Sky

BT/UEFA Rights Deal

08 March 2009

Last week, BT Chief Executive Gavin Patterson was reported as saying that “rampant inflation in sports rights” had to end.

Today we learn that BT is going to pay £394m a season for UEFA Champions’ League and Europa League rights from the 2018/19 season, up from £299m a season under the previous agreement.

By my calculation, that’s a 31.8% increase over three years.

What was that about “rampant inflation” again?

BT’s new deal also includes all rights to highlights, meaning that there won’t be any TV highlights on ITV. Instead, BT will share free highlights in social media.

Hmm.

And of course UEFA is going to an 1800/2000 GMT/BST structure on Champions’ League match days, meaning lots of UK residents will still be at work or commuting while matches are taking place, as already happens with the Europa League. Oh good.

Prior to this deal being announced there had been lots of rumours in the press that UEFA advertisers were unhappy with the loss of free-to-air coverage.

One estimate suggests that being a tier one partner of the Champions’ League costs $70m. There are eight main sponsors of the Champions’ League (Heineken, Mastercard, Gazprom, Sony, Nissan, PepsiCo, Adidas and Unicredit), and if we assume that they all pay the same, that’s $560m a year in sponsorship revenue (Approx £460m).

UEFA’s calculation is that £100m more for UK rights is worth it, set against £460m of pan-European sponsorship revenues, and any reduced reach for those advertisers within the UK market for their premier competition.

This feels like a very short-term deal.

There is a quote in BT’s press release that says:

BT will enhance its social media coverage to reach new audiences, by making clips, weekly highlights, UEFA’s magazine show, and both finals available for free on social media. BT streamed both finals last year on YouTube for the first time, taking the number of people who watched BT’s live coverage of the finals to more than twelve million. The company will also seek to bring the best of the action to its large mobile customer base.

That suggests that only the final will be made available free. Everything else will be behind a BT paywall. No BT Showcase any more. There’s the possibility of BT sub-licencing some matches to another channel, but absolutely no guarantee they will.

I’ve examined the 12m number before, and it is to be regarded very carefully indeed. First of all 12m is not 12m different people – it’s the sum of the Champions’ League audience and Europa League audience. Football fans being who they are, that’s a lot of the same people who watched both matches.

And as I mentioned in the previous article, BT is using “reach” rather than the more usual “average audience” to get as big a number as they can. Last week 3.45m watched a one-sided FA Cup replay between Man City and Huddersfield. 3.45m means that at an average of 3.45m watched the entire broadcast from 1930-2200. Audiences aren’t constant, and once Man City were well ahead, audiences drifted away to other programmes. Other people turn on late and perhaps watch the last half an hour. Overall, at any given point in the entire match 3.45m were watching. But BT is using a reach number – the number of different people who watched any of the game. This is necessarily bigger. And it’s not a number that would normally be bandied around by a broadcaster when talking about viewership of their shows.

Finally, without a great deal more information we can’t be sure what the 3m YouTube component of the audience really means. First of all, the Champions’ League final had 1.8m views, meaning the Europa League must have had about 1.2m. YouTube registers a view when someone watches as little 30 seconds. So this almost certainly doesn’t mean 1.8m or 1.2m watched the entire match. And again, many of the same fans will have watched both matches.

Digging into BT’s YouTube channel doesn’t seem to surface the complete live videos any longer. There are just highlights packages. There are a couple of short videos with several hundred thousand views each, and it’s not clear if these were once the live streams (I suspect they may have been), or just incredibly popular promo videos, but either way, we need to be careful what we’re counting. Interestingly, the CL promo has around 470,000 views while the Europa League promo has over 600,000 views. If they were the live streams, then that doesn’t total 3m.

To be fair to BT for one moment, a single YouTube view does not equal a single viewer. Many will have been streaming to smart TVs with sizeable numbers potentially watching. But online video views can be a murky business, and the methodology is completely different to the BARB measurement for TV, meaning combined audiences figures should be treated with tremendous caution.

I suppose in the end, I find it incredibly disappointing that either a single match isn’t made available to ITV, C4 or C5, and that highlights are removed from TV altogether. Saying that you’ll make highlights available in social media is a nice addition, but shouldn’t replace a broadcast channel. Many older viewers in particular will struggle to see footage now. It’s the elderly and poorest in society who don’t have access to the internet for streaming and the devices necessary to enable them.

UEFA clearly doesn’t care about those viewers. BT will pay more for complete exclusivity, which they now have. And if you either can’t afford BT, or don’t have the means or ability to watch their social streams, then tough luck. No European football for you.

If this were any other sport – I’m looking at you, cricket – you’d question the ramifications for the future of the sport by striking this kind of lockout deal. But this is football, and the major competitions are always likely to be important.

The only tiny bit of hope is that Karen Bradley, Culture Secretary, recently talked of “future proofing” listed events like the World Cup. Would free-to-air Champions’ League highlights ever be included in that list?

Incidentally, if you were in Belgium, Germany or Italy, you’d be able to see, at minimum, the finals of the Champions’ League or Europa League of a home club reached the final, because of rules regarding listed events in those countries.

A 32% increase in fees? This time next year, the next Premier League TV deal will be being announced. I bet over in Gloucester Place, the Premier League is rubbing its hands in anticipation of next year, unless BT and Sky reach some kind of appeasement in respect of their relative positions in the TV football marketplace.

More “rampant inflation” to come?

