The Olympics TV deal & UK listed events: what are the options for Discovery in the UK?

Published 11 August 2015 | Authored by: Paul Shapiro, Ben Rees

In June 2015 the global media company Discovery Communications, the owner of Eurosport,1 acquired the exclusive rights for the 2018-2024 Summer and Winter Olympic Gamesin a deal worth €1.3bn (roughly £922m).2 The deal is in respect of all platforms, including free-to-air television, subscription/pay-TV television, internet and mobile phone across 50 European countries and territories.3 In the UK, the International Olympic Committee (“IOC”) had already entered into a deal, with the BBC, for the broadcast of the 2018 and 2020 Olympic Games; meaning that Discovery’s rights in this territory will take effect for the 2022 Winter Olympics.4

Historically, the IOC has sold the European rights in a number of ways – for example, in 2009, the sports advertising and marketing agency SPORTFIVE acquired exclusive rights to 40 European territories for the 2014 Winter Olympics and the 2016 Summer Olympic Games;5 alongside this, the IOC sold the rights for the six most profitable European territories – France, Germany, Italy, Spain, Turkey and the United Kingdom – on an individual basis. In contrast to this approach, the collective sale to Discovery has the obvious benefits to the IOC of simplicity and ease of negotiation, perhaps at the cost of a slightly reduced value in the rights as compared with selling on an individual basis.

This new deal raises the immediate question as to how, as the pan-European exclusive rights holder, Discovery intends to exploit its newly acquired rights. Within the Olympic charter there is a commitment by the IOC to take “all necessary steps in order to ensure the fullest coverage by the different media and the widest possible audience in the world for the Olympic Games .”6 Putting this pledge into practical effect, the IOC mandated that Discovery must show 200 hours of each Summer Olympic Games and 100 hours of each Winter Olympic Games on free-to-air television in each Games period.7 There is however more stringent domestic legislative regimes across Europe which seek to ensure that treasured sporting events are broadcast at no cost to the consumer.

This article considers the UK regime on broadcasting ‘listed events’ and the options open to Discovery in broadcasting the Olympics in the UK.

The UK Regime – Listed Events

For over 30 years, legislation has existed in the UK to ensure that sporting events deemed to be in the national interest are available to the public live on free-to-air television. Through the current legislative provision, the Communications Act 2003 (which itself amends the relevant provisions of the Broadcasting Act 1996), the Secretary of State is empowered to maintain a list of such events.8 Though no legislative explanation is given of what is an event of “national interest”, the Department for Culture Media and Sport describes them as events that have a “special national resonance” and provide a unifying date on the national calendar.9

The regime sees the list of events broken down into two categories, Group A and Group B events (these are set out below).10 The Broadcasting Act 1996 also distinguishes between category 1 and category 2 broadcasters; the former being broadcasters whose programming is available without charge to 95% or more of the population (the category 1 list currently comprises BBC 1, BBC 2, Channel 3, Channel 4 and Five), the latter being all other broadcasters.11 Group A events remain protected from exclusive live broadcast by category 2 broadcasters (in that they must be offered to category 1 broadcasters on fair and reasonable terms), whereas Group B events can be shown exclusively live by category 2 broadcasters provided category 1 broadcasters were offered the opportunity to carry edited highlights or delayed coverage.12

Ofcom (the communications regulator in the UK) have provided guidance on what they consider “live” coverage. For a single short event, such as the FA Cup final, it is fairly obvious that live coverage must include the whole match, but what about the Olympic Games which include a wide range of overlapping events? Ofcom considers the Olympic Games to be one single event so the restrictions on live coverage apply to the entirety of the Games.13

The Broadcasting Act 1996 only binds broadcasters subject to the UK government’s jurisdiction. On an EU level the Audiovisual Media Services Directive14 (the successor to the Television Without Borders Directive15) provides a framework for member states to “draw up a list of designated events…which it considers to be of major importance for society” and duly notify the Commission of the contents of their list.16 It further provides that each member state should take measures to ensure that its broadcasters do not circumvent the listed events regime in another member state (for example by broadcasting a listed event into the UK from abroad).17

Currently, both the Summer and Winter Olympic Games are Group A events. The table below sets out the current list of Group A and Group B events.18

