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…

100m reasons why Sony could succeed in owning the world’s living rooms

I am the one and Sony. In many ways OTT is a technology that has been successful in spite of its best efforts. Competing services offer limited and exclusive bouquets of content, different STBs may or may not allow you to stream your DRM-protected content around your house, and all these services are buried in user interfaces that look and function like they’ve been designed by one-armed gibbons, and not very bright ones at that. Can PlayStation Vue really change that?

In a word: perhaps. Which might sound a tad qualified, but is positively glowing compared to many of their rivals. Certainly it has there important factors in its favour: existing numbers, content and experience.

For starters, the numbers that Sony can command in the living room space are impressive. The Vue service, which is rolling out slowly across the US initially, can eventually expand to reach 80m Playstation 3s and somewhere in the region of 14m PS4s worldwide (liable to be 20m or thereabouts by the time the service gets beyond beta).

So, let's call that an installed base of 100m devices. In the meantime, it's gaming-oriented PlayStation Network has 110m users in 63 countries worldwide, so it also has demonstrated experience in scaling up for this sort of thing in its favour

Plus, of course, it owns some interesting properties on the content front. In fact, when the whole concept of OTT first appeared on industry radars a handful of years ago, Sony was one of the  companies that appeared at the top of everyone's list of corporations that could really leverage them there synergies.

It's taken the company a long time to fulfil that promise, but it seems to have learned from the mistakes of those that have gone before. Licensing deals have been struck with Discovery Communications, Fox, NBCUniversal, Scripps Network Interactive and Viacom, while it will also offer some live linear programming from CBS and affiliates among the 75 or so channels available. Three days’ worth of programming appears on demand in the EPG, while Sony is also making much of the service's advanced recommendation and smart search facilities.

Interestingly for its long-term health, the online TV service will also become available on iPad fairly rapidly and later will appear on more Sony and non-Sony devices.

So, why might Sony succeed where the might of others — Google, Apple, Amazon et al — does not necessarily guarantee success? Because it’s already the incumbent, basically. 100m Vue-capable consoles are already linked to TV screens worldwide — the majority of them in living rooms as befits seventh and eighth generation gaming machines rather than languishing in bedrooms. No reprogramming, no changing settings, no faffing and fiddling about with cables: 100m machines hooked up and ready to go.

Price it right and the beleaguered corporation could have something to smile about again. And seeing as how we’re using a pic of the Big Bang Theory to illustrate all this: Bazinga!

The latest US OTT machinations

A quick update to the update: Obama wades in: http://www.whitehouse.gov/net-neutrality

There is so much news coming-out of the OTT market in the US at the moment that we’ve had to create it its own graphic. Today: the latest developments in the on-going net neutrality debate coupled with a small Canadian codicil.

First up, net neutrality. The FCC is, as we and the rest of the entire internet has mentioned before, looking at reclassifying broadband provision as a public utility in an attempt to effectively wrest back control of the whole concept from the open market.

As an ISP quite looking forward to the extra payments a two or even three speed internet would unlock, Verizon (the ruling in whose favour sent the whole edifice tumbling down and kick-started the debate at the start of the year) is somewhat opposed to this. Hence a bit of sabre-rattling and some veiled threats that the whole thing could be heading back to court sometime soon unless the FCC changes its stance.

Poor old Tom Wheeler and the FCC though are caught in something of a cleft stick. Not reclassifying ISPs as telecoms providers will probably lead to the development of the fast lane/s and be good for the ISPs and bad for consumers; while an attempt at reclassifying will be good for the content providers, bad for the ISPs and good for the consumer that’s seeking choice.

Is is a genuine regulatory crossroads but one of the key arguments, one reiterated by everyone from the White House to the CEOs of the likes of Kickstarter, is that there is a wider issue here too and that a free and open internet is about more than just being able to watch 4K films from Netflix in bed. That paradigm of greater consumer choice extends out to the whole internet in all of its multifarious and diverse uses.

Should the FCC prioritise its duty of care to consumers, or should it be looking to encourage the growth of industry? Answers on the back of a postcard please…And as to the implications for the rest of us, the chances are that it will put a very large cat amongst a flock of rather nervous pigeons.

Neelie Kroes, the European Union’s commissioner for the digital agenda tweeted earlier this year “Maybe I shd invite newly disadvantaged US startups to EU, so they have a fair chance.”

Not so much runaway productions as an entire runaway industry…

But then they have to be careful where they run to. Canadian lawmakers, for instance, are reportedly thinking about extending the production quotas that require all broadcasters to carry roughly one third of Canadian-produced content on to the OTT providers; not to mention asking them to contribute to the general pot that everyone else pays into to shore up the Canadian production industry. Netflix and Google have gone on record as saying they’re rather unimpressed.

Amazon’s Echo: genius or hubris?

Can you hear me at the back? Amazon’s new Echo is one of those rarest of tech beasts: a new launch that genuinely seems to have caught everyone on the hop. And, as per usual with tech giants nowadays, it’s either an astounding innovation or something destined for landfill and a quiet disposal of inventory somewhere rather remote.

When it boils right down to its essentials, Echo is simply a WiFi-connected standalone speaker (or “a crazy speaker that talks to you” as The Verge adroitly put it). Currently available only in the US, it comes with a $199 price tag, or will be available for a limited time for $99 for those Prime members that secure an invite.