[Later] An interesting piece in The Guardian about BT’s need to win these rights following a fairly miserable year for them. Although I would make a couple of points:

  • Only in football could a 32% increase in rights fees be considered to have cooled a little. BT drove the last round of increased fees by making a knockout bid. This time, they’ve still paid a substantial premium at a time when Sky “…did not look to submit a knockout Champions League bid.”
  • The Guardian piece notes that Sky is paying £11m a game under its current deal compared with £1.1m a game for BT’s UEFA deal. But that’s not really a fair comparison because Sky’s Premier League games are not all played simultaneously. In the group stages there are sixteen matches per round, spread over two nights. Even with two timeslots a night, that means at least three out of four matches will be behind a red button. And you can only watch one match at a time. Even watching the “goals” show, it means that a Tuesday evening is costing £8.8m for BT in rights fees. Sky only schedules a couple of simultaneous games on the final day of the season if there’s something to be played for. Yes, there’s “Super Sunday”, but you can watch both games.

Discovery and Sky Do a Deal

[A follow-up/continuation of the piece I wrote the other day about the fallout between Sky and Discovery in the UK and Germany.]

On Sunday morning there was an epic final at the Australian Open. Somehow the top 8 men’s players in the world conspired not to make the final, and we got a “throwback” final of Rafa Nadal (9) v Roger Federer (17). The last time these two played in a final together was 6 years ago in Roland Garros.

The match duly ran into a tense and exciting fifth set, with Federer coming out the winner after some amazing points played at the highest level. The match was broadcast on Eurosport (a channel owned by Discovery), and no sooner had the final point been scored, than the Eurosport commentator was reminding viewers, via a prepared script, that in the next few days Sky viewers would no longer be able to watch this channel and others in the Discovery portfolio, and that viewers should either phone Sky or contact them on social media.

As it happens, viewers can now breathe a sigh of relief. Late on Tuesday, a deal between the two companies was agreed, and the channels did not go off air at midnight last night.

Quite who “won” isn’t too clear with reports that both sides claiming victories of sorts.

Set against this was the background of Fox trying to take full ownership of Sky at the moment – something that Ray Snoddy notes in his piece about the affair.

The dispute broke into the open last week, with Discovery setting up a specific site (which some Sky broadband customers reported to have had trouble accessing), and Sky hitting back with pages on its own site suggesting alternative programming that Sky provides.

Over the weekend and for the last few days, there was also a blitz of press advertising from Discovery and Sky, presenting their cases with various levels of implied aggression.

In the UK, we’ve not really experienced a lot like this. Perhaps the biggest channel carriage fallout was between Sky and Virgin Media, which saw some Sky channels, including Sky One, removed from the platform.

Of course, Sky continues to limit access to its Sky Atlantic channel, meaning that its not viewable on Virgin Media, BT TV or TalkTalk TV.

The availability of Sky Sports channels was also messy for a while. Ofcom used to force Sky to provide Sky Sports 1 and 2 on a “wholesale must-offer” basis. That meant that any provider could offer Sky’s channels at a fixed rate (a rate that might be lower than Sky was selling the channels itself). That stipulation was removed in 2015, but it’s notable that on BT TV, only Sky Sports 1 and 2 are available. Whereas Sky Sports 1-5, Sky Sports News HQ and Sky Sports F1 are all on TalkTalk TV. While football, cricket and rugby tend to be on SS1 or SS2, other events might easily float over to other channels – particularly at busy times over the weekend. More recently Sky has launched Sky Sports Mix, which is Sky exclusive although it rarely shows fixtures that aren’t on other Sky Sports channels.

But returning to the now resolved Discovery/Sky dispute, were there really any other options for either side?

When you enter the world of multi-channel paid-for TV, you enter the world of bundles. You don’t agree to take Sky or Virgin Media, and then carefully list the channels you’d be interested in subscribing to. Instead you’re presented with various bundles with different channel line-ups. Premium movies or sports channels are then offered on-top of this.

For example Sky currently retails the Sky Variety bundle for £32 a month (prices and bundles vary the whole time, but we’ll go with this value). They say that includes 373 channel (11 being HD channels), of which 250+ are free-to-air. In other words, you’d get those 250 channels anyway with a basic satellite decoder regardless of having a Sky subscription.

So there are somewhere around 100+ premium channels some of which you’re probably interested in, and they are all getting a proportion of that £32 a month. Sky obviously keeps a cut itself for running the service and its own channels. Beyond that are channel providers that do deals with Sky for some of their offerings. UKTV, for example, will offer channels like Alibi and Gold (neither of which are on Freeview) for a set price a month; ITV has ITV Encore; Viacom has a range of channels including the MTV family and so on.

One channel provider might offer both free-to-air channels and pay channels. UKTV offers Dave free, but Alibi on a paid basis. Discovery itself offers free-to-air Quest, mostly repeats of shows that have previously aired on their main channels. You probably do get bigger ratings for making a channel free, but you have to fight for advertising revenue to make it pay. It’s a fine balance. Subscription revenue is more certain, and if you do a good deal with the likes of Sky or Virgin Media, then the channel ticks over financially on its own.

When you go free-to-air, each channel you make free has to survive on its own accord. While you might try to force advertisers to not be able to buy Dave on its own, but also have to advertise on, say, Drama and Really, it’s a slightly tougher sell. The advertiser might only be after the young male audience that Dave provides.

But when you go down the paid-for route, it certainly makes sense to bundle your channels up. Discovery bundles the various Discovery channels (+1, DMAX, Shed, Turbo, History, Science), along with TLC (and its sister channels), Eurosport 1 and 2, and Animal Planet. Some of these get decent ratings, and have real investment in them (Discovery, TLC, Eurosport); others tick by largely on repeats (Shed, Turbo).

