95-98 99-02 03-05 06-09
C4 / Sky joint
bid
Winning Sky
solo bid
Rights
owner
It is unlikely that, had cricket continued to be listed, rights values would have escalated as rapidly as they did.
Broadcasting revenues are also very important for the ECB; in 2008, 55% of the ECB’s total revenues of
£94.5m103
came from the sales of domestic broadcasting rights. Of course, the value in the future depends on
competitive dynamics – fewer serious bidders could cause a decrease in rights values. It is possible, for
example, that if FTA broadcasters lost interest in showing sports, Sky could be left as the only serious
broadcaster for the rights. However rights holders may be able to mitigate such a situation by creative
bundling of rights to attract alternative bidders.
5.5 Conclusion
Listed events have existed in the UK, in some form, for over 50 years. They do not appear to have had a
significant impact on the broadcast market. The Sky platform has continued to grow from strength to strength,
and this is not likely to change given Sky’s market power. The difficulties face by new entrants like ITV Digital
and Setanta have resulted from overpaying for sports rights rather than lacking access to listed events. Listed
101 FIFA and UEFA are both foreign organisations, managing rights on an international basis. While some of their revenues flow back into the
UK market, there is unlikely to be a material domestic impact from the listing of these events. 102
Does not include new media rights, sold to Vodafone and Hutchinson 3G in 2004 103
Source: ECB Annual report 2008
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events may well have helped new entrants by ensuring that Sky was not able to buy up all sports rights and
construct a position as the only place for sport.
For some listed sports rights holders the reduced number of potential buyers which results from listing may
have reduced the fees they have received for their rights. This may be the case for FIFA and UEFA with the
World Cup Finals Tournament and the European Football Championship Finals Tournament, which are well
suited to pay-TV104
as tournaments running over a few weeks with a high volume of events. The example of
cricket also suggests that delisting may help to accelerate growth in rights values by increasing competition for
rights. However this effect is almost impossible to quantify due to the inability to establish the market price
would have been.
104 However, note that both FIFA and UEFA are both foreign organisations, managing rights on an international basis. While some of their
revenues flow back into the UK market, there is unlikely to be a material domestic impact from the listing of these events.
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6 Market evolution
6.1 Summary
• The broadcast and sports rights markets are changing, and this could change the impact of listed
events.
• In the broadcast market, Digital Switch-Over will increase the number of qualifying channels and
provide further momentum for audience fragmentation. New technologies will change how
viewers watch TV: HD will increase the value of sports as a differentiator, on-demand viewing will
increase the importance of “appointment to view” programming. Sports’ ability to attract large live
audiences will become increasingly prized.
• In the sports rights market, falling production costs and innovations in production technology are
enabling sports rights holders to create more hours from a single event. As an example, the
Olympics Games more than doubled the volume of hours produced between Seoul (1988) and
Beijing (2008), whilst the Winter Olympics saw a threefold increase between 1992 and 2006105
.
Rights holders are also increasingly sophisticated in the way that they sell their rights; bundling
rights into a greater number of packages to appeal to a wider range of broadcasters in order to
increase competition.
6.2 Introduction
The last review of listed events in the UK was in 1998, when multichannel penetration was 28%106
, 14% of
households took Sky’s pay service, but only 7% of these had upgraded to digital107
, only 20% of households
had an internet connection and broadband access was minimal; and Sky paid £168m per season to show 60
Premier League matches.
The current review is being undertaken in a very different environment. Nine-tenths of households108
have
access to multichannel TV, sports can be viewed online or on mobile as well as on TV, and both the volume of
sports shown on TV and the value of those associated rights have increased dramatically109
.
The full effect of the current review will only be felt in three to five years (when most current sports rights
contracts come to an end). To assess the potential impact of any changes to listing, it is necessary to
understand how the market is and will change.
105 Source: IOC, EBU
106 Source: Screendigest UK market summary
107 ibid
108 Source: Screendigest
109 Sky will be paying £115 each season from 2009/10 for 115 Premier League matches
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Exhibit 15: Timeline of listed events rights expiry
BBC
BBC
BBC
BBC
BBC
ITV
BBC
Five
ITV
BBC
BBC
BBC
BBC
BBC
BBC
BBC Scot.
BBC / ITV
BBC
The Open Golf
The Ryder Cup
Cricket World Cup6
World Athletics Championship
Commonwealth Games
Six Nations Rugby
Rugby World Cup Finals
Tournament5
Non-finals play in Wimbledon
Cricket Test Matches
Group B
Rugby World Cup
Final
Rugby League
Challenge Cup Fnl
European Football
Championship Fnl
The Grand National
The Derby
Olympic Games
FIFA World Cup Tournament
FA Cup Final
Group A
Wimbledon
Tennis Finals
Scottish FA Cup Final
BBC
BBC
BBC
BBC
BBC
ITV
BBC
Five
ITV
BBC
BBC
BBC
BBC
BBC
BBC
BBC Scot.
