The Political Economy of Television Sports Rights

Sport is big business. In 2010, the global sports industry was estimated to be worth over $120 billion, and this figure is predicted to rise to close to $150 billion by 2015 (PricewaterhouseCoopers, 2011).¹ The growth of sport as a global industry is largely the result of ‘a marketing mix’, which includes sponsorship, merchandising, endorsement of products and services, corporate hospitality and, most importantly of all, the sale and exploitation of broadcasting rights (Blackshaw, 2009). For instance, in 1960, total broadcast revenues from the Olympic Games held in Rome were $1.2 million. By 2008, the total paid for broadcast rights to the (Beijing) Olympics had escalated to $1.7 billion. Europe accounts for the largest proportion of the total global media rights market, followed by North America, but the fastest growth rates are projected to be in Latin America, where media rights are the largest single source of revenue at 38.8 per cent of the total (PricewaterhouseCoopers, 2011).²

Over the last couple of decades, one of the most significant trends in the global audiovisual market has been the growth of sports coverage. This has gone hand in hand with the general commercialisation of sport and has developed at an ever increasing pace since the worldwide liberalisation of audiovisual markets. The expansion of sports media, television in particular, has made sport omnipresent in most, if not all, countries. Just as significantly, the ever increasing demand of broadcasters for sports programming has produced a ‘sports-media-business’ nexus that is largely built upon the widespread appeal of sport. In effect, the enormous popularity of sport has become a substantial economic resource and this has driven the economy of professional sport in such a way that it is now heavily reliant upon the income generated by television, sponsoring and merchandising. Fuelled by technological developments in broadcasting and communications more generally, this repackaging of sport as a commodity has expanded into a global business that effectively functions as a specialised division of the entertainment industry. Most clearly, the economic impact of sports media on society is reflected in the substantial (mostly television) audience ratings for sports programming, the explosion of sports media outlets, and the multibillion dollar value of broadcast contracts and sponsorship deals.

Over the last couple of decades, the sale of broadcast, and particularly television, rights for sporting events and competitions has become an extremely profitable activity, giving birth to a global industry worth about $30 billion (PricewaterhouseCoopers, 2011). Increased competition between broadcasters has inflated rights fees for many popular sports, which, in turn, has fundamentally altered the nature of these sports. For many sports organisations, selling their broadcast rights has become their main business activity and source of revenue. As discussed in more detail later in the book, regulatory changes (see Chapters 5 and 6) and new developments in technology (see below) have both fundamentally altered the supply and exploitation of sports programming, most notably triggering a struggle for platform leadership between rival broadcasters. In Europe, pay-TV operators started to outbid free-to-air broadcasters for key sports rights and began to provide extensive live coverage of a whole variety of sports events. More recently, convergent media players, including cable operators, telecommunications firms and online video platforms have emerged as potentially significant players in the sports broadcasting market. Desperately looking for a competitive edge, multimedia companies increasingly regard sports rights (or at least access to sports programming) as key to the overall value of their delivery platform and as a means to drive the take-up of bundled telecommunication and broadcasting services — thus highlighting the changing technological context in which sports rights are sold and exploited.

This chapter focuses on the social and cultural character of sport and the next discusses whether the market can be relied upon to deliver the benefits of engagement in culture and sport. By engaging with the relevant academic bibliography, as well as country and intergovernmental reports, the current and the next chapter focus on the potential social and cultural benefits of sport and, indirectly at least, sports broadcasting, including: social inclusion; the fostering and development of health-enhancing physical activity; the forging of social and cultural identity; and the potential of sport to bring citizens together. Sport is a major area of public policy and therefore the promotion of sport, with all its assumed socio-cultural benefits, is high on the agenda of policymakers across the world. Most European countries, the USA, Australia and Canada, among others, have a well-developed sports policy. As regards sports broadcasting, the key argument (examined in more detail in the next chapter) is that the wide availability of sport via free-to-air broadcasting can be seen as a means to develop a more inclusive and participatory society.

