Saturday 5 April 2014

Making football content affordable to all

By Irene Tham, The Straits Times, 4 Apr 2014

SOCCER fans up in arms over the high price of $112 they have to pay to watch the World Cup this year are asking: Why? And can it change?

The first question is more straightforward. Football broadcast rights in Singapore are essentially a game between two pay-TV operators - SingTel and StarHub.

National broadcaster MediaCorp has been sitting out of the bidding war for the World Cup broadcast rights since 2002. The previous cycle in 1998 was the last time MediaCorp bid for the rights to air the matches. A spokesman said: "The licensing fees and the business environment were favourable then."

When there are two potential competitors, simple economics predicts that prices will get bidded up.

In contrast, public TV broadcasters NRK in Norway and DR in Denmark jointly own the rights with pay-TV operator TV2 in the two respective markets.

In Singapore, a similar joint bid involving MediaCorp - should it want to get involved - and any of the pay-TV operators would also help reduce cost pressures.

It makes sense for free-to-air broadcasters and pay-TV operators to join forces because they are not direct competitors.

Over in Hong Kong, TVB - which is both a national broadcaster and pay-TV player - has the World Cup broadcast rights.

This is why many matches will be available for free compared with the four in Singapore that will be aired by MediaCorp, which sub-licensed them from SingTel.

By submitting joint bids with NRK in Norway and DR in Denmark, pay-TV operator TV2 halved its costs although it would not disclose the price it paid. As such, it could price the matches affordably in Denmark and provide free viewing for all matches in Norway.

Over in Hong Kong, a TVB spokesman told The Straits Times that it was prepared to lose money on the games. "We may or may not recover the entire costs for broadcasting rights and production...partly because of the pay channel."

The station relies mainly on television advertising for revenue. As such, it can offer free viewing of 22 matches to secure the TV ads.

TVB may also have a political agenda. It has been trying to win public support for its court appeal against the granting of a new free-to-air TV licence in Hong Kong.

Here, even if the national broadcaster is not interested, another way to keep prices down is for a joint bid to be submitted by SingTel and StarHub. This was a point StarHub did not fail to highlight when SingTel announced on March 12 that it had sealed the exclusive deal with Fifa to broadcast the World Cup matches here.

StarHub complained about being spurned by SingTel. StarHub said it made a "sincere offer" to SingTel to submit a joint bid just like the last World Cup in 2010. But SingTel went ahead to propose to Fifa an exclusive deal. SingTel later explained the two operators were unable to agree on a joint offer that would "meet the content rights holder's expectations".

It is not surprising that they could not agree on the terms of a joint offer. After all, they compete head-to-head for business.

But in fact, SingTel and StarHub had submitted a joint-bid for the 2010 World Cup. Some critics ask why they could not work together again for the public's interest.

It's easy to forget that circumstances have changed since 2010.

Then, SingTel and StarHub were probably more desperate to seal the deal than they were this year.

Back in 2010, World Cup rights holder Fifa had learnt about SingTel's reported $400 million bid for the 2010 to 2012 season of the English Premier League (EPL) in 2009. Singapore reportedly forked out a sum equal to more than a tenth of what the world paid.

With negotiations heading into extra time on the 2010 World Cup that kicked off in June, SingTel and Starhub had to join hands to meet Fifa's demands - reportedly in the region between $40 million and $100 million - or risk the wrath of fans here. A deal was eventually sealed, albeit 35 days before the first match in South Africa kicked off.

But this time round, there was ample time for either SingTel or StarHub to plan their moves.

SingTel did, and outflanked StarHub with its exclusive bid for the 2014 World Cup screening rights. It wanted to use the content to sell more EPL subsciptions.

As a standalone service, World Cup matches can be watched for $112 by pay-TV viewers on both SingTel and StarHub's platforms. The content is exclusive, and as such, has to be available on both platforms under the Media Development Authority's cross-carriage rule.

But it is thrown in free for those willing to sign up for or extend their existing EPL contracts with SingTel for two years.

As Mr Ramakrishna Maruvada, head of South-east Asia and India telecoms research at the Daiwa Institute of Research, put it: "SingTel has taken the most effective route to ensure revenue stability for its pay-TV business."

SingTel was essentially using its World Cup content to sweeten its EPL offerings, which fans had complained were expensive. A basic EPL package now costs $59.90 a month, almost twice the $34.90 sports bundle SingTel used to offer that came with EPL and other premium content like Uefa Champions League and Spanish La Liga.