BBC / ITV
BBC
The Open Golf
The Ryder Cup
Cricket World Cup6
World Athletics Championship
Commonwealth Games
Six Nations Rugby
Rugby World Cup Finals
Tournament5
Non-finals play in Wimbledon
Cricket Test Matches
Group B
Rugby World Cup
Final
Rugby League
Challenge Cup Fnl
European Football
Championship Fnl
The Grand National
The Derby
Olympic Games
FIFA World Cup Tournament
FA Cup Final
Group A
Wimbledon
Tennis Finals
Scottish FA Cup Final
Note:
Source:
(1) For the previous broadcast event (2) To the end of the 2011/12 season (3) To the end of the 2009/10 season (4) Rights not yet sold; date indicated is the year of the next event (5) Tournament Matches Involving
Home Counties (6) Final, Semi-finals and home nations matches
TV Sports Markets, Sportcal, BBC news. Value Partners analysis
Note:
Source:
(1) For the previous broadcast event (2) To the end of the 2011/12 season (3) To the end of the 2009/10 season (4) Rights not yet sold; date indicated is the year of the next event (5) Tournament Matches Involving
Home Counties (6) Final, Semi-finals and home nations matches
TV Sports Markets, Sportcal, BBC news. Value Partners analysis
2009 2010 2011 2012 2013 +2009 2010 2011 2012 2013 + Current broadcaster1
(2)
(3)
(4)
(4)
(4)
(4)
(4)
6.3 Broadcasting market trends
6.3.1 Multichannel and pay-TV penetration will continue to grow
Over the last ten years, the penetration of multichannel in the UK has grown from 25% of TV households to
88%. Growth was driven primarily by take up of the Sky pay-TV proposition, which now reaches 34% of TV
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households (66% of the pay-TV market) and, since 2002, by take up of Freeview’s FTA proposition on DTT,
which now has a penetration of 38% of TV households’ primary sets.
Exhibit 16: Growth of the penetration of UK multichannel
0%
20%
40%
60%
80%
100%
98 99 00 01 02 03 04 05 06 07 08
Free multichannel
Other pay
Sky
Source: Screendigest, Value PartnersSource: Screendigest, Value Partners
Collapse of ITV Digital
pay DTT platform
Over the next five years110
multichannel penetration will be driven by Digital Switch-Over (DSO), replacing
analogue signals with digital signals. This will be completed by 2012 when 100% of households will have
digital television. Sky and Virgin’s market share will increasingly be driven by bundling pay-TV with telephony
and broadband to attract new subscribers and by adding new capabilities (such as HD and on-demand) to
prevent churn. Historically, Sky has done this very successfully; within a year of launching its broadband plus
pay-TV offering in 2006, Sky had one million broadband customers, of whom 30% were new to the pay-TV
service111
.
6.3.2 Audiences will continue to fragment
What consumers watch on TV, and how they watch it, is changing. With digital penetration, audiences are
fragmenting. The viewing share of the five analogue channels has fallen from 86% in 1998 to 58% in 2009112
,
whilst the share of digital channels has grown threefold.
110 The five year time horizon is important as this is the period over which contracts for any of the events added to the list will change (see
appendix) 111
Source: The Consumer Association, http://www.which.co.uk/news/2007/10/one-million-join-sky-broadband-124695.jsp 112
Source: Thinkbox / BARB / Tech Edge. Note 2009 data is to March 2009
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Exhibit 17: Channel viewing shares over time
0%
20%
40%
60%
80%
100%
99 00 01 02 03 04 05 06 07 08 09*
Others
f ive
C4
ITV (inc. GMTV)
BBC 2
BBC 1
Note:
Source:
* 2009 data to March 2009
Thinkbox / BARB / Tech Edge
Note:
Source:
* 2009 data to March 2009
Thinkbox / BARB / Tech Edge
The launch of PVRs and on-demand catch up services to the PC has allowed viewers to download or record
television for later playback. This is particularly popular with younger demographics – for example, for the
teenage drama Skins, 41% of all viewing was non-linear platforms113
.
6.3.3 Economics of Free-to-air Broadcasters will remain under pressure
Increasingly, the economics of commercial FTA broadcasters are under pressure. Revenues are down as
audiences have fragmented and a combination of economic downturn and migration to online has reduced
spend on television advertising; and a migration that may be compounded by ad skipping on time shifted
content. Costs are up as broadcasters have to invest in both digital and analogue transmission and in a
portfolio of digital channels to maintain overall viewing share.
6.3.4 DSO will broaden the number of broadcasters qualifying to bid for
listed events
DSO will mean that all homes will have access to a broader range of digital channels and that more capacity
could become available for additional channels on Freeview. This will increase the number of qualifying
broadcasters who can bid for listed events (to all broadcasters on Digital Terrestrial Television (DTT) including
Virgin 1, Sky 3 and Sky Sports News). It will also increase the channels that existing PSBs can use to show
listed events (to include, for example, BBC 3 and 4 and ITV 2,3 and 4); enhancing their scheduling flexibility.
In addition, with more qualifying channel capacity there could be the opportunity for a new FTA sports channel
(such as Eurosport or ESPN) on DTT.
