By Nick Harris
31 March 2010
The Premier League’s chief executive, Richard Scudamore, has lambasted the decision by Ofcom, the UK communications regular, to force BSkyB to offers its sports channels to rivals at cheaper prices, fixed by Ofcom.
Ofcom’s decision can be seen in detail on its website, where the key point is: “Ofcom has set a wholesale price of £10.63 for each of Sky Sports 1 and 2, when sold on a stand alone basis, which is 23.4% below the current wholesale price to cable operators.
“Most consumers currently buy packages which include Sky Sports 1 and 2 and the wholesale price for this service bundle has been reduced by 10.5% to £17.14.”
The League and other sports bodies fear the ruling will act as a disincentive for BSkyB, and other broadcasters, to engage in competitive auctions for future rights, thereby driving down takings from rights sales, and ultimately damaging the end “product”. Ofcom argues that the consumer will get more choice and cheaper premium TV, although there are widely varying opinions on who will win and lose in the long term.
Certainly access to premium sport should be cheaper, and soon. But whether the quality will remain the same is in doubt.
On the one hand, Sky could quickly find its products being bought by millions of new customers attracted into the market by lower prices. One estimate – disputed – says the company’s revenues could increase by £600m over five years. If that transpires, Sky might not be badly damaged, and a stable share price today supports that view. Sky will appeal Ofcom’s ruling anyway.
On the other hand, the ruling logically diminishes the need for broadcasters to compete for rights so fiercely; they know they’ll get them a fixed rate whoever bids. That could drive prices down, reduce sports’ income, and ultimately hurt sports including cricket and rugby, not just football.
The truth is nobody knows for sure how it will pan out, although it does seem sport could suffer the collateral damage of a regulator waging war on a different target: Sky.
Scudamore is furious and the League is considering legal action. Scudamore said: “The Premier League is at one with the rest of UK sport over Ofcom’s ill-judged and disproportionate intervention in the broadcast market.
“Their proposed action will strip out competition for sports rights and hugely reduce the incentives of all bidders, Sky included, to invest in sports rights. The effect will be to subsidise companies that have shown little appetite for investing in our content and fundamentally damage the investment models that have helped sport become a successful part of the UK economy and made sport so attractive to UK consumers.
“Rights holders want to see competition for their content to attract value to invest in the areas fans want – playing talent and facilities – anything that diminishes that investment will be bad for the consumer.
“Of course we will be considering Ofcom’s findings in full and do not rule out a challenge to protect the interests of fans, clubs and the wider game.”
A League statement added: “By forcing Sky to sell its sports channels to its competitors at a discount, Ofcom will reduce the incentives of all broadcasters, Sky included, to invest in the acquisition of sports rights. This can only have a negative impact on the ability of sport to attract a fair market value for its content.
“Ofcom’s intervention will damage all sports. Reduced income from rights sales will be rapidly reflected at every level of sport – it will be harder to recruit and retain top talent, youth development will come under pressure, investment in grounds and facilities will be deferred and, in the case of football, the ability to contribute to the rest of the game from the Championship to local parks will be severely diminished.
“Ofcom appears to be trying to market engineer by putting the narrow interests of a small number of large companies ahead of the interests of sports fans across the UK. Their intervention is misconceived and wholly unjustified.
“Premier League rights are sold in a way that is entirely compatible with competition law, as approved by the European competition regulator, with multiple packages made available to the market every three years and no single company allowed to acquire the lot. These packages are sold in a way that allows effective competition as well as allowing bidders to enter the market for our rights. Ofcom has no basis for an intervention.
“The Premier League will now carefully study today’s announcement and consider what action to take to best protect the interests of fans, our clubs and football more widely.”
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