Post by QPR Report on Mar 26, 2010 6:48:47 GMT
Guardian
Sports threaten legal action over threat to Sky's TV dominance• Ofcom plans to force Sky to cut prices spark fury• Football, rugby and cricket to challenge regulator
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Owen Gibson The Guardian, Friday 26 March 2010
Sky says its sports rights budget will be hit by Ofcom's recommendations. Photograph: Tom Jenkins
Furious sports governing bodies are considering legal action against the media regulator Ofcom over its attempts to force Sky to cut the prices at which it sells its sports channels to rivals, arguing that the move will "irreparably damage" investment at grass-roots level.
Next week's ruling will spark a high-profile legal challenge from Sky that now looks likely to be accompanied by parallel appeals from the biggest governing bodies.
Ofcom's decision, which follows an investigation into the pay TV market spanning almost three years, is likely to lead to lower prices for subscribers to Sky Sports through BT, Virgin Media and Top Up TV.
But the governing bodies are considering lodging their own objections with the Competition Appeals Tribunal, and potentially to the Court of Appeal and the European Court of Justice, arguing that Ofcom has ignored the impact on them. They say the ruling will damage competition and severely hit the amount broadcasters are willing to pay for rights.
Six of the largest governing bodies – the Rugby Football Union, the England and Wales Cricket Board, the Professional Golfers' Association, the Football Association, the Premier League and the Rugby Football League – have written an angry letter claiming Ofcom has not taken into account the impact of its decision on sport and has ignored their views.
It is understood that Ofcom is determined to press ahead and feels its case is backed up by the evidence. It has been investigating the issue for almost three years and will claim that governing bodies have had ample time to make their case. Ofcom will attempt to apply the cuts immediately but Sky will apply for a stay on the verdict while its appeal is heard.
The governing bodies' letter, delivered to the home addresses of the Ofcom chairman, Colette Bowe, and the board after their representatives felt their arguments were given short shrift by the chief executive, Ed Richards, warned of "serious consequences for the sports sector".
It is understood that the letter claims "it is clear that Ofcom is ignoring the evidence given to it by the sports" and argues that the "grass roots of sport will suffer and be irreparably damaged through loss of funding".
It also criticises Sky's rivals for sparking the investigation, arguing that "any market failure is a result of their unwillingness to invest and take risks".
One rugby union insider said: "We feel we have effectively become collateral damage to solve a different problem. We don't think that's acceptable." The RFU is believed to have written a separate letter making the point that it has to use its TV income to fund the amateur game and the grass roots in addition to the professional game.
An ECB source added: "Ofcom has failed to understand that cricket fans want to watch a successful product. It's no good starving the game of income and ending up with a product that no one wants to watch."
Ofcom's remedy is expected to set the wholesale price of Sky Sports 1 at around £10.50 a month, compared with the current £13.88, cutting Sky's margin and allowing its rivals to make a larger profit. BT has suggested it will be able to offer Sky Sports 1 for around £15 as a result. Sky charges £26 per month for Sky Sports 1 and from £35 for packages featuring all its sport channels.
The leading media analyst Enders has predicted the impact on the market will be small for the first three to five years but could be "significant" after that. Sky's rivals argue that over time they will become stronger and more able to compete for so-called "second tier" rights such as the Football League and the Guinness Premiership as they seek to differentiate their offerings.
The governing bodies are sceptical, believing they will prefer simply to buy Sky's own channels at a cheaper price. With Sky making less money from sport, and facing less competition for rights, they believe there will be an inevitable chilling effect.
BT, Virgin and Top Up TV argue they long ago ceased to be able to compete with Sky in any case and that it has continued to invest in sport for its own reasons.
Sky, which now has 9.7m subscribers and has used premium sport as the catalyst for its growth, said it invested £944m in sport last year and claimed its rights budget would be hit by the judgment.
"The governing bodies are right to worry that Ofcom will hit sport where it hurts. Fixing the price of sport on TV will make it less attractive to us as a business and undermine competition for rights in the future. That's why the virtuous circle of investment, development and growth could come to an end," BSkyB's chief executive, Jeremy Darroch, said.
"It's easy to say it would be nice if something was cheaper but that's not a reason for price regulation. A pound a day is a fair price for a product which costs a billion a year to put on the screen. In the long run consumers won't benefit if there is less money available for investment and innovation."