113 Source: C21 Media, 1
st April 2009
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Exhibit 18: Qualifying Freeview broadcasters after 2012
Current qualifying broadcasters New qualifying channels from existing PSBs
++
Note:
Source:
(1) Sky channels involved would be those on Freeview; currently this includes Sky Three, Sky News and Sky
Sports NewsFreeview website, broadcaster websites
Note:
Source:
(1) Sky channels involved would be those on Freeview; currently this includes Sky Three, Sky News and Sky
Sports NewsFreeview website, broadcaster websites
New post-DSO broadcasters
(1)
6.3.5 High-definition TV will become mass-market
High-definition TV (HDTV) allows broadcasters to show sharper, clearer pictures, with over four times the
resolution of a standard definition TV114
. Forecasts predict that over 22m households could have access to HD
by 2013, of which 8.5m could have the highest-quality “Full HD”. Sport is a big driver of HD which provides
greater clarity to fast-moving action. Sky is using sports to drive their premium priced HD proposition,
generating further value from their sports rights. BBC and ITV are also using sport to drive HD on Freesat (for
example ITV HD was launched in time for Euro 2008115
) and HD propositions are likely to roll out on Freeview
pre and post DSO,
114 A standard PAL broadcast shows 0.4 megapixels in a 4:3 screen ratio. The highest-quality HD broadcast (1080p) uses 2.1 megapixels in a
widescreen, 16:9 screen ratio. Currently 1080p is used for Blu-Ray discs rather than broadcast TV. 115
ITV website, http://www.itvplc.com/media/newsrelease/?page=3&id=2922
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Exhibit 19: Number of High Definition households (m)
Note:
Source:
HD ready = Households with a HDTV (minimum of 720 lines, HDMI connection); Full HD = households with
higher-resolution 1080p setsScreendigest
Note:
Source:
HD ready = Households with a HDTV (minimum of 720 lines, HDMI connection); Full HD = households with
higher-resolution 1080p setsScreendigest
0.62.5
6.6
10.913.9
17.220.0
21.3 22.7
0.0 0.6 1.5 2.2 3.44.9
6.88.5
05 06 07 08 09 10 11 12 13
HD Ready
Full HD
Forecast
6.3.6 Catch up and on-demand will change how some sports are watched
and rights are packaged
New “on-demand” ways of watching programming such as BBC iPlayer on the PC and increasingly to-the-TV
propositions such as Virgin Media’s on-demand service will become more important. On-demand services will
allow catch-up viewing of both highlights and live sport. While historically sports have not been shown on-
demand due to rights issues, more recent FTA sports deals have allowed rebroadcasting online. Such deals
include: Six Nations Rugby coverage being made available for seven days after live BBC TV broadcast116
in
January 2008; Match of the Day 2, with Premiership highlights, made available for catch-up viewing on
iPlayer117
from January 2009,; and Five’s highlights Ashes coverage, broadcast on TV at 7.15pm each day,
being made available from 10pm on its online service, Demand Five118
, from June 2009. However, broadcast
media are well suited to showing live sports, and this is unlikely to change dramatically in the near future119
.
6.4 Sports rights market trends
In the sports rights market, there has been a substantial growth in the volume of sports content available. This
has been accompanied by a growth in platforms wanting to shows sports, including mobile and online. In
response, as pay-TV broadcasters consolidate, sports rights holders have created smaller rights packages to
allow new entrants and PSBs to purchase some sports rights. There has also been growth in the number of
non-live packages as rights holders try to optimise the value they receive from broadcasters and other users
of sports content such as mobile operators.
116 Source: IPTVWatch, http://www.iptv-watch.co.uk/31012008-bbc-iplayer-to-show-six-nations-rugby.html
117 Source: Telegraph online, www.telegraph.co.uk/sport/football/4375429/Football-highlights-will-be-available-on-BBC-iPlayer-for-the-first-
time.html 118
Source: Sportcal, Cricket – 30th June 2009
119 Ofcom state “Broadcast media are intrinsically well suited to content which is based on mass participation in major live events, and this is
unlikely to change in the near future” (Source: Ofcom Pay TV phase three document)
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6.4.1 More sports content is becoming available
The number of hours of sports shown on TV has grown from 33m hours in 2003 to 38m hours in 2007, 90% of
all which is shown on pay-TV. While the amount of sport shown on FTA has fallen over the past five years
(03-07 CAGR120
of -4.0%), the amount shown on pay-TV has grown (03-07 CAGR of 4.6%)121
.
Exhibit 20: UK sports television output
Source: Sports Marketing Surveys, MintelSource: Sports Marketing Surveys, Mintel
Hours of sport broadcast in the UK, 2003 Hours of sport broadcast in the UK, 2007
Pay-TV,
28.4m
FTA,
4.6m
Pay-TV,
34.0m
FTA,
3.9m
33.0m 37.9m
Total
hoursTotal hours
86% 90%
This has been driven by an increase in the number of sports shown on TV, especially new niche sports events
(e.g. the Red Bull Air Race, since 2003), and growth in hours produced for sporting events, with the rise in
broadcasting capacity and decline in production costs, and a continued interest in and demand for sport on
TV122
The Olympics Games more than doubled the hours produced between Seoul (1988) and Beijing (2008),
whilst the Winter Olympics saw a threefold increase between 1992 and 2006.
120 The CAGR, or Constant Annual Growth Rate, is the average year on year growth rate between two points, i.e. between two years.
Technically this is a geometric mean. 121
Source: Sports Marketing Surveys, Mintel 122
See section 4.3, The demand for sport, for more details. Ofcom has stated that “live top-flight sports programming is likely to have a continuing appeal, regardless of technical change” (Source: Ofcom Pay TV phase three document)
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Exhibit 21: Hours of broadcast produced by host broadcaster (000s hrs)
Summer Olympics Winter Olympics
2.6 2.8 3.03.5 3.8
5.0
88 92 96 00 04 08
0.4 0.3 0.6 0.9 1.0
92 94 98 02 06
Source: International Olympic Committee Olympic Marketing Fact File, EBUSource: International Olympic Committee Olympic Marketing Fact File, EBU
14%
30%
6.4.2 Sports rights are being sold in different ways
a) Live rights are being broken into more packages
For major sports, rights holders are adapting how they package rights. In the early 90s, live rights were
typically sold in one package, creating an all- or-nothing model for bidders. In the late 1990s and early 2000s
live rights packaging evolved to encompass several live packages, broken down by platform or type of retail
proposition (e.g. subscription or PPV). This allowed rights holders’ to maximise competition between
broadcasters. Most recently, due to competitive dynamics for broadcasters and regulatory interventions, there
has been a trend towards selling a greater number of smaller packages. These give smaller broadcasters a
theoretical chance to win at least one of the packages and also encourages pay-TV incumbents to bid for as
many packages as possible.
