Listed Events In A Digital World – Time To Move With The Times
Morris Bentata, Sheridans
Introduction
In July 2010, the government announced its decision to postpone its latest review of the listed events regime in the UK, but with a commitment to review the position more fully in 2013 following the completion of digital switchover.
The postponement concluded, temporarily at least, a long period of impassioned debate from stakeholders throughout the sport industry. In late 2009, David Davies OBE had been appointed by the secretary of state for media, culture and sport to lead an independent advisory panel to review the listed events regime in the UK. The panel’s remit was to review the principle of listing generally; the criteria against which events were currently, or might in the future, be listed; and the events which make up the current list (and which events should be on the list for the future). The panel’s report (the Davies Report) concluded that the principle of listing events remained sound, and further recommended that:
• the list of events be significantly expanded (to include, for example, England’s home Ashes test matches, Wales’ matches of the Six Nations Championship as well as each UK national team’s home and away qualification games for the FIFA World Cup and the UEFA European Championships); and
• that the current ‘B list’ – the list of events for which highlights or delayed coverage (rather than live coverage) is protected for free-to-air qualifying channels – be removed completely.
The findings and recommendations of the Davies Report were strongly resisted by sports rights holders. At the time, David Davies said, “I believe our report is challenging for the sports governing bodies, the broadcasters and the government. But unashamedly it puts the viewing public first.”
It was an attractive statement but sports rights holders argued vehemently that it was they, and not the government, who were best placed to decide what was best for their individual sports. They argued that the negative impact of listing on their commercial revenues was potentially hugely significant for them and, during the consultation period, used words such as “catastrophic” and “decimating” to describe the potential effects of listing on their ability to successfully run their sports. They argued that the commercial revenues available from a genuinely open market for their rights were critical to their ability to ensure the financial viability of stakeholders at all levels of their sport, to invest in resources to facilitate and encourage grassroots participation and to support and enhance performance at elite level.
When the review was postponed in 2010, it was considered a victory of sorts for rights holders but with the understanding that the battle would remain to be fought again and resolved after the completion of digital switchover in 2012.
Digital switchover is now complete but there remain no plans for the government to recommence its listed events review. This article argues that fundamental changes are due to the listed events regime in the UK, but not necessarily in the ways focused on by the Davies Report.
The legislative background to the listed events regime in the UK
The listed events regime in the UK is set out in the provisions of the Broadcasting Act 1996 (the Act). Below is a brief overview of the relevant sections of the Act to provide the relevant background and context for the arguments put below:
• sections 98(1) and 98(2) of the Act provide that, for the purposes of the listed events regime, television services are divided into two categories:
• free-to-air channels which are received by at least 95 per cent of the UK population (referred to in this note as Category A channels); and
• any other channels (referred to in this note as Category B channels);
• section 98(5) of the Act provides that Ofcom will from time to time publish a list of those channels which appear to fall within Category A. The Ofcom list currently consists of BBC1, BBC2, ITV1, Channel 4 and Channel 5;
• section 99(1) of the Act provides that any contract granting live UK rights to a listed event is void if the rights are granted exclusively; and
• section 101(1) of the Act provides that, unless Ofcom provides its consent, a broadcaster in one category cannot show live coverage of a listed event unless a broadcaster in the other category has also acquired live rights to that event.
The effect of the foregoing in practice is that the market for listed events is significantly restricted. Category A broadcasters are able, in effect, to compete for the “crown jewels” of sport amongst themselves – and, crucially, without the competitive threat of being outbid for the rights by, for example, a BSkyB or a BT Sport. Indeed, given that Channel 4 and Channel 5 will rarely, if ever, enter the bidding for listed events, the market contracts to just the BBC and ITV. Even then, both channels will often jointly bid for rights to listed events (in particular for the FIFA World Cup and the UEFA European Championships) so that rights holders will often find that competition within one of the most apparently vibrant markets for sports media rights in the world is, in fact, all but nil.