The Premier League fears Ofcom's intervention and an attendant commitment to look at the way it sells its rights could threaten a model that looks set to realise more than £3.2bn for the next round of TV contracts.
www.guardian.co.uk/sport/2010/mar/26/sky-tv-sports-legal-action
Guardian/Owen Gibson
Sky's power struggle heads for extra timeRupert Murdoch's company has grown exponentially to the point where it threatens to obscure any possible competition
Ruper Murdoch has seen Sky expand massively since it first bid for the rights to show Premier League football. Photograph: Eddie Keogh/Reuters
Few phone calls have been quite so farreaching in their consequences. Long before he became an unlikely national treasure, the Spurs chairman, Sir Alan Sugar, irrevocably altered the history of sport and media in this country with a clandestine call to Sky's chief executive, Sam Chisholm, advising him to blow his rivals "out of the water" with a blockbuster bid for live and exclusive Premier League football. In that year, 1991, there were 15 live top flight matches shown on ITV. Now the total is 138, all on pay TV.
Sky was weeks from going bust when Rupert Murdoch famously bet the farm on Premier League football. The pair have been locked in a virtuous cycle ever since. Sky ended up paying £191m for that first live TV contract; the new deal that starts next season will pour £1.7bn into the coffers of the Premier League. Including highlights and overseas rights, the total will be well over £3bn. All that, both claim, could be threatened by a decision due next week from the media regulator.
Since 1992, the rest – Sky's ascension to its position as the most powerful commercial media player in the UK, the explosion in Premier League revenues and player wages and the increased reliance of other sports, notably cricket, on TV revenues and the availability of sport from around the world at any time of the day or night – is history. In the second half of last year, Sky posted revenues of £2.9bn and it can now afford to spend more than £1bn a year marketing and promoting its offering in a bid to retain and expand its base of 9.7m subscribers, who each pay an average of £492 a year.
Around 6m customers subscribe to Sky Sports through either Sky itself or via rival cable operator Virgin Media, the vast majority through its own platform. But Virgin claims that it makes little or no money from selling the channel on to its subscribers. Others including BT and Top Up TV, which operates a paid-for add on service on Freeview, claim it is impossible for them to offer the channel at an economic price at all.
Ofcom concluded last summer that the balance had become skewed and proposed forcing it to offer its sports channels to everybody and regulating the price at which it does so. This complex and wide ranging argument cuts to the heart of what we expect from our media industries, telecoms infrastructure and sporting culture. It will take a significant turn next week when Ofcom finally publishes its proposed regulated prices for Sky's premium channels. Ofcom's remedy is expected to set the wholesale price of Sky Sports 1 at about £10.50 as compared to the current £13.88. As a result, BT has mooted offering Sky Sports 1 to its existing broadband customers for about £15 and Top Up TV is expected to be able to offer it as an add-on to Freeview for around £20.
Some ISPs and pay TV companies may even look to offer Sky Sports 1 "free" as part of a bundle of internet access and entertainment. They are also convinced there is a latent market of viewers who either can't afford to watch live football or are reluctant to sign up to Sky to do so.
Ofcom itself has said it expects only a small effect on prices, placing greater emphasis on the longer term effect on the marketplace. And Sky argues that if BT can drop retail prices so dramatically after a cut of up to £4 at the wholesale level, if could easily afford to undercut it based on the existing price if it wanted to. Sky currently offers Sky Sports 1 on a standalone basis for £26 and charges £35 for all five of its sports channels.
According to Sky's rivals down the years – Telewest, NTL, ITV Digital and Setanta then and Virgin, BT and Top Up TV now – Sky has unfairly used its dominant position to freeze them out and maintain its pre-eminence. According to Sky, they have simply made bad strategic decisions, flopped in fair and competitive auctions for rights and failed to invest and take the risks that have led to its success.
If anything, Sky's grip on the market has tightened as it has extended its investment model to other sports such as cricket. The money it pours in is no longer dictated by what it must pay to outbid its rivals but what it feels must be invested to maintain the quality. In other words, it pours billions into Premier League football in order that its clubs can continue to compete for the best players in a global market. It claims this model is threatened by Ofcom's decision, which is why it has taken the regulator nearly three years to prepare its case and why Sky will fight it tooth and nail in the courts – all the way to Europe if necessary. Enders Analysis has predicted that, given the maturity of the pay TV market and Sky's popularity, the effect would be "modest" to begin with but potentially "significant" in the long term.