The platform operator has to decide the right mix of channels for the right price. How much of that £32 a month should go to Discovery for its bundle of channels? The operator will consider the importance of the channel (Is a must-offer channel that might mean its subscribers cancel and go elsewhere?), its ratings, investment in the channel (Are they making desirable new programmes and promoting them, helping make the platform better?), and the overall value to consumers. They also have to think about their bottom line.

The channel provider will naturally think their offering is more valuable than the platform does, but they usually hammer out a deal between themselves. Remember, there’s only £32 in total to go around, and that has to pay for some other overall costs as well.

And that’s what this battle has been about. It hasn’t been reported what Sky is paying for Discovery’s channel offering, but I’d guess that it could be anything from 50p to £2 a month per subscriber. To put this in context, in the US, the channel group with the highest monthly subscription fees is ESPN with a reported $7.21 a month of cable bills going to this channel. Unlike the UK, where premium sport is only paid for by those who choose to buy it, ESPN gets less per subscriber, but vastly more subscribers pay it by virtue of the channel being a “must-carry” on nearly all cable households.

During the hurly burly of the Sky/Discovery disagreement, there were a few suggestions made by Sky about how Discovery might monetise its channels:

  • Send channels free-to-air and rely solely on advertising revenues
  • Retail the channels itself via the Sky platform
  • Transform the business into an OTT offering

None of those works easily.

Free-to-air Ad Funded

All these channels already take advertising. Indeed, Sky’s own advertising division, Sky Media, sells Discovery’s advertising. Remarkably, while channel carriage discussions were breaking down last autumn, Sky Media, the advertising side of the businesses actually renewed a long term agreement with Discovery Networks.

But it’s likely that advertising only accounts for perhaps 50% of the channels’ revenues. While going free-to-air would mean that channels would be available in more households, Freesat homes and perhaps expansion onto Freeview, it’s not at all clear that the additional advertising revenues this availability would bring, would make up for the subscription shortfall. In turn that might see less investment in Discovery’s channels, with some of the smaller channels almost certainly needing to be closed down.

It should be said, however, that UKTV has grown its business very successfully by taking channels free-to-air. Dave, Really, Drama, Yesterday and Home have driven their business by being or going free-to-air.

Retail the channels itself

Think of this as the BT Sport solution. Market the channels directly to consumers, taking the revenues without Sky acting as an intermediary.

BT went down this route because they wanted a direct relationship with their customers. But they were in a uniquely strong position in the first place. Their original play was aimed at retaining BT customers who might have moved their phonelines and broadband to Sky or other providers, and so they were starting from a massive customer base. Then they offered an initially free BT Sport service. Stay with us or move to us, and get the channel free. They already had a large billing facility to manage the service. Customers could relatively easily add BT Sport to their channel mix, either on BT’s own platform, or via Sky. And they can market the channel easily – bombarding BT customers with email and direct mail explaining the offer.

The other thing BT had was killer programming. And I don’t mean Shark Week. They had Premier League football, and some decent games at that. Retailing the channel themselves has worked well for them.

But few others try this. There are a handful of specialist sports channels that manage this – Premier Sports and BoxNation spring to mind. But again, they are able to target a specific interest group directly. You want to watch lots of boxing? Subscribe to BoxNation (Although notably even BoxNation has now done a deal with BT).

For Discovery, this is much harder. They’d need to develop a whole new subscription team, and market the channels heavily. While Eurosport could probably reach cycling and tennis fans relatively successfully, the more general interest nature of Discovery is a much harder sell.

In short, this would be an expensive gamble, persuading viewers that they should phone-up Discovery and spend an additional £2.99 a month or whatever to subscribe to their channels.

The OTT Offering

The other route is to sell directly as a streaming service. Offer the linear channels, but also boxsets of programmes, making them available through various digital platforms. In essence Discovery already does this with the Eurosport Player.

If you don’t have a premium TV subscription, then you can pay monthly or annually for access via the Eurosport website or app. Remember, something like 40% of UK television households are Freeview only. So there’s definitely a market to be tapped if the price is right.

Again, that works for sport better than a general entertainment channel.

Summary

Only those in the room will know what really happened, but I would argue that Discovery was between a rock and a hard place. It would have been colossally disruptive to lose its main channel distributor in Sky.

On the other hand, Sky is definitely looking to reduce costs, since it simply can’t place the full 83% increase in Premier League rights fees it’s now paying solely on Sky Sports subscribers. Other parts of the business have to take part of that cost. And this is before we consider the upcoming next round of UEFA Champions’ League rights which if Sky tries to win back, will place an added cost burden on Sky.

Being seen as a “bully” probably also isn’t a good place to be right now for Sky as it seeks regulatory approval for its takeover.

That all said, it’s not clear that bundles are here to stay forever. There seems to be a movement – especially in the US, for “skinny bundles” – a lower subscription featuring a handful of core channels, and then buying “a la carte” services on top. There are “cable-cutters” and “cable-nevers” – those who cancel cable subscriptions, and those who never took one in the first place (especially millennials). They just want to buy HBO for Game of Thrones or whatever.

It’s all certainly a concern for ESPN who can no longer bank on all 100m+ US cable households each paying $7.21 a month for their channels. And if you’re not interested in sport why should you?

Yet buying each channel/subscription separately quickly mounts up. A US subscriber in an OTT world might buy Direct TV Now for a basic selection of streaming channels starting at $35 a month. They might also pay for Netflix, Amazon and Hulu. They add HBO Go for a few more dollars. And then beyond that there are things like CBS All Access if you want the upcoming new Good Wife and Star Trek spin-offs/series. You might expect similar offerings from NBC or ABC in the future. There’s also the forthcoming BBC/ITV BritBox. And only this week we hear that Walter Presents will also be available to US subscribers.

$2.99 here; $5.99 there. That’s a lot of TV that all adds up very quickly.