Developments at the French Ligue de Football Professionnel (LFP) illustrate this evolution. The LFP had one
live package for the 2005/06 – 2007/08 rights, when there was competition between pay-TV broadcasters TPS
and Canal+. However, in 2006, after almost doubling its bid for the Ligue 1 rights to €600m per season123
Canal+ bought TPS. At this point Canal+ indicated its intention to pay less for the Ligue rights. In response,
the Ligue split the rights into 12 packages. This made the rights affordable to smaller broadcasters and
Orange Sport (broadcast on Orange ADSL) managed to win one of the live packages as well as the Magazine
and Mobile packages. The total value (after a second round of bidding) was €668m per season, 11% up on
the previous deal.
The regulatory impact can also be seen by looking at the English Premier League. The 2001/02-03/04 season
raised £430m with one live package (won by Sky) and one PPV package, won by Sky ONDigital, NTL and
Telewest. 2004/05-06/07 auction raised £341m. The Premier League was required to unbundle its live rights
into four packages, a Gold package for 38 Sunday afternoon games, a Silver package of 38 Monday evening
games, and two Bronze packages of 38 Saturday afternoon games each. All of these packages were
purchased by Sky. In the 2007/08-09/10 Premiership deal, the European Commission required the Premier
123 For more details see section 4.3.3.b, “One or two pay-TV broadcasters often own the majority of premium sports rights – Incentives to
merge”
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League to divide matches into six packages of equal value to fans. At least one of these packages could not
be bought by Sky. At the end of the auction, Sky acquired four packages and Setanta two. The auction raised
£569m.
Pressure from the European Commission has also driven UEFA’s decision, starting with the 2003/04 season,
to offer at least two Champions League packages in every region124
. UEFA has split the packages by days of
the week and, in general, is aiming for two broadcasters in each country, one pay-TV, one FTA.
Exhibit 22: Premier League rights packages
01/02-03/04
Highlights
Mobile
Live
Live
VOD(1)
Near-live
Highlights
Mobile
92/93-96/97
& 97/98-00/01
04/05-06/07 07/08-09/10
Live (2)
Live (1)
Live (D)
Live (B)
Live (C)
Live (A)
Live (F)
Live (E)
Near-live (long form) 1
Highlights
Mobile
Pay per view
Highlights
Near-live clips
Near-live (long form) 2
Note:Source:
(1) Package scrapped in January 2003TV Sports Markets “World Football Leagues and TV Rights”; Value Partners analysis
Note:Source:
(1) Package scrapped in January 2003TV Sports Markets “World Football Leagues and TV Rights”; Value Partners analysis
Live (4)
Live (3)
b) More sophisticated segmentation between FTA and pay-TV packaging
Rights holders are increasingly looking at how they can best exploit different broadcasters (both pay-TV and
FTA) to maximise rights values. Trends in the International Olympic Committee’s (IOC)125
rights sales may
illustrate one direction that thinking may be evolving. Traditionally the IOC sold all of its rights to FTA
124 Source: the Guardian, Europa.eu
125 The IOC is not a UK sports right holder, so it is not technically a UK market impact. However, there will be a knock-on impact on the UK-
based British Olympics Association
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broadcasters to ensure the “widest possible audience”126
. However, for the 2013 Winter and the 2016
Summer Olympics, the IOC are selling “gatekeeper rights”127
to pay-TV broadcasters in selected countries
(e.g. Fox in Turkey and Sky Italia in Italy). The pay-TV gatekeepers are obliged to resell a minimum of 200
hours of the Summer Olympics and 100 hours of the Winter Olympics to FTA broadcasters128
, ensuring that a
core of events remain FTA. This approach has increased IOC revenues in some markets; for instance, in
Turkey, Fox Turkey paid €23m for the rights, approximately three times the amount that Turkish state
broadcaster TRT was thought to be paying129
. However, some broadcasters may reduce the value they place
on core rights once they lose exclusivity.
c) There are a greater number of non-live packages
There is greater demand for non-live packages as broadcasters and other platforms (such as mobile
operators) are making greater use of football clips, end of season roundups and longer-form content made
available at least a month after the event (e.g. DVD of the “Best of the season” for top Premier League clubs).
Highlights remain the most important non-live package.
As an example, the English Premier League rights for the 2007/08 - 2009/10 season consisted of a total of
twelve packages of rights, of which six were non-live: six live packages split between Sky and Setanta; two
delayed-live packages, won by Sky and BT Vision; a delayed, on-demand clips package won by NTL; a
highlights package won by BBC; a mobile clips package won by News International / Sky; and a club rights
package owned by the clubs themselves, which allows each of the clubs to use highlights of their matches on
their own television channels and websites. Despite these changes, the live rights still comprise the majority
of value.