Here’s why it’s interesting:

• It takes the battle for the living room out of the, er, living room, and round the rest of the house by decoupling it’s service from the TV. Much of the promo material has an Echo sitting resplendent in the kitchen…
• It exemplifies the scatter-gun approach of major tech companies nowadays that seem to be operating on a ‘build it and they will come’ philosophy. Sometimes that works, sometimes it doesn’t. Amazon is currently sitting on a whole heap of unsold Fire Phones. How many? The company’s Q3 results included a $170m write-down due to "Fire Phone inventory valuation and supplier commitment costs.”
• It’s platform agnostic. While it is, of course, deeply tied in to Amazon music serbices, it will also stream material from iTunes etc via Bluetooth
• If it can get the technology right it signifies a mass market entrance by one of the biggest players in the field into the home automation field.

The last is especially interesting. If the voice recognition is reliable and good — at least as good as the much improved Siri — then it’s not hard to imagine this becoming just a component of a house-wide system. Amazon’s promo bumph has users firing questions at it such as How many teaspoons in a tablespoon, what the weather will be like in Runcorn this weekend (okay, I admit it, I localised that one somewhat) and so on.

A recent survey suggested that by 2020 the average house in the averagely developed world will have an average of 60 internet-connected devices. Being the gate-keeper that provides access to them would be a powerful position.

In the meantime, it will be interesting to see what the reviews make of it when they start rolling in. Key will be audio quality and what Amazon says is the ability to fill a room with 360º music. If the company has cracked that at the price point and in the form factor, then it could have a hit on its hands in the here and now.

Constantine: a game-changer for UK TV?

Almost without herald, the new series of Constantine has premiered in the UK on Amazon Prime. One chain-smoking Scouse exorcist and dabbler of the dark arts later, the TV landscape looks subtly different.

The roots of all this lie back in February earlier this year, back before Amazon Prime Video launched, when Amazon and Warner Bros. International Television Distribution inked a deal for streaming rights to a brace of properties (Arrow, The Following, Hostages, Revolution and The 100) following their linear UK broadcast runs.

Constantine, as anybody who has read the original source material will tell you, has somewhat upped the ante as is his wont; the show debuting exclusively in the UK hours after its US first screening.

Presumably Amazon has some first look rights to the show as part of its wider deal with Warner Bros. — owners of DC comics, incidentally, Constantine’s original home — and as an untried proposition from a largely untried stable it might not have attracted the same sort of bidding attention as some other US properties. But it does signal a certain amount of intent and the historical precedent is that when the number of bidders sitting round a table rises, so the price does too.

And yes, Amazon has done this before earlier this year with the 13-part Extant from CBS. But then it made a righteous song and a dance about it. The fact that so little fanfare attended Constantine suggests that there will be more of this thing in the future.

Sky paid HBO £150m back in 2010 for a five-year deal to snap up the exclusive UK and Irish TV rights to HBO's archive, new programming and a first-look deal on all co-productions, and earlier this year paid an undisclosed sum to extend that to 2020 (Sky Deutschland did a similar thing in September). Sky must be fervently hoping that Amazon, and a few other OTT rivals, will have fallen by the wayside by the time it comes to extend again…

(As for Constantine, the first show was great, the second was wobbly...it might have to raise its game to make another season.)

What the FCC did next - Part 1

Press releases are all very well, but it seems that to signify a proper change in policy what one needs nowadays is a blog post. At least that seems to have been Tom Wheeler, FCC Chairman’s thinking last week when he lit the blue touch paper under a potential rule change that could make internet TV really take off. And, somewhat predictably, not everyone is happy.

Not for the first time, but perhaps this time it might have loaded the bases in its favour, the FCC in the US is floating a rule change that would put internet TV providers — multichannel video programming distributors (MVPD) in the jargon — on the same footing as cable companies when it comes to certain key regulations. Critically, it would mean that broadcasters wouldn't be able to refuse to let an internet TV provider carry their own content.

"Consumers have long complained about how their cable service forces them to buy channels they never watch,” wrote Wheeler. "The move of video onto the internet can do something about that frustration – but first internet video services need access to the programmes. Today the FCC takes the first step to open access to cable programmes as well as local television."

The FCC hopes to fulfil its avowedly free-market mantra of 'Competition, competition, competition' and give consumers in the US the ability to buy the programmes they want from the suppliers they want.

This is nothing really new. Congress put in place similar rules to help the then nascent US satellite industry in the early 1990s, and this is just an extension of the same; taking the requirement of having a facilities-based transmission path out of the equation. If it looks like a duck and quacks like a duck, then it is a duck.

"The definition of an MVPD should turn on the services that a provider offers, not on how those services reach viewers. Twenty-first century consumers shouldn’t be shackled to rules that only recognise 20th century technology,” writes Wheeler.

As you might surmise, this has not gone down well in certain quarters, namely the head ones of the US National Cable & Telecommunications Association (NCTA). “Redefining what it means to be an MVPD raises profound questions about how government will extend regulation to Internet video services and how any would-be virtual MVPDs will meet their 'social compact' obligations,” it thundered.

Now this is interesting. The social compact dates back to 1934 and is largely guff, and unenforced guff at that. In exchange for their licensed airwaves, broadcasters were to be required to fulfil the standard (at the time) Reithian doctrine of airing programming that served the “public convenience, interest, or necessity.”

This has evolved over the years to paying lip service to locally-oriented public affairs and political, educational, and cultural programming, but with no minimum standards set or enforced it is largely ignored. How about this for a takedown of the whole thing:

“Most broadcasters today air very little of this sort of public interest programming, and some air none of it at all. Nevertheless, Congress and the FCC continue to confer onto broadcasters all of the privileges of public trusteeship, including, most recently, the assignment of a new, lucrative digital television channel at no cost to them. By contrast, other FCC licensees, including landline and wireless telecommunications providers, paid in excess of $23 billion for certain digital licenses in spectrum auctions conducted over a four-year period in the 1990s.”

(Anthony E. Varona - University of Michigan Journal of Law Reform)

Perhaps the likes of the NCTA really ought to be careful what they wish for…