Big Clubs Possible Reduction in TV Income

Guardian

Cost of TV sport to tumble as Ofcom turns screw on SkyRegulator's price cut will bring good cheer for armchair sports viewers, but it will create tension between Murdoch and the Tories

Richard Wray, communications editor guardian.co.uk, Sunday 17 January 2010

Armchair sports fans will soon have something to cheer, with the cost of watching live football, cricket and rugby on ­television set to plunge as rivals attempt to end the dominance of Rupert Murdoch's ­satellite broadcaster BSkyB.

BT and Virgin expect to capitalise on plans by the media watchdog, Ofcom, that will force Sky to drop the price it charges rival broadcasters for its Sky Sports channels in the biggest shake-up of sports TV for almost two decades. Prices should drop in time for the 2010/2011 Premier League football season.

But while viewers are likely to benefit from a price war that would challenge the hold Sky has had since it bought its first football rights in 1992, Ofcom's move could present David Cameron with a major headache.

If the Conservative leader wins the general election, the timing of Ofcom's intervention in sports broadcasting would result in one of his first choices as prime minister being whether to take the unprecedented step of overturning the decision of an independent regulator or to let it stand and risk infuriating the ­Murdoch empire, one of his party's most powerful supporters.

The Ofcom board is due to meet on Tuesday to discuss the level of the proposed cuts to the wholesale price of Sky Sports. It will make a formal announcement in March, perilously close to a potential election. The satellite broadcaster is expected to launch an immediate legal attack on any moves to cut its prices but the regulator will use its powers to introduce the measures while the lawyers make their arguments.

Ofcom is well aware Sky has used the courts as a delaying tactic before: almost two years ago the competition authorities told the broadcaster it must sell at least half its controversial 17.9% shareholding in ITV. It still owns the entire stake.

Once the price cuts are announced, BT hopes to start offering Sky Sports 1 to customers of its BT Vision service for £15 a month. Sky customers currently pay at least £25.50 for the channel and most satellite households are paying upwards of £36 a month for a full complement of sports and premium movie channels. "The case is crystal clear – the customer benefits if they get more choice," said the head of BT's retail division, Gavin Patterson.

Virgin Media, which already provides Sky Sports to its cable TV customers, is also expected to undercut Sky's own prices once Ofcom's price cuts are introduced. Sir Richard Branson has already said he expects the price of Sky Sports 1 to fall by a fifth for cable subscribers.

Ofcom has been investigating the pay-TV market since 2007 in a process that has involved three separate public consultation exercises and dragged on for so long that one of the broadcasters that sparked its inquiries – Setanta – has gone bust.

Last summer, in its initial findings, Ofcom decided Sky must be forced to wholesale its premium channels, dropping the price of Sky Sports 1 and Sky Sports 2 from the £13.48 it currently charges ­Virgin Media to somewhere within the range of £9.41 and £11.24 per channel, while a bundle of both channels and Sky Movies – which currently costs Virgin £23.40 per subscriber – should come down to between £16.98 and £20.43, a 27% discount on current prices.

For Sky, the price cuts would allow its bitter rivals to mount a challenge to the commanding lead in the British pay-TV market it has built up using sports rights over the past two decades. From Premier League football and rugby's Heineken Cup to the US Open tennis and the most recent Ashes series, Sky has much of the content on any sport fan's must-watch list. As a result, it is on track to sign up its 10 ­millionth subscriber this year, while ­Virgin Media has fewer than 4 million and BT's hybrid Freeview and broadband TV ­service BT Vision has just 436,000 after two years and a multimillion pound ­marketing campaign.

Sky has made no secret of its resentment that its rivals are looking to piggyback on the billions of pounds the ­company has invested in sports rights over the years. "We invest almost £1bn a year to create a top-quality sports service," said a Sky spokesman. "It would be perverse to force us to sell it on the cheap to competitors who have shown no appetite to invest in content or support British sport."

But Ofcom is desperate to prove itself as the consumer's champion at a time when the Conservatives have made it clear they would dramatically reduce its ability to set policy if they were in power.

When the Sun switched allegiance to the Tories last year, there was little doubt among some of the Labour frontbench it was part of a secret deal with the Murdoch empire. Last year the culture secretary, Ben Bradshaw, accused the Tories of "subcontracting" their media and broadcasting policy to News International.

The Conservatives, however, do not appear interested in reversing any decision by Ofcom concerning Sky. Shadow culture secretary, Jeremy Hunt, told the BBC's Newsnight on 26 November: "On pay-TV … and Ofcom, we explicitly said that is something that should be decided at arm's length from politicians".

www.guardian.co.uk/media/2010/jan/17/tv-sport-media-ofcom-sky