By throwing in the World Cup, SingTel is better able to convince subscribers to part with their money. It is not a small sum; each subscriber pays a total of more than $1,400 over two years.

The guaranteed income will be music to the ears of SingTel shareholders as SingTel has been trying to make money from its pay-TV business.

Hong Kong's TVB paid HK$400 million (S$65 million) to secure the broadcast rights and programme production. It is unclear how much Denmark and Norway paid.

It is also not known how much SingTel paid for this year's World Cup rights. But extrapolating in part from the 2010 joint bid by StarHub and SingTel where they paid about $20 million combined, the amount cannot be too far from this.

Could SingTel have offered less? It could, but Fifa would probably reject it, and fans here would be deprived of the World Cup.

"Fifa has the upper hand being the only supplier of the World Cup. It's Economics 101," said CIMB regional economist Song Seng Wun.

Mr Greg Unsworth, consultancy firm PricewaterhouseCoopers Singapore's technology, media and telecommunications industry leader, said: "The TV business model is under pressure with Internet video streaming. Sports content is the only reason why people would be glued to the TV. This is why the value of sports content is going up."

Theoretically, MediaCorp should be interested as well but it may be restricted by content acquisition budgets that would not permit bidding for football rights. Moreover, MediaCorp may have broader societal objectives competing for the same budget.

Other commercial forces are also driving up the price of football content. "There is celebrity factor in football, with football players and club managers demanding more money," said Mr Unsworth.

World Cup rights are sold through Fifa agents, who customise prices depending on what they think a market can afford to pay. Singapore has shown it can afford to pay with EPL.

Someone has to pay for football content. Some people think the Government should foot the bill.

There might be reason to make this demand, in countries like Denmark, where each household pays 2,414 Danish kroner (S$560) in TV licence fees, and in Norway, 2,680 Norwegian krone (S$560). But in Singapore, households no longer pay such fees.

There are also no compelling reasons why taxpayers should pay for football matches that are enjoyed by a minority. Nor is it reasonable to expect SingTel, a listed company, to make a loss in the name of "public interest".

If any organisation has public interest to cater to, it would be Singapore Pools, the only legal lottery operator here established by the Government.

The football betting money it collects can perhaps be used to fund the football content itself. This is not unreasonable and perhaps the most feasible way to make football content affordable for all.




Watching the World Cup: Why comparison with S'pore charges inappropriate
By Irene Tham, The Straits Times, 4 Apr 2014

SINGAPORE is possibly the most expensive place to watch the World Cup on television.

Football fans here are scheduled to pay a whopping $112 to SingTel to watch the competition, which kicks off on June 12 in Brazil.

Unlike Singapore fans, those in many other territories will get to watch all 64 matches free in the month-long tournament: including Japan, South Korea, Thailand, Indonesia, Cambodia, China, Britain and Australia.

Even in markets that charge a subscription fee, the charges are nowhere near the $112 price tag. In Malaysia, for instance, it costs viewers RM100 (S$38.40) to watch all 64 matches, split between free-to-air channels and cable television.

But the sheer size of these markets makes comparison with Singapore inappropriate, analysts say. They think that it would be fairer to compare what Singapore pays with countries or cities with a similar gross domestic product (GDP) per capita or population.

The Straits Times picked Hong Kong, Denmark and Norway - the closest matches to Singapore's population of 5.3 million and GDP per capita of US$60,500 (S$76,345).

In Denmark, fans will pay 25 Danish kroner (S$6). Half of the matches will be available over free-to-air channels in Denmark. In Hong Kong, fans will pay HK$128 (S$21) to watch all 64 matches; 22 will be screened free.

In Norway, all 64 matches will be available free. Pay TV operator TV2 and public broadcaster NRK jointly own the football rights.

In Singapore, however, only four matches - the opening, semi-finals and finals - will be free.





Dilemma of ensuring a good deal for football fans
By Irene Tham, The Straits Times, 26 Apr 2014

THE World Cup dilemma Singapore faces is this: Walk away from the deal, or cave in to the high price set by the football rights owner.

There is only one price setter - Fifa - and Singapore is unfortunately a price taker, as outlined in Parliament on April 14.

Senior Minister of State for Communications and Information Lawrence Wong said: "Inherently, this is an issue where the rights owner, the property owner calls the shots."

The only other alternative is for Singapore to walk away. "Until then, (it) is very hard to change the fundamental dynamic, which is that (Fifa) will look at us as a market that can afford this rate," he added.

Are these the only two options? To pay through the nose for World Cup games, or to go without? Or are there other possibilities?