Exhibit 23: Illustrative live rights as a % total sports rights (£m)
Note:Source:
(1) Five are reported to have paid a nominal fee for highlights (2) Payment for near-live rightsTV Sports Markets, Value Partners analysis
Note:Source:
(1) Five are reported to have paid a nominal fee for highlights (2) Payment for near-live rightsTV Sports Markets, Value Partners analysis
56952 10.6
1030.5
Premier League 07/08-09/10 Domestic test cricket England Rugby Union autumn
internationals
85% 98% 95%
(1) (2)
% total rights value
in live
Live
Non-live
126 IOC Olympic Charter, as quoted in http://www.america.gov/st/sports-english/2008/April/20080416111949cmretrop4.587954e-02.html
127 The gatekeeper broadcaster for the IOC buys the entire package of rights, and then breaks it up themselves to sell to other broadcasters
or interested parties (e.g. mobile operators) (Source: Redorbit, http://www.redorbit.com/news/sports/459971/ioc_sees_hike_in_20102012_games_tv_rights_revenues/index.html) 128
Sochi 2014 website, http://sochi2014.com/79038 129
TRT was paying as a part of the EBU, so its precise contribution for the 2010/12 Olympics is not known. (Source: TV Sports Markets, 7th
November 2008)
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6.5 Conclusion: market evolution
Major live sporting events remain “appointments to view”, able to attract large audiences at a time when these
are becoming harder to obtain. In broadcast, DSO, HD and on-demand should make it more important for
PSBs to show sport (as large audiences become rarer and relatively more valuable) and easier for them to do
so (due to the channel capacity on digital). In sports rights, bundling live content into smaller packages,
differentiating between FTA and pay broadcasters, and the growth of non-live content will increasingly allow
rights holders to maximise rents and meet other objectives around reach and sponsorship revenues. With
expanded programme propositions for larger competitions there may be a case for listing not an event in its
entirety, as may have been the case in the past, but considering which of its component parts need to be
listed.
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7 Potential for future impact
7.1 Summary
• Digital Switch Over will increase the number of qualifying channels with 95% reach and will give
PSBs more capacity to show listed events
• Audience fragmentation, increased use of PVRs and eventually on-demand will increase the value
of “appointment to view” programming. For PSBs with a commitment to sport, sports rights are
likely to take an growing share of their increasingly pressurised programme budgets
• As a result there will be greater competition amongst FTA broadcasters for listed events which
will support the level of listed events rights fees in the future
• Regulatory pressure and competitive dynamics will increasingly drive rights holders to
disaggregate their rights into smaller packages targeted at both FTA and pay-TV. The case for
listing events will increasingly need to consider not just the event but applicability to the
components of a particular rights package
• As historically, Listed Events are unlikely to have a significant impact on the dynamics of the
broadcast market. Adding new events to the list is unlikely to change this, unless the most
valuable properties (such as the Premier League) are listed or a substantial volume of other
important events is listed .The Premier League is the most valuable property and any significant
intervention here would be likely to have an impact . The listing of a significant number of second-
tier (in terms of value) events would, ultimately, damage Sky’s proposition but such a substantial
increase in listings appears very unlikely to occur. A major increase in the number of listed
events would affect smaller sports channels (e.g. new entrants) before it had an impact on Sky,
particularly if the newly-listed events were those most suitable for pay-TV scheduling (i.e. frequent
and long-running). Conversely, it is possible that significant delisting could also harm a new
entrant; if Sky were able to acquire events such as the FIFA World Cup or the Olympic Games, the
scale of the challenge facing a new entrant to attract subscribers might seem much greater.
• The listing of events is likely to continue to have some adverse impact on the revenues of rights
holders because they are unable to maximise competition among pay-TV and FTA broadcasters.
However, there are so many different factors which affect price, it is almost impossible to quantify
the specific impact of listing. Digital Switch Over raises the prospect of increased competition
between a larger number of qualifying broadcasters, which may partially mitigate this impact.
7.2 Introduction
This chapter examines the potential impact on both the broadcast and sports rights markets of Listed Events
in the future, both with and without change in the events listed.
7.3 Impact of trends in the broadcasting market
Digital Switch-Over will mean that all households are multichannel by the end of 2012, fragmenting audiences
across a larger number of channels and increasing the number of channels that qualify to bid for listed events
7.3.1 Fragmentation will increase value of “appointment to view” television
like sports
With increasing audience fragmentation and time shifted viewing, commercial PSBs need programmes which
can draw large audiences, like sports, as the consumer demand section demonstrates. For PSBs committed
to sport, the relative value of sports rights is likely to increase. Sports remains one of the few “appointment to
view” genres that can attract large audiences who will watch live, driving audience share both for that
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programme and aggregate channel shares in hard to reach male demographics. PVRs are also likely to erode
overall advertising effectiveness; however, sports events are well suited to sponsorship, which viewers are
less likely to skip. This is likely to increase the value of Listed Events to qualifying commercial PSBs,
7.3.2 DSO will increase competition for Listed Events
After DSO in 2012, all FTA channels on Freeview will achieve 95% reach and qualify to bid for Listed Events.
This will increase the competition between qualifying broadcasters for these events; it will increase the
scheduling flexibility and capacity of PSBs who wish to bid for Listed Events (they will be able to manage
rights across their entire FTA digital portfolio without interrupting core prime time schedules on their primary
channels); it could also potentially allow a new FTA sports channel to come into the DTT market, leveraging a
mix of Listed and non-listed events. In combination, these should increase the value that sports rights holders
can achieve for Listed Events rights.