Group A events Group B events
The Olympic Games Cricket Test Matches played in England
The FIFA World Cup Finals Tournament Non-Finals play in the Wimbledon Tournament
The FA Cup Final All other matches in the Rugby World Cup Finals Tournament
The Scottish FA Cup Final (in Scotland) Six Nations Tournament Matches involving Home Countries
The Grand National The Commonwealth Games
The Derby The World Athletics Championship
The Wimbledon Tennis Finals The Cricket World Cup – the Final, Semi-finals and Matches involving Home Nations’ Teams
The European Football Championship Finals Tournament The Ryder Cup
The Rugby League Challenge Cup Final The Open Golf Championship
The Rugby World Cup Final  

The contents of the above UK list was last considered domestically in 2009 by an independent advisory panel commissioned by the then Secretary of State Andy Burnham and chaired by ex-FA director David Davies. A number of recommendations were made, such as the addition of qualification matches for FIFA World Cup Finals Tournaments and UEFA European Championship Finals Tournaments, the entirety of Wimbledon Championships and the home Ashes test matches and Rugby World Cup matches. It was proposed that a number of events be de-listed, including the Winter Olympics, the Derby and the Rugby League Challenge Cup Final. Further consideration of these recommendations was put on hold following the election of the Coalition Government in 2010; they have not been materially re-visited since.

The list of Group A and B events may be amended by the Secretary of State, provided they have consulted with the BBC, the Welsh Authority, Ofcom, and the rights holder in question.19

The benefits of this regime are perhaps obvious; it keeps events of societal importance in living rooms for free, thereby maximising audience reach and in turn seeking to inspire and drive up participation in the process. However, there are possible drawbacks – principally for rights holders. Most obviously, it serves to reduce the number of possible bidders for rights (with the possible effect of depressing the value of the rights); one look at the finances behind the recent Premier League broadcasting deal serves to evidence the financial muscle of category 2 satellite broadcasters such as BSkyB and BT. For further information on this point please see our recent article on Premier League broadcasting.

Those rights holders without events in the Group A list are, largely, unfettered by the limited pool of broadcasting suitors. By way of example, this means the FIFA World Cup (as a Group A listed event) must be offered to free-to-air broadcasters, whereas the Royal & Ancient are able to sign an exclusive live rights deal with BSkyB for the rights to the Open Championship from 2017, whilst granting the BBC a highlights rights package (as it is a Group B event).

 

What are the options for Discovery in broadcasting the Olympics in the UK?

 There are broadly three options for Discovery:

  1. it sub-licences the rights to a free-to-air broadcaster;
  2. the group broadcasts the Games themselves; or
  3. the group keeps rights for certain platforms, whilst it sub-licences others. We consider each below.

(i) Discovery sub-licences the rights to a free-to-air broadcaster

This would see Discovery acting, in effect, as a distributor of the rights – offering (in this case) a sub-licence to a category 1, free-to-air, broadcaster. Given the relatively small number of such broadcasters, for the reasons set out above, this may mean that the rights are sub-licenced at a lower price than if they had been tendered to the wider UK broadcasting market. Discovery will have been aware of the restrictions in this regard and, it will be assumed, have in turn factored these considerations into the price it was willing to pay the IOC for the rights.

This option enables Discovery to monetise its rights in the short term and, unlike option (ii) below, there are more limited regulatory hurdles to overcome.

This position can be contrasted with that taken for other events where a rights holder may appoint an agent to assist with the marketing of the rights but will continue to control the rights centrally. By way of example, UEFA manages the broadcasting rights for EURO 2016 in house but they have appointed CAA Eleven Sàrl as its exclusive marketing agency for EURO 2016 and its qualifying matches. Along with administering these rights, CAA Eleven Sàrl manages the process of inviting qualifying media organisations to tender for these rights on a territorial basis.20 In practice these rights are often then sold directly to particular media organisations or through alliance groups, such as European Broadcasting Union (“EBU”) who recently signed an exclusive deal which covers 26 European territories.21 Unlike the Discovery IOC deal the rights sold to the EBU will be televised by its constituent members in each territory and not centrally by the EBU.

(ii) Discovery broadcasts the Games on one of its channels

As the Games are a Group A listed event, they must be offered to category 1 broadcasters on fair and reasonable terms. As is noted above, category 1 broadcasters are those whose programming is available without charge to 95% or more of the population.

The most recent addition to the category 1 list, Five, came in 2008.22 Technology has moved on a great deal since then, not least as the UK has seen the completion of the switchover from analogue to digital television in the intervening period. The current reach of the commercial Freeview television channels stands at approximately 90% of the population.23 It is certainly possible that the reach of those commercial channels will increase in the period until the 2022 Games, with the result that there may be a number of new channels that are capable of meeting the required 95% criterion of a category 1 broadcaster.