Singapore could consider Government subsidy, as some members of Parliament suggested. But this could put an unnecessary burden on taxpayers.

The Government has arranged for the four key matches - the opening, semi-finals and final - to be made available for free-to-air TV broadcasters to acquire. These matches are in Singapore's "anti-siphoning" list, which means that pay-TV operators cannot acquire the content rights exclusively.

Mr Wong said that putting all 64 matches on the list would result in a significant amount of Public Service Broadcast funds being channelled to sponsor the cost of World Cup media rights.

The Government will not do that - and rightly so. Taxpayers should not be made to pay for football matches that are a form of entertainment enjoyed by a minority.

There is yet one more option that has not been fully explored. This involves Singapore Pools, the only legal lottery operator here established by the Government.

The argument is that since this organisation collects football betting from punters, the collection can contribute towards subsidising football broadcast rights to lower fees for football fans.

Mr Wong said in Parliament that Singapore Pools already contributes via different schemes towards free viewings at community centres and national broadcaster MediaCorp.

But no details were given. For instance, how much does Singapore Pools make from football betting? Is there scope for increased participation by the lottery operator?

Singapore Pools could submit a joint bid with SingTel or StarHub, or even MediaCorp.

Unless and until this option is fully explored, Singapore cannot be said to have only two options.

Mr Wong may be right to say that Fifa looks at Singapore as a whole, with the purchasing power to pay a high price. Whether the bid came from one party or several parties would not alter the negotiation dynamics.

But sellers do not always get what they want.

Vietnam offers an interesting case study. National broadcast station Vietnam Television (VTV) reportedly rejected Fifa media rights agent MP&Silva's asking price of US$10 million (S$12.5 million) to telecast the matches, which will kick off in June in Brazil. All of Vietnam's TV broadcasters turned down the deal.

Haggling took place for months, and now it seems that VTV could soon seal the deal at "a reasonable price", presumably much lower.

The lesson here? It pays to haggle until the 11th hour. In the world of football, taking negotiations to the 11th hour can work in the favour of the buyer. This is because the value of a live telecast goes down the closer one gets to the matches' kick-off date.

Broadcasters have less time to get sponsors, advertisers and subscribers and, as such, would not be able to pay more. Arguably, the seller becomes more desperate to sell, as was the case with MP&Silva with Vietnam.

SingTel managing director of TV Goh Seow Eng reportedly said that the high cost of football rights would send negotiations right down to the wire.

"Sometimes, you have to take it to the last minute to make sure you have the best deal," Mr Goh had said in September 2012, after SingTel signed a non-exclusive deal to broadcast the Uefa Champions League a day before the first round of group games.

So why didn't SingTel take its own advice this time round?

Instead, it sealed an exclusive World Cup deal that made Singapore possibly the most expensive place to watch the matches.

It is not known how much SingTel paid for this year's World Cup rights. But extrapolating in part from the 2010 joint bid by StarHub and SingTel, where they paid about $20 million combined, the amount cannot be too far from this.

The deal was announced in March, three months before the first World Cup match kicks off in June. Surely, taking negotiations to the 11th hour could work in consumers' favour.

But SingTel had another commercial agenda. It wanted to use the content to sell more English Premier League (EPL) subscriptions, in order to help stabilise its pay-TV revenue for two years.

As a standalone service, World Cup matches can be watched for $112 - an early bird price of $94 expired on April 17 - by pay-TV viewers on both SingTel and StarHub's platforms. The content has to be available on both platforms under the Media Development Authority's cross-carriage rules.

But the matches are thrown in for free by SingTel for those willing to sign up for or extend their existing EPL contracts with SingTel for two years.

It is highly unlikely that an avid football fan would sit out EPL games but pay for World Cup matches. So if fans renew their EPL contract for another two years, they can essentially get to watch the World Cup without paying extra.

One thing football fans should avoid doing is complaining when deals are concluded late. The more fans clamour for deals to be signed early, the more the balance of power will shift in favour of the seller.

Perhaps fans should accept last-minute deals as the order of the day, and leave bidders to drive their hard bargains.

There is no turning back the clock: Fifa already knows what Singapore is willing to pay based on past bids. SingTel reportedly paid $400 million for the 2010 to 2012 season of the EPL in 2009, a sum equal to more than a tenth of what the world paid.

While prices are unlikely to fall to yesteryears' low, there may still be hope that they will not spiral out of control.