One way or another, resolution of the Sky/Discovery dispute means that Sky viewers are able to continue to watch Idris Elba: No Limits on Discovery. Which is as well, because Elba is also the marketing face of Sky, and it would have been kind of awkward when he’s plugging the new Sky Q box, that his series wasn’t available to Sky viewers.

Personally, I’m left having splashed out £20 for Eurosport Player before I learnt of the dispute’s resolution. As it turns out, this wasn’t really necessary. That said, that app gives me a number of additional streams that mean I can often watch sports action live, when TV will only be showing highlights later on. So perhaps it’s a fair investment.

Sky/Discovery Carriage Dispute

Channel carriage disputes are relatively rare in the UK, but we’re in for a sizeable one right now, with Discovery publicly stepping forward and saying that from the end of this month, Sky subscribers may no longer get access to a Discovery channels. It seems that the two companies have been unable to reach agreement on how much Sky pays Discovery from the subscription fees it collects from viewers.

Sky says that it has overpaid for Discovery’s channels for years.

Discovery says that it is now paid less than it was ten years ago. They claim Sky is playing hardball because of its Premier League rights inflation.

The whole dispute has become very public, very quickly. I noticed that during the BBC’s reporting of a Venus/Serena final in the Australian Open at the weekend, there was already a crawl along the Eurosport footage they’d lifted.

Discovery has set up a Keep Discovery website, and their social media outlets are alerting followers to the dispute. This is straight out of the US-playbook, where such tactics are common and often go public. Sometimes they’re quickly resolved; but other times they go on for years (In Los Angeles there is ongoing dispute between Time Warner Cable who own SportsNet LA with exclusive LA Dodgers coverage, and the major cable companies who actually reach customers in the area. As a result, most locals have been unable to watch local basseball coverage for at least three seasons now.)

Meanwhile, Sky has also added a section to its customer service website.

While I’m not sure how long discussions have been going on, this must have been a while. I know this because sometime around October last year, I completed a Sky customer research survey in which many of the questions seemed to be about how much I valued Discovery’s channels, and whether I’d continue as a customer if I lost access to their channels.

A few thoughts on this:

  • I’m sure Sky is trying to save cash after its record breaking Premier League rights bid. While they’ve not passed full costs onto consumers, they’ve clearly cut back in places, reducing coverage of some sports, and cutting overheads where possible. They do continue to invest in original programming however.
  • According to BARB, in December 2016 the Discovery Group had a 1.69% share of viewing. But this includes Quest, a free-to-air channel which is potentially unaffected by this dispute.
  • Discovery is clearly investing in Europe. It took full ownership of Eurosport in 2015, and has also bought a large swathe of exclusive European Olympic rights beginning in 2018 in some territories.
  • Sky announced a 9% fall in operating profits today as a direct result of their increased Premier League costs.
  • This is not just a UK affair. The disagreement extends to Sky Deutchland as well.
  • Eurosport calls itself the “Home of Cycling” and it does indeed carry vastly more cycling coverage than any other channel. This ironically means that the Team Sky cycling team (fully owned by Sky) will be largely invisible to Sky TV viewers post the 31st January if the dispute is not resolved. At least until the Tour de France which is also carried on ITV4.
  • My favourite FAQ on the Sky site is: “I regularly watched Eurosport. What can I watch on Sky instead?” To which the answer seems to be Premier League football, rugby union, cricket and rugby league. None of which is much use if I actually wanted to watch cycling, downhill skiing, tennis or snooker. Sky Sports and Eurosport UK have almost no sporting crossovers!
  • When live sports are affected, it’s not uncommon for viewers to look for “alternatives.” These aren’t always legal. If your favourite sport goes off-air, and you’re not willing to change TV provider, that mate who’s mentioned how easy it is to set up a Kodi box and pull in illegal feeds, might open your eyes to how easy piracy is. And that doesn’t help any sports TV channels. Why pay if you can get them free?*

In the meantime, do I pay £19.99 for a year’s subscription to Eurosport Player? It’s on sale until 31st January when the price reverts to £59.99? It works with Chromecast. Paying would be hedging my bets. And if the channels do disappear, then a conversation with Sky’s retention team might see me recouping that cost.

* I’m not advocating this, but it must surely be a temptation.

John Oliver on Brexit

On Sunday night, HBO in the US aired a new episode of Last Week Tonight with John Oliver. The second half of the show was a long explanation/opinion piece from Oliver about what Brexit is (this is a show aimed at Americans after all), and was essentially a 15 minute piece imploring Britain to Vote Remain. It’s very good and hits the nail on the head.

On Monday morning the HBO had posted the full 15 minutes on YouTube.

In fact some of the videos from Last Week Tonight put on YouTube are blocked in the UK by the uploader – i.e. HBO. But this one wasn’t. The reason is almost certainly because Sky Atlantic has the rights to the show in the UK, and Sky prefers to limit access to clips from the show to its own subscribers.

But in this instance, UK viewers could watch — almost certainly because Oliver and his producers knew that the piece wouldn’t be broadcastable in the UK until the Brexit referendum had finished.

I noticed quite early on Monday that the piece was unbroadcastable under UK election guidelines, and later on Monday, Sky Atlantic pulled its planned broadcast from Monday night when new episodes of the show usually air. Sky Atlantic will instead broadcast the show on Thursday after polls close.

Now if you were to believe a certain section of the “Twittersphere” this is because Sky is owned by Rupert Murdoch, and his papers in particular are rampantly “Leave.”

But the truth is that Sky Atlantic couldn’t have shown the programme whether or not they had wanted to (Murdoch doesn’t fully own Sky either, although he certainly exercises a lot of control).

