TV programme rights “lockdown” – lack of competition stifles growth

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Every African TV station relies on buying international programme rights to bring in subscribers and advertisers. Until recently Africa has been a small and largely stagnant rights market. But with increasing competition, the issue of access to international rights is proving a barrier to greater competition. Russell Southwood scratches below the surface to find out what’s actually going on.

Once there was just state-owned TV stations and then liberalisation added new Free-To-Air channels. Last year the Pay-TV market began to grow with new entrants delivering content by satellite and IP-TV and more will follow. In the olden days, the limited number of TV stations made a proportion of their own local content and bought in the rest internationally, largely from the USA.

In today’s liberalised climate with the prospect of more channels in the digitalised future, rights sales will move to something more like a supermarket where a wider range of operators will be able to get access to both basic and premium content rights. Without this shift, the gatekeepers in the newly liberalised TV markets become those who have a monopoly rights “lockdown” on key content and succeed by denying access to others.

The sellers of premium rights content have a powerful position in the market. For example, the Premier League is now broadcast to 600 million homes in 202 countries. As a global product, its overseas rights revenues have been more or less doubling at the end of every three year rights period:

2010-2013 Estimated £1.7 billion

2007-2010 £625 million

2004-2007 £325 million

2001-2002 £178 million

Like Hollywood, the Premier League produces global stars and it is the strength of the idea of these people and their visibility that creates the audiences that lay the golden egg. But whereas it’s possible to cost and benchmark wholesale telecoms services, there is no objective measure for how much people will want to pay for the rights to see Didier Drogba or Harrison Ford as Indiana Jones.

These rights are global trading stocks that can go down as well as up. Last year’s successful TV series is this year’s slightly embarrassing failure. Television loves a slavishly copied format but even these get past their sell-by date. However, many of the key premium rights seem to move in only one direction: upwards.

Key premium rights holders are: the Premier League and a small number of other sports fixtures, news channels, Hollywood and globally known TV series like Lost and Prison Break. The owners of these rights hold expensive franchises as stars and creative talent do not come cheap therefore they have to maximise by any means necessary what they get from rights sales.

It is in their interest to extend the number of categories for which they claim rights income as DStv discovered when it launched mobile TV: some rights holders were willing to consider this part of the wider broadcast rights, whilst others insisted on separate rights.

Sitting in Los Angeles, London or Paris, it is perhaps forgivable that there is little understanding of how the African market is different. The stream of African TV executives making the pilgrimage to MIPCOM and Cannes is increasing but is still only really a trickle. Historically, for most owners, the African rights were the “lunch money” after the real business had been done elsewhere.

But as African rights deals escalate in size, it makes it harder to create the kind of successful low-cost packages of the kind both DStv and GTV have on the market. The failure to achieve this kind of low-cost selling could mean that Africa remains largely a pirate market. One African Pay-TV operator told us a couple of years back that in its second largest market that there were three times as many decoders as there were paying subscribers. But what is a pirate market except for one where the copyright owners have not found the right price to sell at? Unfortunately this may not be well understood by all of the premium rights sellers.

Before the arrival of GTV, Naspers-owned DStv/Multichoice had more or less a monopoly over these premium rights in Anglophone countries and had reached agreements with a range of the continent’s Free-To-Air channels as it sought to maximise both revenues and audiences. With GTV purchasing the key Premier League rights for 2007-2010, it is now slugging it out with this new competitor.

However, in francophone territories French-owned Canal Plus retains its monopoly over all of the key premium rights for its audiences as Orange discovered in both Mauritius and Senegal. In the former, its IP-TV operation was effectively locked out of access to key content and in Senegal it was given the content but only allowed to sell its bouquets at the same price as the local agent for Canal Plus.

The same problem is recurring in some of the Portuguese-speaking markets. In Cape Verde, it’s possible to subscribe direct to Portugal’s TV Cabo and receive its channels by satellite. TV Cabo has content exclusivities on the best Portuguese TV content on long-term contracts.

Without reasonable and fair access to premium content rights, wider competition in African broadcast markets will be stifled. Some evidence of this difficulty has emerged in two cases on the continent which came to a head last year:

- Senegal’s RDV, part of the Radio Dunya Vision Group, took Walf TV to court in October 2007 to prevent it screening the second season of Prison Break. In its frustration, Walf TV had plainly transmitted the first season of Prison Break, for which RDV had an exclusive contract with Ivorian distributor Convergence Communication. Playing the national card, Niasse said:”These Ivorians who come here to get themselves mixed up in this thing need to understand that it’s not possible to turn Senegal into Cote d’Ivoire”.

