The 4 key issues facing sports media rights lawyers in 2017: From Head Counsel, Sky Sports
Published 24 May 2017 By: Stephen Ridgway
This is an extract from the Sport & Media Rights chapter of the LawInSport & BASL Sports Law Yearbook 2016/17. To access or order a full copy of the Yearbook, please see here.
Note: The views expressed in this piece are the author’s own.
The sports media rights market continued to make headlines in 2016 with major properties such as the Premier League securing record breaking rights renewals in multiple markets. And despite reports suggesting a decline in the popularity of football and NFL viewing in the UK and the USA, live sport continues to be crucial in attracting substantial audiences, paying subscribers and to the overall success both of diversified, established media groups as well as new entrants.
Behind the headlines, however, a number of commercial and related legal issues continued to come to the fore in 2016, which will affect the packaging, sale and contracting for sports media rights through 2017. This article examines the most significant of these issues, looking specifically at:
- Exclusivity v “Reserved Rights”
- Rise of dedicated OTT sports services
- Geo-blocking and EU Cross-Border Portability
Exclusivity v “Reserved Rights”
When negotiating the licensing of premium sports media rights, a key area of debate is always the question of “reserved rights”. This means, in essence, what rights the rights holder will seek to hold back and exclude from the scope of “exclusive” rights granted to its principal broadcast partner. It is a particularly important issue for pay-TV broadcasters to consider given their investment in premium sports rights is premised upon acquiring as great a level of rights exclusivity as possible.
Generally speaking, market practice over the past 10 - 15 years has seen rights holders retain a standard list of “reserved rights”, covering (among other things) DVD/“Download to Own” rights allowing the sale of delayed coverage of major matches following a lengthy holdback, together with limited digital clip rights for use on the rights holders’ websites. However, in the past few years, the scope of these reserved rights has substantially grown as rights holders and their member clubs look to further “slice and dice” their media rights to derive additional value and also in order to develop their own consumer-focussed propositions.
At the forefront are US rights holders such as the NFL, NBA, WWE and the PGA Tour which, in 2016, alongside their traditional broadcast agreements, have looked to push their own OTT (“over-the-top”) digital subscription services in addition to free-to-view digital clips on websites and social media channels. These subscription services offer access to additional live matches, behind the scenes content and other features. In 2016 both the NFL and the PGA Tour also announced partnerships with Twitter to offer live streaming of certain matches.
In addition to OTT services, the sports media rights sector has also seen the development of a separate industry in the licensing of live betting streaming or so called “bet & watch” rights. While the principal broadcast partner will be the only partner entitled to broadcast matches live via traditional television services (and related digital services), many rights holders now look to retain a right to separately license live streaming rights for distribution on betting websites operated by major bookmakers such as Bet 365, William Hill and Ladbrokes. Restrictions will be included on how these “bet & watch” rights can be exploited by bookmakers (e.g. limited screen size, lower resolution than the HD/UHD offered by the broadcaster and controls on the ways in which the live rights can be marketed). However, “bet & watch” rights do nonetheless represent an alternative way for live sports content to be accessed and, to an extent, undermine the scope of the “exclusivity” enjoyed by the principal broadcast partner.
A further “reserved right” that has come to the fore in 2016 and will only grow in 2017 is “virtual reality” or VR rights. The technology in this area is its infancy but a number of rights holders – particularly in the US - are looking to retain a separate right to develop enhanced virtual reality coverage, potentially on a live basis and not to allow VR rights to automatically fall into the rights granted to the main broadcast partner. For example, the NBA announced that it had entered into a partnership with the company NEXT VR to stream one game per week in VR and to offer this alongside live broadcasts by its main network partners such as ESPN.
How you view the growth of these additional “reserved rights” and whether they in time affect the value of the core live broadcast rights will undoubtedly depend on whether you work (or act for) a rights holder or a broadcaster. However, in 2017, where there is an expectation that rights fees will continue to increase, and where major sports broadcasters are themselves looking to reach new audiences through expanded digital services and VR content, we may see challenges to the standard view that “reserved rights” can continue to expand without at some point undermining the traditional sports media rights licensing model.
Rise of dedicated OTT sports services
2016 saw the launch of a number of dedicated sports OTT internet services, with (among others) Perform Group launching its “DAZN” service in Germany, Austria, Switzerland and Japan and SFR launching a similar OTT proposition in France. These direct to consumer sports offerings are seeking to follow services such as Netflix in the entertainment sector and to offer access to a range of live sport often at a lower price point than a full subscription to a traditional pay-TV sports service.