In the UK we have strict rules about impartiality in the run-up to an election or referendum. The UK regulator Ofcom, publishes a Broadcast Code which all UK commercial broadcasters have to adhere to (The BBC also adheres to some parts of the code).

Section Six of the code deals with Elections and Referendums, and is based on UK law:

Relevant legislation includes, in particular, sections 319(2)(c) and 320 of the Communications Act 2003, and Article 10 of the European Convention on Human Rights. Broadcasters should also have regard to relevant sections of the Representation of the People Act 1983 (as amended) (“RPA”) – see in particular sections 66A, 92 and 93 (which is amended by section 144 of the Political Parties, Elections and Referendums Act 2000).

Ofcom told broadcasters earlier this year that the “referendum period” would run from 15 April 2016 until 10pm 23 June 2016.

Rule 6.3 is critical during this time:

Due weight must be given to designated organisations in coverage during the referendum period. Broadcasters must also consider giving appropriate coverage to other permitted participants with significant views and perspectives.

It’s pretty clear that Sky Atlantic wouldn’t have been able to balance John Oliver’s piece appropriately, and so, they postponed the episode until after the election.

Topical comedy programmes are always tricky during election periods, and it’s notable that the current run of Have I Got News For You has been interrupted until after the referendum now. You can broadcast topical comedy, but you have to have “balance” in your comedy too.

What if Sky had broadcast the programme anyway? What could have happened?

Well Ofcom regularly finds broadcasters in breach of it’s code. Only this week the Discovery owned Quest (and Quest+1) channel was found to have breached several rules when they broadcast a post-watershed programme, complete with multiple swearwords, in an early-morning pre-watershed slot.

In this instance, the finding was simply a rap on the knuckles (Discovery was extremely apologetic, and put in place new compliance procedures to ensure that the mistake was not repeated), but no further sanction. Broadcasters who repeatedly breach rules can face fines or in extreme cases, have their broadcast licences revoked. In essence they can be shut down. This is rare, and for the most part has only happened to adult channels who have repeatedly breached rules. But a multi-billion pound broadcaster like Sky, reporting to shareholders, cannot possibly risk the loss of its licence.

You can be certain that Ofcom and potentially the Crown Prosecution Service would take greater exception to rules surrounding elections and referendums being broken by a large broadcaster. The Representation of the People Act would potentially leave senior people at an infringing broadcaster personally responsible for illegal actions, and subject to being prosecuted under the law.

Indeed, here’s what Ofcom published with respect to a much smaller local election recently:

Ofcom will consider any breach arising from election-related programming to be potentially serious, and will consider taking regulatory action, as appropriate, in such cases, including considering the imposition of a statutory sanction. (i.e. the removal of a broadcast licence.)

Furthermore, the fine that Ofcom can choose to impose can be informed by that company’s turnover. Sky’s 2015 turnover was around £11.3bn.

Since broadcasting the Oliver piece without “balance” would be deemed quite deliberate by Sky, the cumulative fine, risk to broadcast licence and the potential for personal prosecution means that there was no way Sky was ever going to broadcast it.

It’s not a conspiracy — just the law.

Note: I’m not a lawyer, and these are just my interpretation of the rules as I understand them.

F1 to Follow Cricket Into Obscurity

Here’s how F1 and Bernie Ecclestone do business:

21 December 2015Channel 4 wins terrestrial rights to Formula 1, after the BBC hands them back. There was rumoured to be a fight with ITV for them.

Bernie Ecclestone, Chief Executive Officer of the Formula One group said: “I am sorry that the BBC could not comply with their contract but I am happy that we now have a broadcaster that can broadcast Formula 1® events without commercial intervals during the race.

“I am confident that Channel 4 will achieve not only how the BBC carried out the broadcast in the past but also with a new approach as the World and Formula 1® have moved on.”

(No – that second line really doesn’t really make any sense, but I swear I cut and paste that from the press release!)

20 January 2016 – Channel 4, having announced a new presenting and commentary team, broadcasts its first race in Australia as the new F1 season gets underway.

23 January 2016 AM – The Grand Prix Drivers’ Association (GDPA) publishes an open letter to stakeholders, followers and fans expressing concerns about their sport. This includes an implied concern about the changing TV environment as the sport has shifted from free-to-air to pay TV, leading to a decline in overall audiences.

23 January 2016 PMSky Sports announces an exclusive deal for all F1 rights from the 2019 season. Only the British Grand Prix and highlights will be made available free-to-air – presumably somewhere like Pick TV.

In essence the sport will disappear from most UK viewers’ screens despite a multitude of manufacturers and suppliers being British based, employing many people.

I’m very much a laissez-faire F1 watcher – or at least I used to be. If I was around and it was on, I might watch. But over the years, it has become duller. Tracks have turn numbers and not names; over-taking is so rare we get it from multiple angles; racing is manufactured through forced pit-stops; each season there are seemingly less than a handful of drivers who can win a race while the rest make up has beens. And that’s before we get to the dubious political aspects of F1 which sees the carnival pitching up in whichever country will give Bernie Eccelestone and his cronies the most cash.

Earlier this year I was appalled when I saw that Silverstone was recruiting for volunteers to help out at the British Grand Prix a la Olympic volunteers. This is a multi-billion pound industry. Would you expect, say, a commercial music festival to be manned by volunteers? Nope. They’re nearly all paid. It may be minimum wage, but that’s still cash in hand rather than a T-shirt.

I’ve got to feel sorry for Channel 4 in all of this. They’ve not been given a chance by F1. They’ve only broadcast a single race before losing the rights, and there’s been no time to see what innovations in coverage they can bring to the sport before the tablecloth has been whipped from underneath them. They have no chance to prove their metal or attempt to make a viable business case for continuing their coverage beyond the first three years. What kind of “partner” does that to you? I think that even if this deal has been in the making for many months, it’s extraordinarily bad grace of F1/Sky to announce it so soon.

