What is the Football Association Premier League?
The Football Association Premier League is made up of 20 teams from England competing to become the Premier League champions and is the top flight of English regulation football. Since the onset of the Premier League in 1993 the televised side of the sport has been completely revamped by Sky television and their parent company BskyB.
What is meant by television rights?
Television rights are Intellectual Property rights which are made up of broadcast and copyright rights and is effectively the right to show the sporting contest on television. They are often broken down into the right to show the contest live and the right to show delayed highlights of various matches. If one party has the right to show the match live then this will thus be infringed if another party also shows that game live.
How are television rights for the FA Premier League sold?
Currently the FA Premier League clubs sell their rights collectively through the FA Premier League. This means that the owner of all the television rights for the FA Premier League is the organisation which runs the league rather than the individual clubs that participate in the league. Consequently this means that a broadcaster only has to deal with one party and can purchase a package of rights for a number of seasons relating to all 20 of the Premier League clubs.
This can be compared to other European countries such as Italy where the rights for Serie A football matches are sold individually by the clubs.
Collective selling versus Individual selling
Is the system run by the FA Premier League the preferable option?
Whether collective selling or individual selling is the preferable option depends from which angle you look at it from. The bigger clubs in Italy such as AC Milan, Inter Milan and Juventus are able to sell the rights for their matches themselves and due to being the biggest sides they are the most sought after matches. The clubs can therefore run an auction process to sell their rights to the highest bidder. This will therefore provide them with increased income than if the rights were sold collectively. It does, however, put the smaller clubs at a disadvantage as they will not be able to attract as much venue for their matches and therefore will be unable to compete with the bigger clubs.
The system in England is intended to provide more competition within the league as if the rights are sold collectively the revenues made from this can then be distributed more evenly. The bigger clubs will still traditionally see more of this revenue as the money is split proportionately depending on where each team finishes in the league table at the end of the season but it is not as disproportionate as the system in Italy.
The bigger clubs in England feel that they should be able to sell the rights to their games individually as they cannot sometimes compete in the money stakes with their European counterparts when it comes to transfer fees but the Football Association in England feel that this would decrease competition within the league in England as the smaller clubs will stand little chance of competing. Imagine the money that could be made by a club like Manchester United if they could individually sell the rights to their matches.
European Union Competition Law
If Competition is increased between the teams in the League does this decrease competition for the consumer?
Article 81 European Treaty
Article 81 of the European Union Treaty expressly prohibits agreements, arrangements or concerted business practices which appreciably restricts or distorts competition and which affects trade in the European Union.
If the agreement restricts competition but this is limited to trade within the UK then it will be caught by Section 1 of the Competition Act 1998.
The European Commission has provided its opinions on the agreement between the FA Premier League and the 20 clubs making up the FA Premier League to sell the rights collectively. It felt that the agreement had the following effects:
- That collective selling reduces the choice of media operators by limiting the packages available to them
- That collective selling reduces the choice available to consumers by reducing the amount of different media operators who can show Premier League matches
- That collective selling lead to higher prices as a reduces amount of media operators or in some cases only one in the case of Sky means that there is no competition in relation to price on the market
- If there is no companies competing against each other on the market and all the rights are held by one broadcaster such as Sky then technological innovation will be reduced to the detriment of consumers
The above are the key ingredients of an anti-competitive market.
The European Commission did, however, state the following benefits from collective selling of television rights, namely the benefits to the Premier League clubs, the media operator who is provided with the rights and the consumers as they can get all the matches for the Premier League in one place.
What did the Commission decide?
The Commission sought commitments from the Premier League in relation to the European Union competition rules and took these into account when making a decision. The commitments that the Commission then imposed on the FA Premier League specify precise terms in relation to the following:
- The no single buyer rule and the conduct of the auction process
- Creating more evenly balanced packages of rights
- Increasing the availability of rights to broadcasters via mobile phones
In practice this provides for more rights, including television, mobile and internet rights to be made available and to ensure that the rights are sold in an open and competitive bidding process subject to scrutiny by an independent trustee.
Following this decision the rights for the live matches to be shown on television are now sold in six packages which are smaller and more balanced than they were previously. No one buyer will be able to buy more than five of the packages.
Rights that have not been sold by the FA Premier League or used by the purchaser can also now be exploited by the individual clubs.
For how long are these commitments binding of the FA Premier League?
The decision made by the Commission in relation to these commitments will be binding on the FA Premier League until 2012.
What happens if the FA Premier League is found to have breached these commitments?
If the commitments have been breached the Commission is able to impose a fine amounting to 10% of the FA Premier League’s total worldwide turnover. All the Commission needs to prove is that there has been a breach of the commitments regardless of whether there has in fact been a violation of the European Union competition rules.
Have these commitments been successful in increasing competition?
The Office of Communications (Ofcom) is the broadcast regulator in the UK and they have recently been providing their opinions on the showing of live football matches by Sky. Ofcom considers that Sky has market power in relation to the wholesale supply of channels containing this attractive live sports content and that they act on the incentive to limit the distribution of these channels to rival TV platforms.
For example you can currently watch live Premier League football matches on Sky Sports and ESPN but often the only way to get access to all of these channels is buy purchasing Sky and you cannot get all of them through alternative providers such as Virgin Media.
It is the opinion of Ofcom that as a result of this consumers face a restricted choice of channels and platforms in the short term. In the long term they also believe that new platforms based on innovative distribution technologies may also be prevented from developing without access to this content.
This means that Ofcom may believe that the agreement between the FA Premier League and the 20 clubs may be in line with European Union competition law but the way it works in practice is not in line with UK Competition Law.
Ofcom has stated recently that it plans to step in when the next auction process for the FA Premier League rights takes place in 2012. Sky has stated that it plans to fight them all the way.