Technically at least, it is clear from section 101(1) of the Act that live rights to listed events must also be made available to the Category B broadcasters (for example, Sky and BT). However, the effect of the listed events regime to date is that the rights to listed events are sold on a free-to-air basis to a Category A broadcaster, meaning that their value, if any, to the likes of Sky and BT (at least as a subscription driver for their pay-television services) is significantly diminished. In practice, this has traditionally meant that Category B broadcasters have shown no interest in acquiring live rights to listed events, thereby leaving Category A broadcasters with de facto exclusivity. As per section 101(1) of the Act, Ofcom consent to that exclusivity is therefore required (and obtained) by Category A broadcasters as a matter of course.
Issues
The remainder of this article looks at whether, in a multi-channel digital media environment, the listed events legislation, as described above, remains fit for purpose in its current guise.
Since the completion of switchover in 2012, terrestrial television in the UK is now entirely digital, the UK digital terrestrial television (DTT) service being known as Freeview. The coverage of a channel on Freeview in the UK varies depending on the multiplex(es) on which the relevant channel is provided. The public service broadcaster (PSB) channels (eg, the channels referred to above currently on Ofcom’s list) are received in around 98.5 per cent of UK households. The non-PSB channels (i.e. the “commercial” channels) on Freeview are generally available in around 90 per cent of UK households (source: paragraph 5.1 of the Ofcom 2013 UK Communications Infrastructure report).
In addition to Freeview, other platforms are available in the UK which would serve to push that 90 per cent figure closer to the threshold of 95 per cent required by the Act. For example, many of the Freeview channels are also available on the Freesat platform (free satellite TV). This means that outside of the five qualifying channels currently listed by Ofcom, almost all of the channels on Freeview are likely not far from reaching the 95 per cent threshold. All of that is without counting the now almost universal availability of content services on the internet – and, in particular the simulcasting of many channels in full online.
However, of all the many channels now freely available to viewers in the UK, it remains the case that it is only the five public service broadcaster channels referred to above that are listed by Ofcom as Category A broadcasters. The last of these channels to apply for (and successfully secure) inclusion on the list was Channel 5 back in 2008 – an age ago in terms of the ongoing digital revolution and certainly several years before digital switchover in the UK. In the years since 2008, the media landscape has changed considerably and, in particular for this debate, the number of channels widely available to the public on a free-to-air basis has grown exponentially.
Does this apparently closed shop of five channels therefore remain appropriate for the listed events regime in the context of the new digital media landscape?
Why is the UK threshold set at 95 per cent?
The Audiovisual Media Services Directive (the European law directive governing, among other things, listed events in the Europe Union) requires that listed events should not be made available in such a way as to “deprive a substantial proportion of the public” of watching the event on free television (article 14(1) of the Directive). The term “substantial proportion of the public” is not defined in percentage terms in the Directive and accordingly, it is left to member states to interpret and define the term as they deem appropriate for implementing national legislation.
Given that the lowering of the threshold in the UK to, say, 90 per cent would, in an instant, enable the majority (if not all) of the channels freely available on Freeview to participate in the market for listed events, a central and key question as to the proportionality of the UK’s implementation of the Directive must be as to whether the intentions and requirements of the Directive would still be satisfied if the threshold were so lowered. Would the exclusive award of live listed event rights to a broadcaster with 90 per cent coverage of the UK population “deprive a substantial proportion of the public” of watching the event?
The briefest look across to the regimes implemented by other member states of the European Union would suggest not. Indeed, the UK’s threshold (alongside that of the Republic of Ireland) at 95 per cent is the highest in the European Union. No other member state sets its threshold above 90 per cent. Many member states set their threshold yet lower.
Accordingly, there would seem to be compelling precedent that lowering the threshold to 90 per cent in the UK would still satisfy the aims and requirements of the listed events provisions of the Directive.