It’s as though F1 is sticking two fingers up at C4 and saying – carry on paying us for the next three seasons, but we don’t care, because we have a new best friend.

Yes – Sky wants F1 exclusively. The fans are probably considered upmarket, and often don’t follow other sports. But expect ratings and interest in F1 to wane as it has done for cricket and golf before them.

Out of sight – out of mind.

I understand that this makes sense to Sky, because Sky has profits to achieve each year. But you’d be foolish to think that Sky actually has the long-term interests of the sport in mind. Instead they have spreadsheets detailing what proportion (and it will only be a proportion) of free-to-air F1 viewers they can sell subscriptions to.

I’ve no doubt their coverage will be technically superb. UHD is fine in principle, but in practice I’ll wait for standards to fully finalise themselves before I even think about upgrading. And you do have to listen to the world’s dreariest commentator in Martin Brundle – the man who on learning in 2011 that Sky would share rights with the BBC, instantly Tweeted a “come and get me” message.

But popularity will diminish as it has done with cricket, and is doing with golf. That’s what happens when your sport is owned by an investment company. They want the highest returns over the shortest period.

How Not To Reinvigorate T20

The ECB has a problem. As the third Ashes Test gets underway, largely unwatched by the British public, participation in cricket continues to fall. According to Sport England’s Active People survey, just 0.6% of people ever play cricket. And this is a number that’s been in decline since the survey began measuring sports uptake.

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In the meantime, they’ve looked around and seen a global explosion in the popularity of the Twenty20 form of the game. India is the most obvious example with the IPL said to be valued in excess of $3.5bn.

In Australia, the Big Bash has seen record audiences on TV and elsewhere, and an overall increase in cricket participation.

Even the Caribbean Premier League is looked at fondly.

In the UK we have the T20 Blast with 18 counties in two divisions, playing matches across the May, June and July. But there doesn’t seem to be quite the same excitement that some of the other leagues get. There’s a general view that “something must be done.”

And that something, the view says, is that we need to go to a franchise system with fewer teams. A report at the weekend suggested that there might be just 8 teams, based in big cities, and matches would be played over a shorter period.

This in itself is contentious enough. Many counties would lose out – despite actually getting decent crowds for their current T20 matches.

But the ECB is hoping that the increased value of the tournament would allow big name signings (basically the same international globe trotting journeymen who currently play T20) to come and spice up the game. This, they think, is the answer to making a bigger and more excitingly received competition.

I wouldn’t dismiss that idea completely. Fitting in all the forms of cricket we want is hard to do.

However, what I do think is idiotic is the idea of selling the whole competition, lock, stock and barrel, to Sky TV for £40m as the report suggests.

Of course Sky wants exclusivity. They “own” cricket, and they’d like that to continue. It means that anyone who wants to watch any semblance of cricket on TV has to take out a Sky subscription.

But the real reason for the success of the Big Bash? They’re on the free to air Network Ten. When they switched from pay TV in 2013, interest soared. And that becomes self-fulfilling as revenues rise, and bigger names can be attracted as there’s more money.

In India it’s different as Sony MAX owns the rights and that’s a pay TV service. But this year it was bundled in a regular package. And cricket is of course the biggest sport in India, so it’s the equivalent of live Premier League not being on free to air TV in the UK. In any case, premium pay TV tends to cost between £3-4 a month in India (based on Tata Sky’s website).

However, the idea that a revamped British competition, still only on Sky, would somehow excite the nation is naive at best, and idiotic at worst.

I’m not going to kid myself that a really big free-to-air channel would fill their summer schedules with wall to wall cricket as Network Ten in Australia is prepared to, but it seems extraordinarily short sighted of the already myopic ECB (a sports organising body only marginally less inept than FIFA), that going pay-TV only is a smart thing to do at this point in time. They desperately need BBC, ITV, C4, or [Viacom owned] C5 to take an interest. Sure, do a deal with Sky too, but at least some of the games, including the final, need to be free-to-air.

The recent Six Nations deal with the BBC and ITV is instructive. A realisation that removing sport from free-to-air TV would damage the overall value of the competition and the interest in the sport in general. Like cricket, rugby will always have a hardcore of fans, but if it wants to grow beyond them, they realise that getting exposure is as important as maximising television revenues.

If the ECB wants to have any hope of reversing that downwards chart at the top of this post, then they need to make this competition as available as possible. This is possibly a last chance saloon for the sport.

BT’s Advertising

As the new football season rapidly approaches (even though it’s still only July), so the marketing spend of the various pay-TV operators ramps up. Sky is showing some fairly well-received adverts highlighting their Premier League heritage and super-imposing Thierry Henry into the video.

On the other hand, BT is busy trying to let the British public know that it’s home of the Champions’ League and Europa League from this season. To that end they’ve created one of the worst ad campaigns in recent years.

Their recent TV ads have all been of the faux behind-the-scenes variety. So we have Ewan McGregor (who I like) hamming it up about why BT is making such a tawdry ad when “they’ve got the big films” (Only in the sense that Apple/Google/Everybody has the big films for PPV), Jose Mourinho putting up with glitter cannons and so on.

But the nadir is the BT “house party” advert featuring lots of footballers and BT Sport presenters seemingly having a blast in some mansion. Only at the very end is it “revealed” that this is another fake ad with the same characters directing it.

It’s awful.