The preceding chapter established that sport is a type of popular cultural output — alongside drama, comedy, film and music — that has the power to bring about socio-cultural benefits. Building on this argument, this chapter discusses whether the market can be relied upon to deliver the benefits of engagement in culture and sport and whether it has the capacity to fulfil cultural citizenship, civic participation and ultimately enhance the public sphere. Until the 1980s, in Europe at least, cultural citizenship obligations were partly addressed through the maintenance of public service broadcasting (PSB) institutions. Over recent decades, however, this model has come under threat from neo-liberal economic ideologies and commercial competition, especially in the form of pay-TV channels. Does the proliferation of commercial channels create an audiovisual space at the behest of citizens? If the answer to this question is yes, then government intervention to increase levels of engagement in cultural programmes, like sport, through the maintenance of public institutions may not be justified.

Given the widespread commercialisation of contemporary professional sport, it is difficult to dispute the European Commission’s claim that ‘high level sport has become to a great extent, an economic activity’ (EC, 2007f). This point is perhaps most clearly illustrated by the escalating value and commercial significance of television sports rights (see Chapter 2). Against this background, it is perhaps unsurprising that interested parties should seek (or oppose) the application of competition law to the sports broadcasting market. Just as, if not more significantly, the increased salience of competition law to sports broadcasting should also be understood as part of a more general shift towards the ‘marketisation’ of broadcasting, particularly in Europe, but also in the USA and throughout much of the rest of the world (see the Introduction). It is against this essential backdrop that the remainder of this chapter considers the application of competition law to sports broadcasting.

In an era of multichannel digital television and increasingly fragmented audiences, live coverage of major sporting events remains one of the few forms of programming able to bring the nation together for a shared viewing experience. A small number of high-profile international events, such as the Olympic Games or the FIFA World Cup football tournament, attract millions of viewers worldwide but, for the most part, the sporting events that attract the biggest national television audiences tend to be nationally and/or culturally specific.¹² For example, in the USA, the 2012 Super Bowl (XLVI) was watched by just over 111 million viewers, an all-time record high for US television (Deans, 2012). In Europe, key matches of the FIFA World Cup football tournament regularly attract record television audiences within the participating countries. For instance, in 2010, Germany’s semi-final match (against Spain) was watched by 31.1 million viewers, a national audience share of 83.2 per cent (FIFA, 2010: 10). Beyond the USA and Europe, live television coverage of major sporting events is just as popular. For example, in India, the final of the 2011 ICC World Cup Cricket tournament (between India and Sri Lanka) was watched by an audience of over 120 million (TOI, 2011).

According to a study by PricewaterhouseCoopers (2011), the sports media rights market in the Pacific region is valued at $4,285 billion, representing 17 per cent of the global media rights market. The value of broadcast rights in the Pacific region is significantly smaller than in Europe and the United States, where pay-TV operators drive up the value of sports rights to a larger extent than in Australia. At least in part, this is because Australia has one of the most rigorous systems of anti-siphoning regulation in the world (see Chapter 6), whereby free-to-air television networks have the first pick of rights for major sporting events, thereby curtailing the bidding process and reducing the value of key sports rights. Nevertheless, the recent Summer Olympics in Sydney (2000) and Beijing (2008) have fuelled the value of media rights, which are growing steadily at 4.4 per cent per year. It is estimated that the Australian market for sports rights is worth a $350 million a year (all figures in this chapter are in Australian dollars).

Together with sunny beaches and samba music, Brazil is probably most renowned for its football (‘futebol’). The national football team, most commonly referred to as the Seleção Brasileira, has won the FIFA World Cup a record five times, and has produced legendary star players such as Pelé, Zico, Sócrates and Ronaldo. In Brazil, sports are widely practised and have become of national significance, occupying a central place in Brazilian social and cultural life. Hosting the 2014 FIFA World Cup, 2015 Copa America and 2016 Summer Olympics, the value of the Brazilian sports rights market is expected to inflate in the coming years. Brazil is the fastest growing sports market in the world, valued at $3.47 billion and accounting for 39 per cent of the total revenue of the so-called BRIC nations. The Brazilian sports rights market is also the largest in the Latin American region, valued at $1.26 billion (PriceWaterhouseCoopers, 2011). As one of the BRIC nations, Brazil has experienced rapid economic growth over recent years, becoming the sixth largest economy in the world.

