Current trends in the acquisition of sports rights: multi-territory bidding and new technology

This is an extract from the ‘Media Rights’ Chapter of the Sports Law Yearbook 2015/16 - UK, Ireland and EU, an eBook publication by LawInSport & British Association for Sport and Law.

The Yearbook reviews developing sports law trends in the UK, Ireland and Europe. It contains legal commentary and analysis from over 50 leading sports lawyers and will be of use to students, academics, athletes, coaches, the media, sports business professionals, in-house counsel and lawyers worldwide.

The Yearbook can be downloaded for free by all LawInSport Plus members with an annual subscription. To enjoy all the perks of being a LawInSport Plus member, please register here.

Changes in the way rights are brought to market and the convergence of technology (such as the proliferation of multi-screen viewing, viewer expectation that content can be consumed at any time on any device and the increase in use of connected TVs) mean that broadcasters and rights holders need to constantly re-evaluate how rights are acquired and on what basis.

It is undeniable that marquee rights, especially when acquired on an exclusive basis, are vital to a channel’s success but reliance on one or two key properties alone is not a sustainable model when faced with the huge breadth and depth of quality content on other channels. The need to update existing content and to acquire new content to engage and retain an audience is a constant challenge for broadcasters. Such issues are not, however, new.

The Growth of Multi-Territory bidding

The rise of the pan-European and global award of media rights is probably the most significant shift, in recent years, to the acquisition of sports rights. The 2018-2024 award of Olympics rights to Discovery/Eurosport was the first totally pan-European deal entered into by the International Olympic Committee (IOC). The deal covers 50 European countries, excluding only Russia, and marks a significant move away from the previous strategy of targeting the principal countries (UK, Germany, France, Spain and Italy) for individual deals with the EBU sweeping up rights for the remaining countries. 

In July 2015 Discovery agreed to complete its takeover of Eurosport¹ and this has provided it with a Europe-wide platform for exploitation of sports rights. The breadth of the enterprise allows Eurosport to offer a regional sports network in a number of countries. David Zaslav, Discovery’s President and CEO succinctly points out the benefit of engaging with Eurosport to rights holders who “can do a deal in every country in Eastern and Western Europe, or…do a deal with us and be carried everywhere”². The simplicity of dealing with one licensee and of having one set of contractual terms governing multiple territories is a powerful draw for rights holders.

Pan-territory broadcasters such as Eurosport have the option of acquiring rights en bloc across their entire network, or of following a more targeted, opportunistic, market-by-market approach with localised content. It is extremely difficult, if not impossible, for local broadcasters to compete with such buying power. Alternative approaches need to be looked at to enable them to stand on a comparable footing. It is worth asking the question whether closing out national broadcasters in this way raises any competition issues. 

A company such as BT, who has substantial power and influence in the UK, is unlikely to have the ability to compete against the buying power of a pan-European or global organisation who acquires rights on a multi-territory basis. However strong a local broadcaster is, without a physical network outside its own territory, that broadcaster is limited in what it can offer, on a unilateral basis, to a rights holder who seeks a single multi-territory licensee to exploit its rights. 

In the absence of a physical network outside their borders, national broadcasters must try and forge relationships with broadcasters or media agencies in other countries to create a group that can compete with the buying power of the multi-territory companies. Incumbent single territory broadcasters have limited options in-term to try and renew existing rights or extend their term in order to secure the rights for as long as possible, or to try and acquire individual rights that are secondary to the principle live rights that may be offered on a non-exclusive basis or that the international broadcaster might not be able to exploit (e.g. OTT-only, highlights, near-live etc.). 

Apart from the Olympics, other significant, multi-territory deals concluded since late 2014 include the ICC’s award of cricket rights for 2015-2023 that were acquired on a global basis by Star India, the Rugby Football Union’s award of global rugby rights for 2015-2020 to Sky Sports and the grant of Davis Cup rights to BeIN Sport. It would be surprising if rights holders do not increasingly look to market their rights on a multi-territory basis. 

Despite the trend towards a more multi-territory approach gaining momentum there are still a significant number of sports rights that have been awarded on a national basis. An obvious tier 1 example is the English Premier League, the rights for which are still offered on a territory-by-territory basis and net a significant rights fee for The FA Premier League.³ Notwithstanding the Bundesliga multi-territory tender, the football rights for the top five European football leagues have traditionally been sold on a largely territory-by-territory basis. The outcome of the Bundesliga tender may therefore have a much wider impact than purely the distribution of these rights, if this approach is seen to be successful.

