Market Insight

UK regulator to investigate Premier League rights sale

November 18, 2014  | Subscribers Only

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit

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UK communications regulator Ofcom has opened an investigation into the sale of Premier League audiovisual rights in the UK. The investigation follows a complaint from Virgin Media in September over the number of televised matches and the cost to consumers of the coverage.

Ofcom will examine whether the Premier League's deals with broadcasters breach UK competition law; namely whether they 'restrict or distort competition'.

Virgin complained that only 41% of matches are made available live, which is lower than some other leading European leagues. The cable company alleged that this contributes to higher prices for consumers of pay TV packages.

The current agreements for the Premier League run to the end of next season (2015/2016), with live rights shared between Sky and BT. The bidding for a new three contract running from 2016/17 is expected to take place over the next months. 

Ofcom said its investigation is at a very early stage and that it is 'mindful' of the Premier League auction process and is 'open to discussion' about its plans. The regulator is likely to approach interested parties including football supporters' groups as well as TV companies.

Sky currently has the live rights to 116 matches a season, paying the Premier League £760 million a season, while BT is paying £246 million a season for live rights to 38 matches. In all, 380 matches are played in the Premier League but matches played between 3pm and 5pm on a Saturday are not televised live in the UK. The league says that this is 'primarily to protect match attendances and atmosphere at all levels of the game'.  

Our analysis

Although Ofcom stressed it was unable to give any indication of timing for its investigation, it is highly unlikely to be complete before negotiations for the next round of rights get underway. The regulator said that it had not reached a view about whether there was enough evidence of competition infringements to issue a statement of objections. 

Virgin Media, now wholly owned by Liberty Global, currently offers both Sky Sport and BT Sport packages to its subscribers under wholesale agreements. It seems unlikely that Virgin will bid for rights in the next round simply because, with both Sky and BT heavily committed to offering their own live premium sports channels, they are both expected to dig deep to renew rights. The challenge for Sky is to maintain its position as the market leading pay TV sports broadcaster in the UK - and it would be hard to see it doing to so without retaining a superior share of rights packages to BT. 

The telco, on the other hand, may be looking to capture more Premier League rights in order to drive further into the pay TV market. At present its BT Sport channel package is offered for no extra charge to BT broadband subscribers and is bundled in with Virgin's higher tier XL package. However, from next season, when BT will have exclusive rights to the Champions League and Europa League, it may be looking to change the business model for BT Sport and convert it to a premium service.

With this is mind, it seems inevitable that both players will have to stake more than the roughly £6.5 million per match they are currently paying, significantly raising the barriers to entry for any new player like Virgin Media. However, a more extensive offer of matches might open up new opportunities. Ofcom's enquiry comes at a delicate time for the new rights auction but regardless of its conclusions may influence the way the most valuable rights in the UK pay TV market are sold.

Geography
UK
Organization
BT Sky Sky TV
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