Over the last couple of decades, India has experienced a period of breathtaking economic, political and technological change. Nowhere has this been more apparent than in relation to Indian television. During the late 1980s, the state-owned monopoly broadcaster, Doordarshan (since 1997 part of Prasar Bharti — the Broadcasting Corporation of India) provided one terrestrial channel (or two in major cities) to just over 20 million television homes. By 2011, the number of television households had grown to 143 million, around 60 per cent of all Indian households. Of these, over 90 million subscribe to multichannel cable television services and more than 35 million to direct-to-home (DTH) satellite services, offering access to hundreds of different channels from both domestic and international broadcasters (Kohli-Khandekar, 2010; TRAI, 2011). According to India’s telecommunications and broadcasting regulator, the Telecom Regulatory Authority of India (TRAI), India is currently the world’s third largest television market, after China and the USA (TRAI, 2011). The sheer size (and growth potential) of the Indian television market makes it important in its own right. Put simply, India’s experience with broadcasting services and policies affects almost one-fifth of the world’s population.

The Italian broadcasting market has many peculiarities. It is dominated by free-to-air terrestrial television channels and its main shortcomings can be summarised as spectrum chaos, non-enforcement of the law and market concentration (Matteucci, 2010). RAI (Radiotelevisione Italiana), the Italian public service broadcaster (PSB), has a distinctive history which, in some respects, sets it apart from other European PSBs. Its mixed funding structure of advertising and licence fee, and its regulatory framework and governance, which have fostered a close relationship between the government of the day and the leadership of the corporation, are some of the most important elements defining RAI’s history. A system known as lottizzazione (the allocation of positions of power inside the broadcaster according to a quota system based on political affiliation) and the concentration of media and political power in the hands of Silvio Berlusconi, majority owner of Fininvest/Mediaset¹⁸ (the main commercial broadcaster) and three times Prime Minister (1994–95; 2001–06; 2008–11), add layers of complexity to this history (Padovani, 2010). In an environment characterised by a large number of parties and a conflict-based democracy, and poisoned by decades of an unresolved conflict of interests between Berlusconi’s private holdings and his public office, questions arise as to the health of the Italian contemporary democracy.

From around the 1960s, until the abandonment of apartheid during the early 1990s, South Africa was a pariah state. Foreign governments, multinational corporations and religious leaders all condemned apartheid. For their part, international sporting organisations, including FIFA and the IOC, instituted a sporting boycott, which resulted in the isolation of South Africa from virtually all international sporting competition. By contrast, since the first post-apartheid elections in 1994, South Africa has become a regular focal point for the sporting world, hosting a plethora of international sporting tournaments, including the 1995 Rugby World Cup, the 1996 and 2013 African Nations (football) Cups, the 2003 Cricket World Cup and, perhaps most notably of all, the 2010 FIFA World Cup. However, the transformation in the position of South Africa on the international sporting stage should not obscure the extent of the challenge faced by South African sporting organisations and (particularly public) broadcasters in the post-apartheid era. To a greater or lesser degree, over the last couple of decades, sporting organisations and broadcasters have both attempted to use sport as a means to contribute toward the wider objectives of nation-building, reconciliation, democratisation and cultural diversity in the new South Africa. However, the pursuit of these objectives has taken place (and continues to do so) against the backdrop of an increasingly marketised South African broadcasting system.