The European Commission’s Draft Portability Regulations, published in December 2015, concerning portability of online content and the potential prohibition on geo-blocking, are likely to provoke less concern to pan-European broadcasters than to single territory ones. An obligation to allow portability, if imposed as widely as currently expected, could devalue a broadcaster’s exclusive territorial rights where the same content is available from a number of different sources. A prohibition on geo-blocking or a mandate to offer European-wide licensing could devastate single territory broadcasters as cheaper, streamed services of the same content become available from outside the territory. Clarity on the proposed scope of the Regulations is eagerly awaited.

Is Free to Air on the wane?

Notwithstanding listed events, it is clear that the ability, if not the appetite, of the free to air broadcasters to compete for sports rights is being increasingly restricted. The BBC’s constant battle for funding and its recently announced drop in funding for sports has surely caused a review of its existing contracts as well as the rights it wishes to target. 

In November 2015, the BBC announced a £35million cut in its sports rights budget⁴ which was followed within a matter of weeks by the early termination of its Formula 1 Highlights deal, and the acquisition of those rights by Channel 4. Stalwarts, such as 6 Nations rugby, are now to be shared with ITV, but Wimbledon, one of BBC’s key properties, is likely to remain firmly in the BBC’s hands. 

BT Sport’s acquisition of exclusive UEFA Champions League and Europa League rights in the UK was the first time in the competitions’ history that there had been no sharing of the rights with a free-to-air broadcaster. The evidence suggests that the power of the traditional free to air broadcasters is waning and, notwithstanding the protection offered by listed events legislation⁵, it looks likely that the volume of tier one sporting events on terrestrial TV will continue to fall in the UK as the desire and ambition of pay operators increase.

New Technology 

One of the challenges facing broadcasters in the acquisition of rights, and a source of increasing debate with rights holders, is how to deal with the emergence of new technologies and the need to future proof the exploitation of rights. Acquiring platform and technology neutrality to cover any future developments is key to the broadcaster.

There is a fine balance to be achieved between consolidating all existing rights and awarding them to one licensee to try and achieve a higher overall fee, or awarding the rights on a piecemeal basis to broadcasters and other parties who can exploit each individual right in the optimum way. Complete exclusivity across platforms and technologies is extremely valuable to a broadcaster as it also offers a very powerful marketing message and the ability to create a unique, broadcaster-specific, identity for the rights, and so tends to come with a premium. 

A question that has started to arise is whether exploitation on social media is to be seen as a separate right in itself or simply as an addition to wider digital rights. It is debateable whether the availability of content through less “traditional” outlets, Facebook, YouTube and other social media, will become a significant right in respect of long form content. Current indications point towards it being an ancillary right, best suited to an overall highlight and clips package rather than a stand-alone right. 

The desire for exclusivity and platform neutrality is also driven by consumer expectation. Consumers have various ways of receiving content over different distribution means and as technologies merge, consumers increasingly expect to be able to access the same content on a TV, a mobile device, PC, live and on demand and, importantly, do not expect to have to pay more to do so. 

A counter to this increased convergence is the fact that rights holders are becoming more sophisticated in the content that they are able to offer to consumers. The reservation of rights is a key element of negotiation in many media rights agreements as rights holders see the value in exploiting certain rights, primarily digital rights, themselves. 

Rights holders and broadcasters are constantly seeking to offer better and more varied ways of consuming the output, more varied technology solutions and to engage with the viewer as widely as possible. In BT Sport’s relatively short life it has developed from offering three SD and HD channels to offering thirteen channels with a variety of SD, HD and now UHD variants, connected red button functionality and increasingly varied web and mobile offerings. This is partly as a response to rights holder requirements under the contracts it has entered into but is also to ensure that it remains a new and innovative sports broadcaster. 

It is clear that the process of acquiring sports rights is constantly changing. The rights on offer, the means of exploitation and the means of acquisition change from one year to the next. The two principle themes over the next 12-18 months are likely to be the increasing significance of the pan-European and multi-territory tender and how free-to-air broadcasters deal with shrinking budgets and changing priorities.

This is an extract from the Sports Law Yearbook 2015/16 - UK, Ireland and EU, an eBook publication by LawInSport & British Association for Sport and Law.

The Yearbook can be downloaded for free by all LawInSport Plus members with an annual subscription. To enjoy all the perks of being a LawInSport Plus member, please register here.

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