Tuesday, 18 November 2014

Of Ofcom, the NFL, blackouts, and the future of football rights in the UK

Rights, rights, baby: Following a complaint by Virgin Media, Ofcom has opened an investigation into how the EPL sells domestic live rights for matches. With the reputation of the football business in as parless a current state as Sunderland’s defence, you can only hope it will have more teeth than Fifa’s latest whitewash. But events in the US show that change may be in the air.

The next Premier League rights tender is expected to kick off in the new year with the next tranche of three-year deals announced before the end of the current 2014-15 football season. BSkyB and BT Sport are the current incumbents. BT acquired two of the seven available rights packages in the three-year cycle from 2013-14 to 2015-16, for £246m per season, with Sky acquiring the other five packages for £760m per season.

Yes, that’s £1bn per season. Find another £100m — less than the annual wage bill at Manchester City — and you could fund ESA to send a Rosetta probe to a comet every year if you so wished. And the price is only going to head upwards from there, with all sorts of fevered speculation regarding how much they will go for in the next round of bidding as BT and Sky continue to slug it out for viewer eyeballs.

So, why the investigation? Well, Virgin (currently priced out of the comeptition) says the current arrangements for the collective selling are in breach of competition law and, in particular, that the proportion of matches made available for live television broadcast (41%) is pegged artificially lower than other European leagues.

Now, a lot of this stems from a historic edict designed to protect attendance at football matches that sees rights holders barred from broadcasting matches that kick-off at 15.00 on a Saturday. This sort of thing happens across sports and continents, but in the new media landscape such protectionism is is no longer guaranteed.

In 1975, for example, US regulator the FCC passed a blackout rule which meant that any NFL games that failed to sell enough tickets could not be shown on free television in the home team's own local market. 39 years ago, as a result almost 60% of NFL games were blacked out on broadcast TV because not enough fans were showing up at stadiums. Today, less than one percent are blacked out — two games in the entire 2013 season and 15 in 2012 — and TV contracts contribute “a substantial majority of the NFL’s revenues,” according to FCC Commissioner, Ajit Pai.

The FCC rule change doesn’t mean blackouts will disappear just yet because the NFL has clauses written into existing contracts with regional broadcasters that guarantee them, and many of those contracts last until the early 2020s. But it will certainly have great trouble enforcing them once more after the next contract negotiations and the whole thing does at least set a precedent.

Of course, the NFL can argue that it’s the existence of the blackouts that have ensured those currently healthy attendances. But, if that is the case, perhaps they can be seen to have done their work now. And returning to this side of the Atlantic, you certainly cannot argue that the top flight of the EPL, with their season ticket waiting lists and extremely deep pockets, are in imminent danger of fan desertion if their match just happens to be shown live at 15.00 on a Saturday afternoon.

Yes, gate receipts go down, but payments more than compensate. Research undertaken by Adam Cox in Broadcasting live matches and stadium attendance http://footballperspectives.org/broadcasting-live-matches-and-stadium-attendance (2012) estimates that gate revenue is reduced by an average of 19.7%, or £232,237 based on the average gate revenue for all clubs when a match is broadcast live. Payments to each club from the EPL, meanwhile, total on average £4.12m per game broadcast (2007-08 season figures, now substantially more).

Anyway, Ofcom, while acknowledging that an investigation could have an impact on the next tender process, is going to look and see whether there has a breach of the UK and/or EU competition law.

“Ofcom is mindful of the likely timing of the next auction of live UK audio-visual media rights, and is open to discussion with the Premier League about its plans,” said a statement. “Ofcom understands that the scheduling of football games is important to many football fans, in particular attending 3pm kick-offs on Saturdays. The investigation will take this into account and Ofcom plans to approach the Football Supporters' Federation and certain other supporters' groups to understand their views.”

One to watch…

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