Time to rein in runaway bidding for sports rights
By Mabel Tan And Ang Peng Hwa, Published The Straits Times, 29 Apr 2014

THE world-beating prices Singapore viewers will have to pay to watch World Cup 2014 left many wondering if anything can be done to rein in this runaway price increase. Although the Media Development Authority (MDA) expressly stated that the cross-carriage rule implemented in 2010 was not intended to lower or control prices, it did seem to be promisingly consumer-friendly. But since then, prices have risen by up to 59 per cent.

Which raises the question: Can anything be done to bring sanity to the situation?

One response is that nothing can be done. In a free market, business should be free to set prices and consumers should be free to accept or reject them. Singapore may be one of the most expensive places in the world to watch the World Cup, but it is not alone in experiencing seemingly unstoppable price hikes. Even in less well-off countries such as Laos and Cambodia, the price for sports programmes like the English Premier League (EPL) has seen large increases.

We do not subscribe to this approach that nothing can be done.

In Britain, the regulator has a "must offer" rule. This obliges the exclusive rights winner, in this case Sky, to sub-license its football content to its rivals. British regulations allow Sky's rivals to price, package and brand the football leagues as part of their own suite of content instead of merely "cross-carriage", as in Singapore.

The European Commission has adopted a different approach. Following its system, rights to key football leagues are split and sold to multiple pay-TV operators to ensure that no single player holds total exclusivity. Yet, neither Britain's sub-licensing nor Europe's multiple-rights approach has arrested escalating bids and price increases in these countries.

In 2010, Sky's bid for EPL broadcast rights in Britain rose by more than 70 per cent with the entry of British Telecom (BT) into pay-TV. The effect was to raise prices for both consumers and BT. Meanwhile, the multiple-rights approach in the rest of Europe meant that each key sport is offered by a different player. Because the TV rights for live matches remained central in hotly contested bidding wars, prices continued to rise.

In Singapore, the cross-carriage rule arrested the trend of exclusive content on pay-TV. This was particularly true for branded entertainment channels, which had been increasingly offered by both operators. However, the rule did not produce a similar salutary effect on sports. Many sports rights continue to be offered to a single pay-TV operator.

Why is that? We think a key difference is that entertainment channels are sold on a variable per-subscriber rate or revenue- share basis. By contrast, the rights to sports events such as EPL and the World Cup are sold at a fixed lump-sum fee.

A sale based on a fixed lump- sum fee creates an "all-or-nothing" exclusive sale. This produces a fear of losing a perceived "crown jewel". Coupled with intense rivalry between a few, large pay-TV competitors which have faced off repeatedly in other telecommunication battles, key sports rights to events such as the EPL and World Cup quickly become the alter ego for corporate pride to be safeguarded, even at loss-making levels.

Further analysis reveals a surprising corroboration. In contrast to individual sports rights, branded sports channels such as Fox Sports and ESPN have been shared by both Singapore operators since the cross-carriage rule took effect. In other words, where there was no bidding but per-subscriber sale, the outcome of acquiring sports programming was no different from other entertainment channels.

When they charge the pay-TV operator on a variable basis, the branded sports channels seek to maximise distribution revenue, just like other entertainment channels. This is because their payoff is directly tied to the number of subscribers in the market on a per-subscriber fee or revenue- share basis.

The variable rate also changes the frame of reference of the pay-TV buyer. It forces the buyer to consider the incremental cost and profit potential of the sports content instead of the win/loss ultimatum.

In short, our research proposes that regulations mandate that sports rights be sold on a variable rate tied to retail prices. This will turn the focus of rights sellers of sports such as the World Cup or EPL to maximising subscribers in the market instead of pitting pay-TV operators against each other in a bidding war. Rights sellers would have an incentive to exhaust all channels, possibly even selling the sports programmes directly to consumers themselves.

Regulations that impose obligations on these external rights sellers are not unprecedented. Europe's rights-splitting puts the onus on sport owners to sell in multiple packages to different pay-TV operators, even though they would have preferred a single, all-exclusive sale. Similarly, Australia's extensive anti-siphoning scheme dictates that international sports such as the Olympics and World Cup must be first offered and sold to free-to-air TV.

The spiralling prices viewers pay for sports programmes suggest a need for rules to protect consumers. Many would agree that the runaway competitive bidding for sports rights should be dampened if not stopped. This would allow resources to be diverted to technological and service innovations in pay-TV, which MDA has set out as one of the industry's objectives. Let's not score an own goal in football.

Mabel Tan, a former assistant vice-president of content at StarHub, is pursuing her master's degree by research at the Wee Kim Wee School of Communication and Information, NTU. Ang Peng Hwa is professor and director of the school's Singapore Internet Research Centre.


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