In many ways, Sky Sports has been a phenomenal success. More than 6m people hand over upwards of £36 a month for access to a suite of channels delivering more live sport than ever before. Even those who could once have been heard decrying Murdoch and his influence on British political life will happily sit down with their kids in front of Soccer AM on a Saturday morning. And while many consumers willingly hand over their cash, others resent the effect that Sky's billions has had on football, and increasingly sport in general, in this country.
The quality and range of sports broadcasting in this country has risen exponentially since Sugar made his call, with Sky bringing forth a slew of innovations from interactive coverage to high definition, and there is far more live action available than ever before. But rivals argue that consumers are only happy paying £36 a month for premium sport because they know no different. If they had access to more choice, to new innovative services that combined broadband television with social networking and internet functionality, and – most importantly – could save up to £150 a year they would feel quite differently, they argue.
Both sides have employed armies of consultants, analysts and lobbyists to make their case. Ofcom has prepared thousands of pages of case studies, analysis and economic modelling, which has been powerfully contested by Sky. For all the forests of paperwork produced, Sky insists that Ofcom's arguments are inherently flawed.
Sky and the Premier League have sought to portray Ofcom's actions as ideologically driven, arguing that the chief executive, Ed Richards, wants a big win that would compare with his predecessor's efforts to force BT to open up its lines to competition and accelerate broadband provision. The other intriguing subplot is that the Tories have been repeatedly accused of doing a deal with Rupert Murdoch to cut the regulator, a bete noir of his clan, down to size. Ofcom insiders insist its intervention is purely process and evidence driven. With the fight certain to persist beyond next week's announcement to the Court of Appeal and beyond, this already long running and highly-charged clash is certain to enter extra-time.
Posted by
Owen Gibson Friday 26 March 2010 00.
www.guardian.co.uk/football/blog/2010/mar/26/sky-sports-ofcom-legal-dispute
Sports threaten legal action over threat to Sky's TV dominance• Ofcom plans to force Sky to cut prices spark fury• Football, rugby and cricket to challenge regulator
Tweet this
Owen Gibson The Guardian, Friday 26 March 2010
Sky says its sports rights budget will be hit by Ofcom's recommendations. Photograph: Tom Jenkins
Furious sports governing bodies are considering legal action against the media regulator Ofcom over its attempts to force Sky to cut the prices at which it sells its sports channels to rivals, arguing that the move will "irreparably damage" investment at grass-roots level.
Next week's ruling will spark a high-profile legal challenge from Sky that now looks likely to be accompanied by parallel appeals from the biggest governing bodies.
Ofcom's decision, which follows an investigation into the pay TV market spanning almost three years, is likely to lead to lower prices for subscribers to Sky Sports through BT, Virgin Media and Top Up TV.
But the governing bodies are considering lodging their own objections with the Competition Appeals Tribunal, and potentially to the Court of Appeal and the European Court of Justice, arguing that Ofcom has ignored the impact on them. They say the ruling will damage competition and severely hit the amount broadcasters are willing to pay for rights.
Six of the largest governing bodies – the Rugby Football Union, the England and Wales Cricket Board, the Professional Golfers' Association, the Football Association, the Premier League and the Rugby Football League – have written an angry letter claiming Ofcom has not taken into account the impact of its decision on sport and has ignored their views.
It is understood that Ofcom is determined to press ahead and feels its case is backed up by the evidence. It has been investigating the issue for almost three years and will claim that governing bodies have had ample time to make their case. Ofcom will attempt to apply the cuts immediately but Sky will apply for a stay on the verdict while its appeal is heard.
The governing bodies' letter, delivered to the home addresses of the Ofcom chairman, Colette Bowe, and the board after their representatives felt their arguments were given short shrift by the chief executive, Ed Richards, warned of "serious consequences for the sports sector".
It is understood that the letter claims "it is clear that Ofcom is ignoring the evidence given to it by the sports" and argues that the "grass roots of sport will suffer and be irreparably damaged through loss of funding".