7.4 Impact of changes to listed events on the broadcasting market
Changes to the list of protected events could have an impact on the broadcasting market, however such
changes would have to be substantial for this effect to be material.
7.4.1 Potential for impact on existing pay-TV operators if a schedule of
events is listed
Sky’s strong historical growth suggests that it has not been materially impacted by the existing Listed Events
regime130
. Two factors could change this; if the Premier League was listed (Ofcom data suggests that 54%131
of Sky Sports subscribers to whom football is important would cancel their subscription if Sky lost the Premier
League, and they have stated that to undermine Sky Sport’s wholesale position “Sky would need to lose the
majority of Live FAPL rights”132
) or if a large volume of other events was listed133
. In practice this is unlikely;
there are no proposals to list the Premier League and given the large number of sporting events available to
pay-TV and the ability to schedule these flexibly, the increase in volume would have to be substantial before it
had a real impact on Sky. Sky’s resilience is demonstrated by its ability to withstand the loss of two of the six
Premier League packages (46 matches) to Setanta.
7.4.2 New entrants need to have access to a package of rights
The feasibility of new entrants in pay-TV sports is contingent on their ability to build a compelling portfolio of
sports rights. Historically, Setanta acquired not just Premier League rights but also the Scottish Premier
League, home nations World Cup qualifiers, the PGA Tour, Indian Premier League cricket and Magners
League rugby to create its channel. As for Sky above, if a significant volume of new sports rights were listed, it
could undermine the viability of a new entrant, focussing competition on a smaller subset of un-listed rights
and pushing up values to an unsustainable level for a new entrant with a small customer base. The sports
properties which are particularly important to new entrants are those which are suitable for pay-TV scheduling
and relatively inexpensive. The listing of such events could undermine the feasibility of new entrants such as
ESPN.
130 Sky Digital was launched in 1998. Source: Digitalsat.co.uk. Subscriber growth data is in Section 6.2, Impact on the broadcasting market
131 Source: Ofcom, Annex 10 to the pay TV market consultation
132 Source: Ofcom Pay TV phase three document, section 5.47
133 Ofcom state that, for Sky Sports 1, “FAPL is the most valuable competition” but “Sky Sports broadcasts a range of content which is highly
valued by subscribers” (Source: Ofcom Pay TV phase three document, section 4.80-2). Respondents to the Ofcom pay TV review including BT, Virgin BT, Virgin Media, Top UP TV and Setanta have also stated that while “live FAPL content is very important, other non-FAPL sports are also important in making Sky Sports channels a “must stock”” ((Source: Ofcom Pay TV phase three document, section 4.242)
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Conversely, if too many events on the list were de-listed, and Sky acquired many of those events currently
protected such as the FIFA World Cup and Olympic Games, a new entrant would face an even harder task in
attracting subscribers.
7.5 Impact of trends in the sports rights market
Sports rights holders are now showing more sport than ever before, and are using this volume of content to
produce more packages and ensure that there is competition for rights. Regulators, particularly the European
Commission134
, have also put pressure on rights holders to ensure that rights to an entire tournament or
competition cannot be bought by just one broadcaster.
7.5.1 Evolution of packages means composition of listed tournaments needs
to be considered
Some rights holders are starting to increase the volume of content produced from their competitions and
segment their properties into FTA-specific and pay-TV-specific packages to increase value yet ensure public
access. Listing an entire competition or tournament would make this impossible. Because of this, there is
potential for a greater market impact on rights holders from listing events, making it important that more
consideration is given to the cases for listing each of the component elements (e.g. the individual matches) of
major events, particularly international tournaments, than was necessary in the past.
7.6 Impact of changes to listed events on the sports rights market
Changes in listed events will have an impact on sports rights holders, primarily on the revenue they receive for
their sports rights, although this may be mitigated by broader audiences and increased sponsorship revenues.
The greatest impact will be on those sports which are well-suited to pay television, and where the sports rights
body relies most heavily on the revenues from these rights. The market impact should be carefully analysed to
ensure that there is genuine public value that offsets the potential consequences in the sports market.
7.6.1 Counterbalancing impacts can mitigate some revenue loss
Sports rights holders have a number of aims, ranging from maximising broadcast rights fees to driving
participation and interest in their sport. A listed event is likely to have a lower rights price, either because pay-
TV would pay most for the rights or because there is less competition for their rights - allowing interested
PSBs to lower their bids. Against this, listing is likely to increase television audiences and increase other
revenue streams, such as sponsorship. It may also ensure value in the long run - if an event were to be
delisted, and existing FTA audiences and thus broadcasters lost were no longer interested in it, then the
resulting loss in competition for those rights could decrease prices. If the economic situation for PSBs
improves, this is also likely to be decrease the impact of listing on rights holders as the amount PSBs can pay
for sports increases. The extent to which revenue loss is offset by the benefits that listing can provide will
depend on the event under consideration.
7.6.2 Greatest impact on the sports which are best suited to pay-TV
Sports properties which have a long-running series covering much of the year, where there are a number of
events every week, and where the matches are in prime-time or at weekends are most suited to pay-TV.
134 For example, the EC has required the Premier League to disaggregate rights for the 2007/08 – 2009/10 season into six packages, not all
of which can be bought by the same broadcaster
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Some high-profile examples of those types of sports properties are the Premier League, PGA Tour, and
Cricket Test match series; there are also lower-profile examples of the same types of events.