For one thing, it’s trying to have its cake and eat it. The makers think that this is actually a good ad. It has expensive production values. It has a cast of current European footballing stars (Gareth Bale, Alex Oxlade-Chamberlain, David Luiz etc.). The two second “reveal” says to me that really they just wanted to make this ad anyway.

But what this ad actually says is that overpaid footballers live hedonistic lifestyles that none of us will ever have, and they’re doing it through inflated TV deals, pricing out younger fans from games. In short, it highlights everything that’s wrong with the game.

And was it a smart idea to include Franck Ribéry in the ad given some of his own past?

The makers may claim that their tongue is in their cheek for this ad, but I really don’t think it is.

The other problem is that it really doesn’t do the job of conveying BT’s European football rights at all. The ad just doesn’t do the job.

BT has quite a complicated message to convey about how to get its new football offering. As I’ve said before, the previous message was pretty simple: Get BT Sport free if you’re a BT Broadband customer.

Simple and punchy. It probably worked too, stopping Sky from gaining broadband customers.

Now BT’s more complicated message is: Get BT Sport for £5 a month if you’re BT Broadband customer watching via BT TV or Sky, or pay closer to £20 a month if you’re on Sky and don’t have BT Broadband, or get it free if you have BT TV too (although you need fibre for the full offering including 4K), or get it as part of the XL bundle on Virgin Media, and don’t forget that you’re “opting in” to the £5 deal even if you thought it was free, but you can downgrade to free if you get BT Sport Lite which just gets you BT Sport 1.

Clear?

In the meantime, this atrocious ad played out in just about every commercial break during Saturday and Sunday’s Tour de France coverage on both ITV4 and Eurosport. I couldn’t avoid it.

I would fire AMV BBDO, the creative agency that came up with this mess.

Six Nations’ Deal

Yesterday we learned that the BBC will lose it’s exclusivity of broadcasting the Six Nations, and will share coverage with ITV from 2016. The BBC has pulled out two years early from a previous agreement that ran until 2017, in a similar manner to the deal with Sky over F1.

To be honest, this seems like a sensible deal in cash-straightened times, and it’s smart that the Six Nations matches are being left on free-to-air TV. It seems likely that Sky or maybe even BT bid a higher sum, but there’s immense value to the rights being free to air. Sponsors get better coverage, and you get a new generation of viewers who are interested in the sport.

I’m still awaiting a comprehensive series of charts to fully explain to me whether the new BBC Licence Fee deal, which was rushed together in a week, is actually “cash flat”, represents a “10-12% cut by 2020”, or is “cut by 20% in real terms over five years”. [This blog posting is probably closest, suggesting a real-terms 10% fall.]

But it’s clear money is tight at the BBC, and sports rights have to be looked at sensibly. Sharing those rights with ITV seems a good win for both viewers (they stay free-to-air, and are shared as they are for World Cups and European Championships), the BBC (saves money) and ITV (gets rights to a very valuable sports commodity at a time when they’d lost FA Cup rights and Champions’ League football, and seriously needed something to fill the gap).

I’m not at all sure that this is the “body blow” that some reports would have you think. Memories are short, and at the start of the millennium, England games from the competition were actually broadcast by Sky Sports. It’s only relatively recently that the BBC has had exclusive coverage of all the games, and that they’ve been spread out over a weekend so that they don’t clash for a TV audience.

Platform Exclusives

On Monday, Game of Thrones finished its fifth series run on Sky Atlantic with an explosive episode. Don’t worry, you won’t find any spoilers on this site (Unlike certain news sites). Anyone who wanted to, could watch it on Sky Atlantic.

Well, up to a point Lord Copper.

If you’re a Virgin Media customer, then you don’t get Sky Atlantic. Sky sees the channel as a point of difference between it’s own platforms and others. So while Sky One and Sky Living are offered to third parties like Virgin Media, Sky Atlantic is held back.

You can, as of Tuesday this week, legally access that entire fifth series of Game of Thrones via platforms like iTunes, Amazon Instant Video or Google Play. But obviously that’ll cost you.

Also this week came the announcement that AMC Networks is launching a UK offering, but that it’ll be exclusively available via BT TV on YouView. AMC in the US has been home of series such as Breaking Bad, and its spin-off Better Call Saul, Mad Men and The Walking Dead.

But who broadcasts those shows in the UK can vary quite a lot. The new Channel 4 Sunday night series, Humans, is an AMC co-production. The Walking Dead, which is the biggest drama in the US, goes out on Fox TV in the UK, with Channel 5 having had second run rights. Mad Men went out on Sky Atlantic having been poached from BBC Two in the UK, and Breaking Bad and its spin-off are on Netflix (although Breaking Bad is also now on free-to-air Spike). Other AMC shows can be found on Amazon too.

What’s interesting about this deal with BT is that they’ll have exclusive access to Fear the Walking Dead – a new spin-off series set in the same world as The Walking Dead. And to watch it, you’ll need new hardware. BT is seemingly trying beef up its non-sport TV portfolio.

Of course AMC now owns a near 50% stake of BBC America, and this means that you’d anticipate some BBC co-productions down the line between the two broadcasters – John Le Carré’s The Night Porter with Hugh Laurie and Tom Hiddleston seems like a good example of this (although I believe this was presented to both parties by a third party who put the package together).

So how this will all fit together with regard to BT-exclusive access to AMC programming in the longer term remains to be seen. However it should be noted that despite the Sky/HBO deal, there are still instances where, say, the BBC does a deal with HBO and Sky is cut-out – The Casual Vacancy being a recent example.

But what this clearly means is that viewers are going to be faced with some hard choices.

At the moment, should I want to watch Game of Thrones, Daredevil and Transparent, I can do one of three things (or a mix of them).

