Sports rights – is it a level field?

With Euro 2004 under way and the world’s top athletes limbering up for this summer’s Olympic Games, what better than firing a few arrows at the mess that is the sports rights market? Given the regulatory risk and uncertainty inherent in the negotiation of sports rights contracts, several once-active broadcasters now seem to be sitting on the touchline. They have decided that the commercial value of covering a particular event is not great enough to warrant getting involved in the bidding war.

Much of the blame for this can be laid at the door of the EU regulatory system. With the lack of any clear, EU-wide framework for policy decisions – which can result in different decisions in similar cases – negotiating rights is undoubtedly a tricky game for buyers and sellers alike.

Seeing riders pull up in the European sports rights race has injected a “bust” phase into the proverbial “boom-and-bust” cycle.

The “boom” was manifested in the explosive rise in fees paid by European broadcasters in the 1990s. Rights to the Fifa World Cup leapt by no less than 900% between 1992 and 2002, for example, while the fees paid by the European Broadcasting Union for coverage of the Olympic Games increased almost four-fold.

Now this staggering inflation has come to an abrupt halt.

Witness the fall in the price for live rights to English Premiership games – down from £1.1bn to £1.02bn for a three-year period starting in 2004/5.

While the price of a sports rights agreement hinges on a vast range of commercial pressures and variables – such as the sport’s appeal and profile at the time, as well as economic and advertising cycles, it is also influenced heavily by the possibility of regulatory restrictions, conditions and interventions.

So much so that now, more than at any time since the sports rights boom began in the early ’90s, it is commercially acceptable for broadcasters to decide not to bid for rights. This change reflects the market’s growing maturity, along with its widespread disillusionment with the flawed, and essentially unreliable, regulatory regime.

At a European level, we have recently seen the commission’s decision to place conditions on BSkyB’s exclusive live rights to the English Premier League for the period 2004 to 2007.

The commission forced BSkyB to put rights out to tender for six to eight games per season for the next three seasons as a “compulsory licensing” as a way to inject some competition. Last month, however, BSkyB announced that, because no bids had met the reserve price agreed with the commission, it would not be sub-licensing the rights after all.

This case illustrates not only the arbitrary nature of interventions but also the ease with which parties can side-step conditions set by the regulator and the downward pressure on rights pricing and waning enthusiasm for sports coverage.

Going forward, what the sports rights market needs most from regulators is the creation of a level playing field upon which rights agreements can be transacted with far greater clarity and confidence.

This is especially pressing given the speed of market and technological developments, such as 3G licensing, which allows for mobile phone transmission of Premiership clips.

A clearly defined regulatory framework for sports rights could deliver a win-win situation by enabling companies and regulators to work more closely together and reduce the jeopardy commonly associated with deals.

Assuming healthy competition re-emerges, European broadcasters would be able to pass some of the benefits of greater regulatory efficiency onto consumers. For now, however, the ball remains in the regulators’ court.

Olivier Wolf is a partner at PriceWaterhouseCoopers

This article was first published on Media Week