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Stricter regulations loom for SA sports broadcast rights

A case of throwing the baby out with the bath water.

EAST LONDON – A move by the Independent Communications Authority of South Africa (Icasa) to regulate the highly lucrative business of sports broadcasting rights came closer to policy last week as the deadline for submission on Icasa’s “preliminary findings and conclusions” closed on Friday.

The arena for this battle – and don’t let anyone tell you that it isn’t a battle – has been Icasa and though the submissions to the regulator from the public and stakeholders are as dry as toast, blood pressure is up on all sides.  The money is big and the stakes are high.

On the one hand, there is the government’s determination not to allow pay-TV operations to acquire exclusive rights to broadcast national sporting events that all South Africans should be able to watch and enjoy – and, crucially, for children of all backgrounds to be inspired to grow up to be national sporting heroes.

There are also the national sports bodies, which rely on money from broadcast rights for an average 60% of their revenue. Internationally, sports bodies’ revenue comes from – in descending order of importance – broadcasting rights, sponsorships, ticket sales, merchandising and government subsidies and grants, according to Amanda Armstrong, a director and law specialist in telecommunications and broadcasting at Werksmans Attorneys.  In South Africa, the government’s contribution was less than 1% of the annual revenue of most sports bodies in 2008.

There are the free-to-air channels, and the SABC, for which there are obvious commercial gains – both in terms of audience and advertising – if they can get the first option to bid without competition from pay-TV operations for more live sport. SABC and say – a tad sanctimoniously – in their Icasa submissions that the “… the broadcast of key sporting events on pay-TV has a negative impact on the participation of many South Africans in sport and could undermine the transformation in sport”. But free-to-air channels can often struggle to find air space to broadcast live events amid their local content programming. It’s worth noting, for instance, that the tripartite agreement between the PSL, SuperSport and the SABC (struck after SuperSport snapped up the exclusive rights in 2007 for the PSL from SABC), the public broadcaster was in fact required to broadcast more games than it did in the previous season when it held all the PSL rights.

The last players in this drama are the pay-TV operators such as DStv’s SuperSport as well as the new guys on the block, ODM and Super 5 Media, which are expected to launch this year.  SuperSport, which coughed up about R2bn for the exclusive broadcast rights of PSL soccer games over five years, is hugely concerned about the current Icasa review. Chiefly, the problem is that there’s no point in spending large sums of money if you can’t get them exclusively.

According to PricewaterhouseCoopers, the global value of sports TV rights worldwide will be more than $27bn this year – an increase of over 70% from $15.85bn spent in 2003. While the rising cost of live sports broadcasting rights is exerting a major pressure on pay-TV operators’ margins worldwide, it is also their biggest revenue driver.

Simply put, for many a punter out there, live sport is the most compelling reason one pays for satellite or cable TV.  What would Sky be without the English Premier League, for instance? And without the big bucks Sky lays out for the Premier League, the soccer stars of Chelsea and Man United would be off to Spain in a heartbeat as the richest and most popular league in the world became less so.

For SuperSport, the key concern is that the current Icasa review was initiated to introduce a dispute resolution system but it has morphed into Icasa tampering with existing regulations that many – including sports bodies – felt were quite fine to begin with and also struck a compromise between commercial and public interests.  

So in its submissions to Icasa, SuperSport is pushing for self-regulation on the basis that the sports bodies – and not the regulator – are best placed to decide what’s best for their sports events. 

The current review introduces uncertainty into the market, says Brandon Foot, SuperSport’s legal counsel, and Graham Abrahams, its regulatory and enterprises head, because of a recommendation for an annual review. When you’re talking about billions or rands for rights deals that run for three to five years, an annual review of regulations is anathema to commercial negotiations. Abrahams and Foot believe an annual review is practically impossible for Icasa, the sports federations and the broadcasters, considering the current review is already 17 months in the making. 

SuperSport is also unhappy that Icasa is also pushing for an automatic listing (instead of listing after public consultation) of sports events for which broadcast rights cannot be sold on an exclusive basis. These include:

* National knockout competitions (though there is a recognition that even though the PSL league games are hugely popular, they are not necessarily “national in character”). International events should be considered for the list, says Icasa. These include the Olympics, the Commonwealth Games, the Soccer, Rugby and Cricket World Cups and the African Cup of Nations.

*The opening games, one quarterfinal, one semifinal and the final event of all official international events featuring a senior SA national team even if the team isn’t playing in these games as well as all the games featuring the SA team or a South African individual. When it comes to Super14 and Cosafa Cup, only games involving a South African senior team and the final should be listed, says Icasa.

*Free-to-air channels will not be forced to delay broadcasting. Instead they will be able to screen the events live. If the live event clashes with local content programming, however, the free-to-air channels will be allowed to delay the broadcast.

So how do other countries deal with sports broadcasting rights? Armstrong says there are those such as the US and Canada that let market forces rule while the European Union takes the position that member states can elect to regulate if they wish. Many EU member states have instituted regulations, she says, but have listed few events and with very limited criteria.

Australia, however, is an instructive example of how too much regulation has backfired.

The Australians have a long list of sports events for which the rights must first be offered to free-to-air channels but the reality is that these channels often don’t have the programming time or the money to bid for the events and so very few live national sports events are broadcast on these stations. In the first six months of 2006, for instance, only 16% of the total listed events were broadcast live on Australian free-to-air channels and only 7% were broadcast on a delayed basis or as highlights packages. It’s not easy to get up-to-date figures, says Armstrong, but the situation has not changed much.

My view is that it is highly unlikely that the SABC as it emerges from financial meltdown will be able to better the Australian free-to-air channels on this score so the current review of the regulation seems very much a case of throwing the baby out with the bath water. Whether we like it or not, sport has become big business and South Africa would do well to learn from the Australian experience.        

*Media columnist Gill Moodie spent 14 years as a salaried hack in print media in South Africa and the UK before escaping to the blogosphere and freelance journalism. She is the publisher of Grubstreet in between unpacking and packing the infernal dishwasher and bringing up a four-year-old with attitude.

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