– Subscribe, respectively, to Sky Atlantic (via Sky or Now TV), Netflix and Amazon Prime
– Wait until they become available through DVD/digital
– Pirate them

(I’m not advocating the third, incidentally).

Assuming I’m a Walking Dead fan who also wants to watch the other series, at least until now I could access to the OTT services through an inexpensive one-off purchase of a Google Chromecast, Now TV, Roku or Apple TV box. To see the Walking Dead spin-off, I’m going to need a full-on BT TV subscription and one of their boxes. Or I’ll have to wait until the DVD/digital downloads are made available.

This is where it gets even more complicated.

At the moment, most of these productions are actually owned by third party companies, and they simply licence their output for specific windows to services like Netflix or Amazon. But that has meant that when Netflix launched in France, they had to do so without House of Cards, because it had been licenced to another channel. That’s also why DVDs/downloads are made available of the series in due course – the studio that owns them distributes the DVDs and earns revenues from them – not Netflix. House of Cards tends to be exclusive to Netflix for about six months before the DVD/download option becomes available.

Netflix in future says it wants to own as much of its own programming as possible. In other words, it wants to close off those avenues, or at least have control of them. Holding back programming could make long-term sense in platform building, even if it leaves money on the table in the short term.

In the meantime, I’m not sure that this deal on its own is enough to make a compelling case for anyone to cancel Sky and take up BT TV – as it hasn’t been with their sports rights so far. But I can see some of those AMC catalogue programmes disappearing from Amazon in due course, and I can also imagine that there’ll be a significant amount of piracy surrounding Fear the Walking Dead when fans realise that they need a whole different subscription to watch it legally, unless they’re prepared to wait for the DVDs/downloads.

The Champions’ League – Part One

On Tuesday we will hear what BT has in store for its coverage of the Champions’ League and Europa League. It outbid Sky and ITV to win exclusive rights for the next three seasons.

The expectation is that they’ll announce Gary Lineker as co-presenting with Jake Humphries over Tuesday and Wednesday nights, with a £5 per month price-point for the package.

What that means for fans (and sponsors) is that there’ll be relatively little free European football on-air. At the time the bid was won, BT said that at least one fixture involving each British club in the competition will be available free-to-air on a specially set-up Freeview channel – BT Sport Showcase. This will include the final.

But whether they’ll offer the attractive games viewers want to see seems less clear. Man Utd v Zenit St Petersburg isn’t exactly a crowd pleaser, but would fulfill BT’s promise.

In the meantime Sky Sports has posted a blog that seems to say something along the lines of “We might have lost the Champions’ League, but nobody’s watching it any more and they only care about the Premier League, so we don’t really care.” Sour grapes anyone? The Guardian has more coverage here.

Is there too much Champions’ League football? Probably.

Are audiences down? Well the numbers say so.

Is this because English clubs haven’t done so well in the last couple of years? Er, I would think so.

Sky Sport’s audience at the weekend for the final might have been lower this year than last year, but it’s not clear to me that’s anything more than to do with the clubs competing. Personally I want to see Messi and co. I’m not convinced that Saturday night is the right time for the final, and wonder whether returning to Wednesday nights would see a stronger overall audience.

But I do think that UEFA is going to be the loser by selling exclusively to BT. Remember the OnDigital years? ITV had the Champions’ League exclusively then, and it wasn’t enough to save the platform. So yes, people do care more about the Premier League than the Champions’ League.

The football watching audience is divided into the following segments:

a. Free-to-air only. Match of the Day; England internationals on ITV; World Cups; Euros.

b. BT subscribers. Take BT Sport because they already have BT Broadband, so why wouldn’t they?

c. Sky Sports subscribers. Like the substantial Premier League offering.

d. Sky Sports + BT Sports. Pay for Sky Sports first of all, and then either get BT Sports free because of their broadband package, or pay because of the additional games it offers (other sports like rugby come into play here).

(e. BT Sports subscriber. Pay for BT Sport but aren’t BT Broadband subscribers. Probably only rugby or Moto GP fans, and not really football fans.)

We now need a couple of new segments:

f. Sky Sports + BT Sports + BT Sports Europe. Football die hards paying some more money for a complete football offering. This is probably the key constituent for the success of BT Sports Europe.

g. BT Sports + BT Sports Europe. Can anyone who doesn’t otherwise pay for football be persuaded to fork out £5 (or whatever) a month? This will be a small segment.

However the Champions’ League is vital for the top flight Premier League clubs. That’s why the big “four” are always fighting to be in it. Indeed, if they’re not then they’re not going to be able to attract the right players. Top players want to play in the Champions’ League.

It’ll be interesting to see how BT pitch their offering. They need to have the satellite capacity for Sky and Virgin subscribers to be able to watch as they can do now with BT Sports. And they need to persuade a lot of people to part with actual money to watch it.

I know that for me, this means my sports TV costs are going up. Sky has already announced price increases (the massive bids they made to retain Premier League rights ensured this), and now I’m facing £5 or more a month if I want to watch Arsenal in Europe (I do).

And then there’s the question of a monthly subscription fee when matches aren’t evenly spread out across the year. For example in the 2014/15 season, there was a single match in June – the final. July and August saw qualifiers – of interest to fans of the 4th place Premier League club, but few others. The group stage kicked off in September but rounds of the competition are not evenly distributed. There are no games at all in January. So how will subscribers deal with that? Do we all cancel mid-December and re-subscribe in mid-February? The Europa league has more games, and slightly more rounds to add into this mix.

In the meantime, we can look forward to a Media Guardian article this time next year explaining to us that the cumulative audience for the Champions’ League Final has fallen by x% (where x is a big number).

But let’s see what BT says tomorrow.

[Update: Here’s my follow-up piece.]