In effect, Walf TV has been arguing that it has been “locked-out” of the market by this contract. The Court ordered Walf TV to pay e152,000 for breach of contract. However Walf TV’s CEO Lamine Niasse pledged to continue showing it. The two parties have had discussions to resolve the situation amicably but have failed to do so which implies they have been unable to reach payment terms.

- In a strange case of the biter bitten, Multichoice/DStv was taken to the copyright regulator – the Nigerian Copyright Commission - for showing Premier League material by the exclusive right’s new owner Toyin Subair of Hi-TV. According to a report in This Day, between September 6 and November15, 2006 and 13th and 14th of January, 2007 respectively, Multichoice, on its DStv platform, illegally broadcast games from the Euro Qualification matches and La Liga, the Spanish premier league, properties to which Entertainment Highway Limited (owners of Hi TV) have the broadcast rights for Nigeria. The regulatory body was empowered to arbitrate in cases like this. When the case was taken before NCC on November 24, 2006, Multichoice did not deny that it had, indeed, illegally broadcast those games. NCC further to the request of the parties, advised Multichoice and Entertainment Highway to resolve the issue amicably.

After an exchange of correspondence, Multichoice failed to offer an acceptable solution or make adequate restitution. Unable to resolve the issue with Multichoice, EHL took their complaint back to NCC on March 2, 2007. It is on the basis of this (the admitted illegal broadcast of the Euro Qualification matches and La Liga games and the unwillingness to provide an acceptable solution) that NCC made the decision to bring charges of piracy against Multichoice and its chief executive under the amended Nigerian Copyright Act 1990.

In a further bizarre twist, a group of English Premier League fanatics in Zimbabwe said they intended to file an urgent high court application to compel DStv to cover matches as in previous seasons. However, there is no sign that they carried out their threat.

The ghost of the highly public spat in the UK between Virgin Media and Sky which turned on what one party might pay the exclusive rights holder hovers over these proceedings. But whilst these are new days for Africa in terms of premium rights access questions, this is a ground already fairly well trod in Europe where the EU’s Competition Commission has already had several runs at addressing these issues:

- In October 2004 the European Commission decided to close its investigation into the so-called Most Favoured Nation (MFN) clauses found in the contracts of the Hollywood film studios with a number of pay television companies in the European Union after the studios decided to withdraw the clauses. The case remained open with regard to NBC Universal and Paramount Pictures Corp. Inc that still hold on to them. The Commission’s competition services believe that these clauses have the effect of aligning the prices of the broadcasting rights bought by the television companies. In a fairly blatant piece of terms rigging, the MFN clause gave the studios the right to enjoy the most favourable terms agreed between a pay-TV company and any one of them.

- In March 2006, the European Commission adopted a decision under EC Treaty competition rules that rendered commitments from the FA Premier League (FAPL) concerning the sale of media rights to the Premier League football competition legally binding. The case concerned the agreement between the clubs participating in the English Premier League competition to sell media rights to that competition jointly through the FA Premier League. These commitments, which will remain in force until 30 June 2013, increased the availability of media rights, and improve the prospects of competition in providing services to consumers. The FAPL submitted provisional commitments to the Commission in December 2003, which included a commitment that no single broadcaster would be allowed to buy all of the packages of live match rights from 2007 onwards.

The commitments offered by the FA Premier League therefore provided for more rights, including television, mobile and Internet rights to be made available and ensure that the rights are sold in an open and competitive bidding process subject to scrutiny by an independent Trustee. The live television rights will be sold in six packages – both smaller and more balanced than previously - and no one buyer will be allowed to buy more than five.

But in Africa, neither the Courts nor the regulators yet have the knowledge and expertise to create these kind of interventions when anti-competitive behaviour occurs or to arbitrate between rights holders. Without this kind of knowledge and expertise, Africa’s broadcasters run the danger of putting themselves in the hands of Africa’s politicians. When Gabon’s state broadcaster failed to secure the rights for the African Cup of Nations, the country’s President simply ordered it to be shown on the channel. What is watched on TV is increasingly an issue for Africans of all income levels, particularly sports events. Do broadcasters really want to find themselves subject to the populist whims of Africa’s less clear-sighted politicians?

Another route to tackling the same issue is for African broadcasters to generate more local content that commands premium prices on the continent itself. But without investors feeling that competition and copyright are taken seriously, growth in the African broadcast sector could falter.