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4th October: Premier League Broadcasting D-Day?

23/09/2011

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United Kingdom

The Premier League will soon find out whether they have won or lost a court case that may totally change the way supporters watch PL football. Read more >

First published on The Tomkins Times.

The Premier League (PL) will soon find out whether they have won or lost a court case that may totally change the way supporters watch PL football. This will have significant implications for every PL club, including Liverpool. Yet very few people yet seem to be aware of what is just around the corner.

On 4th October 2011, the European Court of Justice (ECJ) will rule on whether the way the PL sells its broadcasting rights in the European Union (EU) is legal.

The central question is whether an EU citizen should be able to legally find a live PL broadcast from a legitimate broadcaster, pay a subscription and view the game. As the exclusive PL broadcaster (along with ESPN) Sky argue that UK citizens should only be able to view PL matches by subscribing to Sky.

However there is a realistic chance such exclusivity will be deemed illegal. Such a ruling would send the PL scurrying back to the drawing board in order to commercialise its broadcasting revenues in the EU. More significantly, Sky, having ploughed billions of pounds into the PL since 1992, would presumably be less inclined to invest such large sums again – and that would have a major impact on the finances and budgets of every PL club.

To understand why this is happening, let’s go back to the case’s humble beginnings. You may recall the case of a Portsmouth pub owner, Mrs Karen Murphy, who used decoder cards imported from Greece to show PL games. She’s hardly the only one. QC Leisure is a stockist and supplier of foreign decoders to pubs and the general public in the UK. (There is a third case called Euroview but for simplicity’s sake, I will highlight just these two cases).

Mrs Murphy was prosecuted by Media Protection Services Limited for the use of an “illicit” Greek decoder card. QC Leisure was sued for copyright infringement by the PL. In their defences Mrs Murphy and QC Leisure both raised questions about the relationship between the EU principles of free movement of goods and services and highly lucrative European broadcasting rights. This led to a series of questions being referred to the ECJ by the English courts.

(It is important to note that this is not the same thing at all as internet piracy. Here Mrs Murphy was paying a legitimate subscription to a legitimate broadcaster who had won the rights in a PL auction to be the authorised broadcaster in that Member State.)

Mrs Murphy and QC Leisure argue that the way in which the PL enters into its contracts with various broadcasters throughout the EU, among other things, infringes EU principles of free movement of goods and services and EU competition law. They argue that the PL restricts:

1.the ability of PL rights holding broadcasters to screen live pictures outside their own designated territory; and
2.the capacity of Mrs Murphy or QC Leisure to either view, or purchase decoders to view, live PL matches from any source other than the exclusive national Premier League rights holding broadcaster (i.e. Sky and ESPN can only broadcast their exclusive pictures in their allotted UK territory).

Where Have We Got To So Far?

Earlier this year a European judge called the Advocate General (AG), gave her reasoned opinion on the matters of European law. It is fair to say that AG Kokott was pretty blunt. Simply put, partitioning individual Member State countries and allocating exclusive broadcasters for each territory was at odds with the internal European market. She believed that consumers should be able to search the European market for the cheapest product and not be exclusively tied into a broadcaster because of where that consumer lives.

The AG’s opinion is not binding however. The ECJ may still take a different approach in its judgment. But if the Court does follow the AG’s opinion, its ruling will strike at the very heart of the PL’s lucrative European broadcasting rights deals. Exclusivity has been the cornerstone of the PL’s highly successful broadcasting revenue strategy. Should the AG opinion be upheld by the ECJ, the implications for broadcasters like Sky, rights holders like the PL and consumers throughout the EU could be ground-breaking.

What are the Possibilities?

If the ECJ sides with Mrs Murphy, the PL will need a fundamental rethink of how it tenders for its lucrative broadcasting rights in the EU. At present Sky and ESPN are willing to pay large sums to the PL because the PL guarantees total national exclusivity for the broadcasters (i.e. UK consumers only have the option of Sky and ESPN).

If this exclusivity is ruled illegal, there are several potential possibilities:

1: The PL may decide to auction off its rights on a pan-European wide basis. That means that broadcasters who have EU wide capabilities may bid to offer consumers in any Member State the ability to watch PL football through a designated channel. Competition may be possible if more than one product is tendered by the PL so that numerous broadcasters can compete on price and quality of the product.

2: The PL takes a risk and starts marketing its own PL channel in the EU, thus by-passing broadcasters completely. This could happen, as occurs in the Dutch Eredivisie, where the subscription channel is available on every platform on a non-discriminatory basis. In the UK, that would mean a subscription PL TV channel being available on each of the Sky, Virgin, BT Vision, Top Up TV and FreeView platforms.

3. The PL may decide to stop supplying some Member States where broadcasters do not pay the high prices like in the UK. This would then have the effect of only targeting Member State countries where demand for PL matches is higher and broadcasters are willing to pay more. The result would mean there would not be large price differences, like those that exist at present, that consumers in the UK take advantage of.

4: The status quo remains. Sky and ESPN keep broadcasting PL football in the UK but the PL cannot forbid a consumer from going to another Member State to buy a legitimate PL broadcast decoder and decoder card. In such instances, the amounts that Sky and ESPN would be willing to pay would decrease rapidly because they are not guaranteed a captive subscriber audience.

Of course, the ECJ may yet rule in favour of the PL. If that is the case, simply forget options 1-4! However, it seems likely that with the AG opinion in favour of Mrs Murphy and QC Leisure, there is a fair likelihood that the ECJ will rule against the PL.

Conclusion

Many PL clubs rely heavily on broadcasting money, primarily from the domestic Sky deal. Although overseas broadcasting revenue has increased dramatically since the last global tender process, there is the potential for a large shortfall in the money paid to the 20 PL clubs should the PL not have a back up plan to maximise commercial revenues in the wake of a negative ECJ decision.

4th October is likely to be an interesting day for all of football’s stakeholders.

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