It also criticises Sky's rivals for sparking the investigation, arguing that "any market failure is a result of their unwillingness to invest and take risks".
One rugby union insider said: "We feel we have effectively become collateral damage to solve a different problem. We don't think that's acceptable." The RFU is believed to have written a separate letter making the point that it has to use its TV income to fund the amateur game and the grass roots in addition to the professional game.
An ECB source added: "Ofcom has failed to understand that cricket fans want to watch a successful product. It's no good starving the game of income and ending up with a product that no one wants to watch."
Ofcom's remedy is expected to set the wholesale price of Sky Sports 1 at around £10.50 a month, compared with the current £13.88, cutting Sky's margin and allowing its rivals to make a larger profit. BT has suggested it will be able to offer Sky Sports 1 for around £15 as a result. Sky charges £26 per month for Sky Sports 1 and from £35 for packages featuring all its sport channels.
The leading media analyst Enders has predicted the impact on the market will be small for the first three to five years but could be "significant" after that. Sky's rivals argue that over time they will become stronger and more able to compete for so-called "second tier" rights such as the Football League and the Guinness Premiership as they seek to differentiate their offerings.
The governing bodies are sceptical, believing they will prefer simply to buy Sky's own channels at a cheaper price. With Sky making less money from sport, and facing less competition for rights, they believe there will be an inevitable chilling effect.
BT, Virgin and Top Up TV argue they long ago ceased to be able to compete with Sky in any case and that it has continued to invest in sport for its own reasons.
Sky, which now has 9.7m subscribers and has used premium sport as the catalyst for its growth, said it invested £944m in sport last year and claimed its rights budget would be hit by the judgment.
"The governing bodies are right to worry that Ofcom will hit sport where it hurts. Fixing the price of sport on TV will make it less attractive to us as a business and undermine competition for rights in the future. That's why the virtuous circle of investment, development and growth could come to an end," BSkyB's chief executive, Jeremy Darroch, said.
"It's easy to say it would be nice if something was cheaper but that's not a reason for price regulation. A pound a day is a fair price for a product which costs a billion a year to put on the screen. In the long run consumers won't benefit if there is less money available for investment and innovation."
The Premier League fears Ofcom's intervention and an attendant commitment to look at the way it sells its rights could threaten a model that looks set to realise more than £3.2bn for the next round of TV contracts.
www.guardian.co.uk/sport/2010/mar/26/sky-tv-sports-legal-action
Guardian/Owen Gibson
Sky's power struggle heads for extra timeRupert Murdoch's company has grown exponentially to the point where it threatens to obscure any possible competition
Ruper Murdoch has seen Sky expand massively since it first bid for the rights to show Premier League football. Photograph: Eddie Keogh/Reuters
Few phone calls have been quite so farreaching in their consequences. Long before he became an unlikely national treasure, the Spurs chairman, Sir Alan Sugar, irrevocably altered the history of sport and media in this country with a clandestine call to Sky's chief executive, Sam Chisholm, advising him to blow his rivals "out of the water" with a blockbuster bid for live and exclusive Premier League football. In that year, 1991, there were 15 live top flight matches shown on ITV. Now the total is 138, all on pay TV.
Sky was weeks from going bust when Rupert Murdoch famously bet the farm on Premier League football. The pair have been locked in a virtuous cycle ever since. Sky ended up paying £191m for that first live TV contract; the new deal that starts next season will pour £1.7bn into the coffers of the Premier League. Including highlights and overseas rights, the total will be well over £3bn. All that, both claim, could be threatened by a decision due next week from the media regulator.
Since 1992, the rest – Sky's ascension to its position as the most powerful commercial media player in the UK, the explosion in Premier League revenues and player wages and the increased reliance of other sports, notably cricket, on TV revenues and the availability of sport from around the world at any time of the day or night – is history. In the second half of last year, Sky posted revenues of £2.9bn and it can now afford to spend more than £1bn a year marketing and promoting its offering in a bid to retain and expand its base of 9.7m subscribers, who each pay an average of £492 a year.
Around 6m customers subscribe to Sky Sports through either Sky itself or via rival cable operator Virgin Media, the vast majority through its own platform. But Virgin claims that it makes little or no money from selling the channel on to its subscribers. Others including BT and Top Up TV, which operates a paid-for add on service on Freeview, claim it is impossible for them to offer the channel at an economic price at all.