In the case of both Perform and SFR, these new OTT services launched off the back of substantial investments in acquiring Premier League rights for the 2016/17 – 2018/19 rights cycle. A question for 2017 will be how these and other planned OTT services by the likes of Discovery for Eurosport develop in the marketplace and whether they are complementary to or a direct challenge to established broadcast sports channels.
We may also see the much-discussed potential for tech giants such as Amazon, Facebook and YouTube to move away from being open platforms carrying third party services and to instead start to themselves acquire and distribute sports rights for their own account become a reality.
While the expansion of the “reserved rights” and the growth of OTT services are significant commercial factors affecting sports media rights, by far the biggest issue is the growth of piracy, and, in particular, the ease of access to and casual use of illegal live streams and clips.
In the case of the Anthony Joshua PPV boxing event in November 2016, Sky Sports identified and managed to block over 1,500 unauthorised live streams of the fight. In conjunction with the England and Wales Cricket Board (ECB), Sky also successfully brought action in 2016 against the website fanatix which (as described in detail in chapter 3.5, above) claimed that its use of multiple 8 seconds clips on a near live basis from cricket and other sports could constitute legitimate “fair dealing” and not constitute copyright infringement. The decision in favour of Sky and the ECB was an important result, but marks only the tip of the iceberg of a much bigger problem in how to effectively tackle sports piracy.
Given the scale of the issue, there will be greater pressure in 2017 on sports rights holders to do more (both independently and in conjunction with broadcast partners) to help tackle it. In short, there is likely to be a need for a greater recognition of the requirement to protect the assets that rights holders are looking to sell for huge sums if we are to see continued growth in rights fees.
Looking ahead to 2017, legal developments in this area are likely to include greater emphasis on what can potentially be done to block “at source” sites hosting illegal sports streams through the use of similar “blocking orders” to those previously obtained against websites illegally hosting movies and music content. In addition, rights holders will need to consider legal remedies available to reduce the widespread sale of adapted IPTV boxes which are pre-loaded with apps facilitating illegal live access to major sports broadcast channels. Sports broadcasters in major markets paying substantial rights fees are also likely to request rights holders take a more consistent approach to overseas rights licensing to ensure they include within legal agreements a clearer contractual right for them to “pull” rights from a licensee whose services are prone to illegal streaming.
Geo-blocking and EU Cross-Border Portability
At the same time as continuing to look at the scope of restrictions on contractual requirements to “geo-block” content to particular EU member states (see chapter 6.2 above), the EU Commission published its proposed Cross-Border Portability Regulation in December 2015. After more than 12 months of negotiation between the European Council and the Parliament, the final version of the Regulation was agreed in February 2016. Thee Regulation will require service providers to allow their digital services to be used by subscribers on a temporary basis outside of the territory of residence and in the wider European Economic Area (EAA). Once the Regulation is formally adopted service providers will have 9 months to implement and start offering cross-border portability to subscribers. Much ink will be spent in 2017 by lawyers in drafting contractual provisions that (within scope of law) ensure the greatest protection for major broadcast partners if lawful portability turns into unlawful cross-border access which undermines high value exclusive media rights.
Finally, we will all need to consider effect of Brexit on cross-border portability. At the time of writing, there are many open questions, most pressingly: will UK service providers be required to cease offering portability if the UK leaves the EU (and not be subject to portability into the UK by service providers in other member states) or will the UK continue to abide by EU rules in relation to copyright?
In summary, as we move into 2017 there are numerous commercial and legal issues affecting the packaging, licensing and protection of sports media rights. The unknown quantity in the forthcoming year is impact that the issues outlined above may have on the value of the next cycle of premium rights such as the UEFA Champions League, England International Cricket and the Premier League as they come to market in 2017 both in the UK and overseas.
Note: Views expressed are the author’s own
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Stephen is currently Head Counsel at Sky Sports, managing a team primarily responsible for Sky’s media rights arrangements with major sports rights holder including the Premier League, Football League, Formula 1, and the RFU.
Prior to moving in-house at Sky 4 years ago, Stephen qualified and worked for 7 years in the TMT team at Dentons, with a focus on the sports and media sector.