08 April 2003

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Simkins early warning - Film & Television

MORE REGULATION OF THE PAY TV MARKET IS BAD NEWS FOR SPORTS RIGHTS HOLDERS

Much to regulators' dismay, the Pay TV market in Europe just will not behave
like a market should. Instead it tends towards monopoly in all member
states. After Spain and the UK, Italy is the latest to come under the
control of a single operator with the recently announced clearance of the
proposed acquisition by Newscorp of Italian pay TV company Telepiù by the
European Commission.

Instead of accepting that there may only be room for one operator in this
market and leaving well alone, the European Commission has piled on the
regulatory burden (to be administered by the Italian competition authority).
The full decision has yet to be published but from the detailed press
release it seems that not only will exclusive TV contracts for premium
sports be allowed only for a two year duration but also the wholesale price
to non-satellite competitors (the subject of the OFT's recent gargantuan and
inconclusive investigation*) is going to be regulated to make sure that they
can all stay in business. If this model is rolled out in other member
states, it is easy to see what will happen to rights fees and who will
suffer. Why pay a premium for exclusivity if it is only for two years? Why
bid even if you can get the regulator to fix your wholesale price from the
winner??

With the listed events legislation already interfering with market forces,
the sports rights markets will be subject to further distortions. Just why
the property right in a premium sporting event should be so eroded for the
sake of the Pay TV market will surely puzzle future historians. Unless the
Newscorp decision is the high water mark of regulatory activism that finally
provokes the soon to be impoverished rights holders into a successful
retaliatory action.

*Discussed in the current edition of the Competition Law Journal (Jordans).

Stephen Hornsby
8 April 2003
155

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