Ofcom concluded last summer that the balance had become skewed and proposed forcing it to offer its sports channels to everybody and regulating the price at which it does so. This complex and wide ranging argument cuts to the heart of what we expect from our media industries, telecoms infrastructure and sporting culture. It will take a significant turn next week when Ofcom finally publishes its proposed regulated prices for Sky's premium channels. Ofcom's remedy is expected to set the wholesale price of Sky Sports 1 at about £10.50 as compared to the current £13.88. As a result, BT has mooted offering Sky Sports 1 to its existing broadband customers for about £15 and Top Up TV is expected to be able to offer it as an add-on to Freeview for around £20.
Some ISPs and pay TV companies may even look to offer Sky Sports 1 "free" as part of a bundle of internet access and entertainment. They are also convinced there is a latent market of viewers who either can't afford to watch live football or are reluctant to sign up to Sky to do so.
Ofcom itself has said it expects only a small effect on prices, placing greater emphasis on the longer term effect on the marketplace. And Sky argues that if BT can drop retail prices so dramatically after a cut of up to £4 at the wholesale level, if could easily afford to undercut it based on the existing price if it wanted to. Sky currently offers Sky Sports 1 on a standalone basis for £26 and charges £35 for all five of its sports channels.
According to Sky's rivals down the years – Telewest, NTL, ITV Digital and Setanta then and Virgin, BT and Top Up TV now – Sky has unfairly used its dominant position to freeze them out and maintain its pre-eminence. According to Sky, they have simply made bad strategic decisions, flopped in fair and competitive auctions for rights and failed to invest and take the risks that have led to its success.
If anything, Sky's grip on the market has tightened as it has extended its investment model to other sports such as cricket. The money it pours in is no longer dictated by what it must pay to outbid its rivals but what it feels must be invested to maintain the quality. In other words, it pours billions into Premier League football in order that its clubs can continue to compete for the best players in a global market. It claims this model is threatened by Ofcom's decision, which is why it has taken the regulator nearly three years to prepare its case and why Sky will fight it tooth and nail in the courts – all the way to Europe if necessary. Enders Analysis has predicted that, given the maturity of the pay TV market and Sky's popularity, the effect would be "modest" to begin with but potentially "significant" in the long term.
In many ways, Sky Sports has been a phenomenal success. More than 6m people hand over upwards of £36 a month for access to a suite of channels delivering more live sport than ever before. Even those who could once have been heard decrying Murdoch and his influence on British political life will happily sit down with their kids in front of Soccer AM on a Saturday morning. And while many consumers willingly hand over their cash, others resent the effect that Sky's billions has had on football, and increasingly sport in general, in this country.
The quality and range of sports broadcasting in this country has risen exponentially since Sugar made his call, with Sky bringing forth a slew of innovations from interactive coverage to high definition, and there is far more live action available than ever before. But rivals argue that consumers are only happy paying £36 a month for premium sport because they know no different. If they had access to more choice, to new innovative services that combined broadband television with social networking and internet functionality, and – most importantly – could save up to £150 a year they would feel quite differently, they argue.
Both sides have employed armies of consultants, analysts and lobbyists to make their case. Ofcom has prepared thousands of pages of case studies, analysis and economic modelling, which has been powerfully contested by Sky. For all the forests of paperwork produced, Sky insists that Ofcom's arguments are inherently flawed.
Sky and the Premier League have sought to portray Ofcom's actions as ideologically driven, arguing that the chief executive, Ed Richards, wants a big win that would compare with his predecessor's efforts to force BT to open up its lines to competition and accelerate broadband provision. The other intriguing subplot is that the Tories have been repeatedly accused of doing a deal with Rupert Murdoch to cut the regulator, a bete noir of his clan, down to size. Ofcom insiders insist its intervention is purely process and evidence driven. With the fight certain to persist beyond next week's announcement to the Court of Appeal and beyond, this already long running and highly-charged clash is certain to enter extra-time.
Posted by
Owen Gibson Friday 26 March 2010 00.
www.guardian.co.uk/football/blog/2010/mar/26/sky-sports-ofcom-legal-dispute