Spain is a fascinating country to discuss as a case study in sports broadcasting. Unlike other major European football leagues, La Liga (Spain’s first division) is the only one of the ‘big five’ leagues in which each football club sells its own individual broadcasting rights. The end result is that those clubs with most market appeal, like Real Madrid and FC Barcelona, have a much higher income than the rest. Analysts have long argued that Spain needs to adopt the model of collective selling and income sharing for television rights used in other major European leagues in order to enable financially weaker clubs to survive and compete. The financial accounts of Spanish football clubs already make grim reading, with the 20 teams in the first division having combined debts of €3.53 billion in 2010–11. Successive governments have attempted to respond to the financial chaos of Spanish football by introducing a whole host of different regulatory measures, including the writing-off of the public and private debts owed by different clubs, the adoption of a supervisory mechanism to oversee club finances and the establishment of a ‘football pool’, from where money can be withdrawn to provide financial assistance for troubled teams. The latest regulatory initiative was the obligatory transformation of football clubs into public limited companies, but as with previous attempts at reform, this measure has proved to be, at best, only a partial success and the debts of many of Spain’s leading football clubs remain unsustainable.

The United Kingdom (UK) provides a particularly good example of the symbiotic relationship that exists between the sport and television industries. At no time was this more apparent than during the summer of 2012. First, in June, the Premier League agreed a record £3 billion joint deal for the sale of its live domestic television rights with BSkyB, the UK’s leading pay-TV broadcaster, and British Telecom (BT), one of the UK’s most popular broadband providers. This deal underlined the importance attached to live Premier League football by UK pay-TV broadcasters and it is also likely to further increase the (already significant) reliance of England’s biggest football clubs on revenue raised from the sale of their television rights.²⁰ Secondly, a few months later, the BBC’s coverage of the London 2012 Olympic Games was watched by record national television audiences.²¹ For the BBC, this was a clear fulfilment of its public service mission to provide programming that ‘unites the nation’. For the IOC, record television viewing figures served to confirm the status of the Olympic Games as one of the world’s most popular sporting events and, largely as a result, one of the most attractive to commercial sponsors. This chapter examines the relationship between the sports and television industries in the UK in more detail. The first part begins by tracing the changing role of sports broadcasting from its initial development as part of a public service broadcasting monopoly/duopoly to its more recent status as premium content for pay-TV (and commercial free-to-air) broadcasters.

A discussion of the North American sports broadcast market deserves a place in every book that aims to provide a global overview of how sports broadcasting markets operate and are structured. The USA hosts some of the most spectacular professional sports leagues in the world and it also offers an approach to the allocation and exploitation of sports rights that is significantly different to that employed in many other parts of the world, notably Europe and Australia. In contrast to pay-TV broadcasters in Europe, who have relied on exclusive agreements with sports leagues to attract subscribers, in the USA the most valuable television sports rights are divided between the main commercial, free-to-air, broadcasters. Competition in US sports broadcasting is intense with four major networks bidding for rights, and four major sports leagues trying to maximise the value of their broadcast rights. However, the general belief that US broadcasting is less regulated than its European counterpart is misleading. On the contrary, government intervention has had a significant impact on both the organisation and governance of sport and the structure broadcast markets in the USA.

This book has highlighted how professional sport has developed into a highly valuable global industry. At the same time, however, we have also been keen to emphasise that sport (both participating and watching) continues to be a social and cultural activity valued by millions of people across the globe. The main focus of the book has been on the role played by the media, and particularly television broadcasting, in the development of sport in both economic and cultural terms. Specifically, on the one hand, sports organisations and television broadcasters have built a synergetic relationship that has allowed both to further their commercial interests. In this sense, it could be argued that the commodification of sport has served the interests of all the main participants within the sports-media-business complex, including media conglomerates, marketing agencies, brands and sponsors, sports event organisers, sports associations and even professional athletes (although perhaps not always sports fans). Just as significantly, on the other hand, in many countries free-to-air television coverage of sports events and competitions, most notably by public service broadcasters and terrestrial commercial networks, has facilitated shared viewing experiences, which have fostered a sense of national identity and cultural citizenship. To begin with at least, the broadcasting of major sporting events played a key role in the development of sport into a core part of popular culture.