Project DisCo: Football pay-TV market unbalanced
June 13, 2014
By Colin Mann
James Waterworth, Vice-President, Europe for the Computer and Communications Industry Association (CCIA), has suggested that while there is robust competition in the market for communications and Internet services in the UK, there is a corresponding lack of competition in the market for Premier League football pay-TV rights.
In a blog post on DisCo (Disruptive Competition) – a project to promote disruptive innovation and competition to policymakers – Waterworth notes that the UK is home to one of the most dynamic Internet, communications and media markets in the world. “Whether we rely on the work of the Boston Consulting Group who proclaimed the UK top of the world’s ‘e-intensity’ index or Ofcom’s, the UK communications and media regulator, homegrown analysis, things are looking pretty good for consumers. There is choice, availability and price competition; mostly, that is,” he claims.
“The English Premier League competition has existed since 1992. In that period the quality of football (soccer for any North American readers), and associated infrastructure such as stadia, has improved considerably. In the same period we have also seen considerable improvements in the UK communications infrastructure, a blossoming of services and a considerable decline in prices. That is what competition does,” he avers.
According to Waterworth, while there is robust competition in the market for communications and Internet services, there is a corresponding lack of competition in the market for pay TV, which is driven by premium sports content, or more precisely Premier League football. “One method of measuring the amount of competition in a market is the Herfindahl-Hirschman Index (HHI), with a score of 1000 indicating a competitive market and over 2500 being unusually highly concentrated. The 2012 report of the UK Competition Commission – Movies on pay TV market investigation – A report on the supply and acquisition of subscription pay-TV movie rights and services – shows that the HHI score for the UK pay-TV market was 5000 in May 2012. The report goes on to note that ‘Sky’s market share has been persistently above 60%’,” he advises, suggesting that such concentration often leads to a situation in which the consumer pays more.
“British consumers pay amongst the lowest prices for communications services such as broadband. This is in part down to the success of regulators in designing a competitive market and the willingness of companies to invest in the UK market. The creation 10 years ago of BT Openreach has been one of the keys to avoiding the problem of persistent bottlenecks, he contends.
He notes an LSE Media Policy Project which concludes that more competition for sports rights is good for the sports themselves, as well as for consumers. “This is something for the football community to ponder over after the excitement of the Brazil World Cup,” he suggests.
“Such concerns are not unique to the UK market. In the United States, Google has noted that exclusive programming deals make it difficult to enter a new geographic market for fibre. Without access to the key programming for a region (football of the British or American variety) it is difficult to compete for customers. The same, of course, applies the other way around: no access to broadband even with programming can cause problems.”
He says that new entrants in a market always shake things up. “They may price differently, bundle with other services and present programming differently. This has certainly been the case for BSkyB over the last 20 years. The successive failures of companies such as Setanta and ESPN wishing to compete with BSkyB in showing premium football content illustrates that this a persistent problem, one that measures up until this point have failed to deal with, and which is hindering new entrants,” he argues.
“Ofcom has recently announced that it is seeking input on a ‘wholesale must-offer’ obligation to be placed on BSkyB with regard to its Sky Sports 1 and Sky Sports 2 channels. This is welcome news as two decades of a lack of competition have led the UK to a place where the lack of competition may harm football supporters,” he claims.
“The goal of policymakers and sporting administrators should be to ensure consumers are able to watch their team at a price that continues to drive investment in football. This balance is not currently struck for English football, and the long-term perspective for investment in football is in jeopardy as a result. An appropriate ‘wholesale must-offer’ is the right place to start,” he concludes.