The distinction between Category A and Category B
A common misconception about the listed events regime is that the distinction it draws is between free-to-air television on the one hand, and pay television on the other. However, as discussed above, the key distinction between a channel which qualifies for the benefits of the listed events regime (ie, a Category A channel) and one which does not (ie, a Category B channel) is not based on whether a channel is broadcast on a free or pay basis, but rather on whether it meets the 95 per cent threshold. So, together with the pay TV operators, the majority of free-to-air channels (ie, those who do not reach the 95 per cent threshold) are in fact Category B broadcasters.
In the context of the new digital world, the 95 per cent threshold therefore not only looks disproportionate, but also creates the potential for what would seem a difficult and peculiar outcome in the exploitation of rights to listed events.
In particular, the current distinction means that a listed events rights holder cannot, in effect, grant exclusive free-to-air live rights to its event. If a commercial multiplex free-to-air broadcaster (ie, any channel available on Freeview other than BBC, ITV, Channel 4 and Channel 5) were so minded, it could require that the same rights granted to, say, the BBC for a listed event were also offered, and ultimately granted, to it on fair and reasonable terms (and query what would be fair and reasonable for such co-exclusive rights).
The issue of a significantly restricted market for the listed events rights holder is therefore potentially compounded by the fact that, because of the current regime, it cannot, technically, undertake to the potential broadcast partners that remain that its rights are available on a free-to-air exclusive basis. Equally, Category A broadcasters do not have the critical certainty that the rights they buy will indeed be exclusive to them on free-to-air.
Would a change really make a difference?
The practical effects of a relaxation of the listed events regime to allow all Freeview channels to qualify as Category A broadcasters would remain to be seen. Clearly, the acquisition of premium sports rights would not be suitable or affordable for the majority of the current Freeview channels. The major players in the sports media market currently (in effect) excluded from listed events are of course pay-TV giants BSkyB and BT. It would be for each to decide whether, from a strategic brand-building point of view (and/or indeed, commercially, from an advertising revenue perspective), it would wish to acquire free-to-air rights for listed events.
It seems that both Sky and BT would have the facilities available to them (on the commercial channel multiplexes) to qualify if the threshold were lowered. While the Sky Sports channels are not themselves available on Freeview, other BSkyB channels are. For example, one such channel, Pick TV, was used by Sky to show free-to-air highlights of England’s (catastrophic) Ashes campaign last winter. The BT Sport channels are available on the Freeview platform (albeit that the channels are normally scrambled so that they are not viewable in intelligible form without the relevant BT set-top box). BT has previously opened up access to its channels on Freeview for promotional purposes. That facility begs another relevant question for the listed events legislation. Is it necessary for the legislation to require national free-to-air coverage of the channel as a whole? Or, rather, should it be sufficient that a channel normally only made available behind a paywall can acquire listed events rights and open up access to its channels for the relevant programming only? Again, considerations as to what is proportionate to achieve the aims of the Directive suggest that the latter should suffice.
***
The Davies Report focused on the principle of listing and concluded that the current list of events should be expanded, and that the current B list should be scrapped altogether. While the important arguments made by many sports rights holders against those conclusions have not yet been finally resolved, and while the philosophical debate as to whether, and the extent to which, listing is necessary or appropriate will no doubt rage on, the argument that the current UK legislative regime for listed events needs updating seems more straightforward. The effect of a lowering of the UK threshold would remain to be seen but, on the assumption that the aims and requirements of the Directive would still be satisfied if the threshold were lowered, that should be a question for the market, rather than the government, to decide. Even if other broadcasters did not immediately enter the market for listed events, sports rights holders would no doubt welcome a UK market in which at least the threat of greater competition to the public service broadcasters existed. Indeed, for all the controversy of the Davies Report, the panel did foresee that digital switchover might radically change the media environment and therefore the context in which these arguments were made. It said (at paragraph 162 of the report) that, in the context of a post digital switchover world, “the secretary of state may wish to review the continued appropriateness of the threshold of 95 per cent.” I agree.
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