For these events the relative difference between what FTA TV and pay-TV would pay is likely to be greatest.
Even if they are currently shown on FTA television, pay-TV is likely to have provided price competition135
.
These properties are therefore most likely to be affected by listing.
7.7 Conclusion
Overall, the evidence above suggests that the negative market impact on broadcasters from listing events is
likely to be minimal. Pay-TV has historically grown steadily in the UK despite the listed events regime, and the
volume of sport that Sky now has to show is likely to be sufficient in the future to ensure that any one event or
a small schedule of events is likely to be substitutable unless it is a key property, like the Premier League. For
a new entrant it is possible that there could be an impact from denying them the opportunity to construct a
consumer proposition by purchasing a desirable but inexpensive bundle of rights. To date, there does not
appear to have been an impact; in the future market impact is only likely if a volume of events are listed. For a
new entrant, there is also a benefit to listing events as it prevents an incumbent pay-TV operator buying all
sports rights and becoming the only serious option for consumers.
In the sports rights market, it is hard to make generalisations about the impact on a rights holder of listing.
While there are benefits of being broadcast on FTA television, it is clear that pay-TV may well be able to pay
more for some events and the presence of pay-TV as a bidder is likely to mean that qualifying broadcasters
end up paying more. Sports properties which are best suited to pay-TV – long running tournaments, with one-
two matches per week in primetime or at weekends – are most likely to be adversely affected by listing.
Smaller competitions of major sports, which are attractive to pay-TV and which depend financially on UK
television revenues, could also be vulnerable.
135 Explicit competition is where pay-TV has bid against FTA broadcasters to win the rights, and so bid up the price that the FTA broadcaster
has to pay. Implicit competition arises where an event has only ever been sold to a FTA broadcaster, such as with Wimbledon. Here pay-TV may well not explicitly bid, but the possibility of selling the event to pay-TV may well encourage FTA broadcasters to put in higher bids
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8 Appendix
8.1 New entrants in the UK
There have been three major attempts to challenge Sky’s control over pay-TV football rights:
• Eurosport in 1989
• ITV Digital in 2001, with its purchase of football league rights
• Setanta sports in 2007-08, with the purchase of two of the six pay-TV packages136
• ESPN in 2009, with the purchase of Setanta’s two Premier League packages (46 matches) for the
2009/10 season and one Premier League package (23 matches) for 2010/11 – 2012/12
None of these have been successful, with ITV Digital collapsing in July 2002 and Setanta as of the date of
writing (June 2009) in administration. Each has been accused of overpaying for rights due to competitive
pressure from Sky.
8.1.1 ITV Digital
ITV Digital was originally launched as OnDigital in 1998, with up to 18 channels divided between a basic
package including Sky One, Eurosport, UK Gold, and numerous Carlton / Granada packages, and premium
channels including Sky Premier and Sky Sports 1-3137
, for £6.99 to £38 for all channels. However, Sky
competed strongly with the new DTT pay-package, promoting its Sky Digital package with ~200 channels and
offering free set-top boxes to subscribers138
. The extent of this competitive pressure meant that ONDigital’s
owners, Carlton and Granada, rebranded ONDigital to ITV Digital in July 2001.
This rebranding was also accompanied by the purchase of Football League rights for 2001/02 to 2003/04 for
£315m. The ITV Sports package cost £6.99 per month and included the UEFA Champions League, the
Nationwide League and the Worthington Cup. 40 pay-per-view Premier League matches were available for
£9.99 per month.139
However, ITV Digital had markedly overpaid for its rights and failed to acquire the required
subscriber base. It went into administration in 2002, owing the Football League £180m140
.
136 Setanta had already launched in the UK but it was the purchase of Premier League rights that made it a serious competitor to Sky
137 Mediatel, ONDIgital announces Channel packages and launch date, 20/09/98
138 Allbusiness, http://www.allbusiness.com/media-telecommunications/telecommunications/7539623-1.html, 1/06/99
139 Managing Change research website, June 2001
140 BBC, ITV Digital goes broke, http://news.bbc.co.uk/1/hi/business/1896732.stm
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Exhibit 24: Football League, UK live rights values per season (£m)
25 2437
88105
95/96-00/01 01/02 - 03/04 02/03 - 05/06 06/07 - 08/09 09/10 - 11/12
Sky
ITV Digital
Sky
ITV Digital
Notes:
Source:
All deals are for live rights only (i.e. not highlights) to the Football League and also include rights to the
League Cup (currently known as the Carling Cup) and the Football League Trophy (currently the Johnstone’sPaint Trophy) (2) Original rights period was supposed to run until 2003/4, however, ITV Digital collapsed in 2002. The rights to the 2002/3 season were then resold and bought by Sky as part a new four-year package (2) Rights purchased jointly by Sky and BBCTV Sports Markets “World Football Leagues and TV Rights”, Press Reports
Notes:
Source:
All deals are for live rights only (i.e. not highlights) to the Football League and also include rights to the
League Cup (currently known as the Carling Cup) and the Football League Trophy (currently the Johnstone’sPaint Trophy) (2) Original rights period was supposed to run until 2003/4, however, ITV Digital collapsed in 2002. The rights to the 2002/3 season were then resold and bought by Sky as part a new four-year package (2) Rights purchased jointly by Sky and BBCTV Sports Markets “World Football Leagues and TV Rights”, Press Reports
(1) (2)
ITV’s package was overly expensive, and it overpaid for non-Premier League sports rights in an attempt to
compete with Sky.
