Advanced Television

Rupert Murdoch needs a sense of humour

August 9, 2010

I wonder if Rupert Murdoch allows himself an ironic chuckle that while the UK government (in common with virtually all its counterparts) is preparing legislation to punish consumers and distributors for stealing content rights, its regulator is forcing Sky to handover those rights (or the product of them) for a discounted price. I imagine Murdoch sees this as daylight robbery and has, understandably, lost his sense of humour about the whole affair.

The ‘establishment’ argument for new rules on downloading (which even proponents admit are complex, hard to enforce and potentially unfair), is essentially that creative industries – movies and music – and sporting bodies, must have their income protected in order to thrive. Well, maybe, though others argue only established artists and distributors benefit and the internet ‘free for all’ actually boosts creativity and breakthrough opportunity for the majority who are overlooked by the traditional infrastructure.

Whichever is right, very few companies have put more money into sport and movies than Sky. They’ve done so through huge and risky bets that owning the best, most attractive content will win them, and keep them, the maximum number of subscribers. It has worked and, as a consequence, they have a dominant market share. And this is their competitors’ problem – the virtuous circle of Sky’s success means they can’t afford to out bid it for the content, therefore they must buy it from Sky at a price set by Sky – as in willing buyer, willing seller, if you don’t like it, don’t buy it.

Ofcom has now agreed this situation ‘distorts’ the market and will try and force Sky to cut its wholesale price on Premiere League soccer channels by 10-25%. Its reasoning is that consumers are ‘likely’ to benefit from smaller packages and possibly lower prices, and innovation will be encouraged. Other than the ‘good intentions’ of the complainants – BT, Virgin and Top Up – they offer no evidence for this. Where is the ground swell of public opinion, the clamour for smaller packages and lower pricing? We may not like the fact most Sky’s money is being recycled by footballers to boost the profits of Ferrari, Prada and Rolex, but who can argue the Premiere League is not the most successful in the world?

As for innovation, other broadcasters sat on soccer rights for decades and did nothing. Leaving aside HD (as, counter intuitively, does Ofcom), Sky has consistently innovated with multi-cams, carry-cams, sophisticated graphics, etc, etc. Meanwhile attendance at games – where prices really are extortionate – has grown and remained steady.

Ofcom thinks this move will help competitors to flourish and, therefore, boost competition. Even if you accept that’s Ofcom’s business, will it work? Will competitors not just pocket the increased margin (there’s nothing to stop them)? And, anyway, is there any further propensity to consume soccer, even in different packages, unless the price is unsustainably reduced? Did BSB, On Digital, ITV Digital and all the many predecessors to Virgin Media, fail in the face of Sky wholly or mainly because of Sky’s content rights position? Or was it because they were just a bit rubbish at more or less everything by comparison?

Categories: Blogs, Broadcast, Nick Snow, Regulation