Discovery does currently have a commercial free-to-air channel in the UK, Quest TV. Should Discovery be able to demonstrate that Quest TV (or another free to air channel set up for the purpose) meets the above 95% coverage criterion, there is an ability for Discovery to apply to Ofcom to request that the designated channel is added to the list of category 1 broadcasters.24

In the days following the announcement of the deal, Discovery has acknowledged that keeping the Games to itself was not currently part of its plan.25 This current intention could, of course, change in the event that Discovery is not able to negotiate a good deal with an existing category 1 broadcaster.

(iii) Discovery keeps the rights for certain platforms, and sub-licences others

Whilst the UK legislative regime is primarily concerned with televisual broadcasting, there are ever greater numbers of consumers taking content from online and mobile platforms. This appears to be very much a trend that will continue to grow as we head towards 2022.

As the rights owner across a number of platforms, Discovery may wish to sub-licence the television rights to a category 1 broadcaster whilst retaining certain others for itself – for example, mobile clips or highlights. Whilst the value of such a venture is diminished by virtue of the fact that the content is otherwise available on free-to-air television (and the free-to-air sub-licensee may wish to acquire clip rights in its package), this could be a powerful way of both providing content in an increasingly popular format and, by aligning the group with the Olympic brand, seeking to establish a platform from which to compete for premium sports.

 

Are there any avenues around the UK regime?

Any challenge to the inclusion of the Olympic Games on the Group A list would have significant hurdles to overcome.

In 2011 FIFA and UEFA sought to challenge the extent of the inclusion of the FIFA World Cup Finals and European Championships Finalstournaments before the European courts, but were unsuccessful before the General Court26 and CJEU.27 FIFA specifically challenged the nature and scope of the Commission’s review of the UK list, in particular the wholesale inclusion of both prime or gala matches (those involving the national team and the knock out stages) along with all other matches (which they considered not to be of major national importance) of the FIFA World Cup Finals tournament.28

The ECJ held that the Commission's right to examine a Member State’s list was limited and did not grant the power to rewrite any list. The Television Without Borders Directive (now as noted above the Audiovisual Media Services Directive29) in giving Member States the power to create listed events, expressly authorised justified and proportionate obstacles to the freedom to provide services, the freedom of establishment, the freedom of competition and the right to property, which are an unavoidable consequence of such a designation.30 In addition, the CJEU observed that it is for Member States alone to determine the events which are of major importance and they have broad discretion to do so.31 Whilst it would appear that the Olympic Games are set to stay on the list for now, of course a lot can change in the 7 years through to the 2022 Games.

Broadcasting into the UK from another EU member state would also not assist Discovery. The Audiovisual Media Services Directive contains broad anti-circumvention measures, providing a mechanism through which the UK government can seek to enforce its listed events regime against foreign broadcasters and also impose its jurisdiction on broadcasters using a satellite up-link or satellite capacity in the UK.32

 

What will coverage of the Olympics looks like in 2022?

Given the above, and the apparent reluctance on the part of Government to involve itself in these matters, it would appear that listed events are here to stay.

Discovery must therefore work within the parameters of the listed event regime and the minimum broadcast requirements of the IOC deal. Should Discovery take the (currently less likely) approach to ‘go it alone’ and broadcast the Games on Quest TV (or another free to air channel), it would in practice need to evidence to Ofcom that the channel is available to 95% of the population.

However, it cannot be ruled out that Discovery will opt for the (perhaps comparatively simple) option of sublicensing these newly acquired rights to a category 1 broadcaster, such as the BBC. Should Discovery adopt this approach, viewers are unlikely to notice much (if any) difference come 2022 – with live Olympics coverage continuing to be shown on one of the first five channels on your remote control.

 

 

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About the Author

Paul Shapiro

Paul Shapiro

Managing Associate, Northridge

Paul is a Managing Associate at Northridge. He specialises in commercial and regulatory advice to clients in the sports and media sectors. Paul’s experience includes acting for athletes, brands and rights holders on sponsorship, licensing and merchandising programmes. He also regularly advises on governance issues and financial regulation in the sport and on player contracts, football transfers and image rights structures.

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Ben Rees

Ben Rees

Associate, Northridge

Ben is a commercial litigator, with a particular focus on the sports sector. He works closely with sports governing bodies, teams, broadcasters and other commercial parties in relation to High Court litigation, arbitral proceedings (including before the Court of Arbitration for Sport), disciplinary cases (including before FIFA bodies) and regulatory matters.

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