8.1.2 Setanta
Setenta Sports was established in Ireland in 1992. It operates international operations in Great Britain, Ireland,
Luxembourg, the USA, Canada and Australia, specialising in football, rugby, cricket, golf, and boxing. In the
UK, Setanta runs Setanta Sports 1, Setanta Sports 2, Setanta Golf and Setanta Sports News. These channels
are available cross-platform on Freeview, Sky, BT Vision, Virgin Media and online via Setanta-i. Direct
subscribers are charged £9.99 / month, and the package is also included for free with certain Virgin Media
bundles (e.g. the XL bundle).
Setanta made a serious entry into the UK market when it acquired Scottish Premier League rights in 2004141
.
Subsequent acquisitions were the FA Cup and home nations away World Cup qualifiers and US PGA Golf.
The most important deal occurred in 2006142
when Setanta won rights for 46 Premier League matches for
seasons 07/08 – 09/10. These packages were created after the EC intervened to force the FA Premier
League to divide live rights into six equal packages of 23 matches, of which Setanta won two. In the aggregate
these rights allowed Setanta to construct a viable year-round package for sports viewers who wanted to be
able to watch television sport without requiring a subscription to a cable or satellite package:
141 TV Sports Markets European TV & Sports Rights 2008
142 Source: BroadbandTVnews, http://www.broadbandtvnews.com/2009/06/23/setanta-enters-administration/
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Exhibit 25: Setanta sporting calendar (number of events per month, 2008)
Note:
Source:
For full schedule see appendix
LivesportonTV.com, Setanta, TV Sports Markets, Value Partners analysis
Note:
Source:
For full schedule see appendix
LivesportonTV.com, Setanta, TV Sports Markets, Value Partners analysis
2317 19 19
24
6 8 5 917
511
136
9
7 10
10 9 12 81
2 44
2
4
22
5 4
13
9
10
15 10
22
38
Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec
Cricket
Rugby
Boxing
Golf
Football
Indian Premier League Twenty20 cricket
However, Setanta was judged to have overpaid for a number of sports rights. For example, values for its
Premier League rights were driven up by the bidding war between Sky, Virgin and Setanta. This resulted in
total live rights valued at £569m per season, an increase of 67% over the £341m per season that Sky had
paid for 04/05 – 06/07. This amount even surpassed the £430m per season that live rights had reached in the
competition between ITV Digital, NTL and Telewest, and Sky for 2001/02 – 03/04 rights:
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Exhibit 26: Price of Premier League live rights
• As for 07/08 -09/10
• Live rights divided into four
packages• Sky required
to sublicence
eight matches after
winning all four packages, but no bidder
matched reserve price
• No significant regulatory conditions
- No significant regulatory conditions
• Live rights divided into six packages
of 23 matches
each
• No one broadcaster
could buy all rights
Reg. condi-tions
Rights owner
• As for 07/08 -09/10
• Live rights divided into four
packages• Sky required
to sublicence
eight matches after
winning all four packages, but no bidder
matched reserve price
• No significant regulatory conditions
- No significant regulatory conditions
• Live rights divided into six packages
of 23 matches
each
• No one broadcaster
could buy all rights
Reg. condi-tions
Rights owner
168
370 341438
540
60
13053
168
430341
569 593
97/98-00/01 01/02-03/04 04/05-06/07 07/08-09/10 10/11 - 12/13
Note:Source:
(1) Includes PPV rights’97 to ‘01 - TV Sports Markets “Who Owns TV Sports Rights in the UK”; ’01 to ’10 - TV Sports Markets “World Football Leagues and TV Rights”, 10 onwards Sportcal
Note:Source:
(1) Includes PPV rights’97 to ‘01 - TV Sports Markets “Who Owns TV Sports Rights in the UK”; ’01 to ’10 - TV Sports Markets “World Football Leagues and TV Rights”, 10 onwards Sportcal
(1)
BSkyB
PPV
Setanta
60 matches 60 matches
44 PPVmatches
138 matches 92 matches
46 matches
115 matches
23 matches
Against these rights costs, the Setanta subscriber base saw only limited growth from 1m direct subscribers in
December 2007 to 1.2m in June 2009, after having added 800,000 in 2007 itself. Further pressure was
reported to have come from Setanta’s private equity backers, who invested £400m after Setanta won its
Premier League rights and were looking for a return on their investment143
. The combination of high rights
costs, limited subscriber growth and little opportunity for future growth, due to the loss of 23 of its 46 matches
for the 2010/11 – 12/13 seasons, lead to Setanta running into significant financial difficulties during 2009.
These became evident in June 2009 when Setanta defaulted on a payment of £3m to the Scottish Premier
League. Amidst speculation of collapse and a refinancing drive, Setanta stopped accepting subscriptions. As
this report is being written, Setanta has gone into administration. The Premier League has sold the games it
owned to ESPN, who have stated that they are intending to launch a new subscription sports channel on a
variety of platforms.
143 Source: BBC news, http://news.bbc.co.uk/1/low/business/8089275.stm
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8.1.3 ESPN
ESPN has secured the 46 live Premier League matches (two of the six packages) previously shown by
Setanta Sports for the 2009/10 season, and 23 live matches (one package) from 2010/11 to 2012/13. They
have announced that they intend to launch a new subscription sports channel on a variety of platforms144
.
144 Source: BroadbandTV news, http://www.broadbandtvnews.com/2009/06/22/espn-secures-premier-league-rights/
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