Making football content affordable to all

SOCCER fans up in arms over the high price of $112 they have to pay to watch the World Cup this year are asking: Why? And can it change?

The first question is more straightforward. Football broadcast rights in Singapore are essentially a game between two pay-TV operators - SingTel and StarHub.

National broadcaster MediaCorp has been sitting out of the bidding war for the World Cup broadcast rights since 2002. The previous cycle in 1998 was the last time MediaCorp bid for the rights to air the matches. A spokesman said: "The licensing fees and the business environment were favourable then."

When there are two potential competitors, simple economics predicts that prices will get bidded up.

In contrast, public TV broadcasters NRK in Norway and DR in Denmark jointly own the rights with pay-TV operator TV2 in the two respective markets.

In Singapore, a similar joint bid involving MediaCorp - should it want to get involved - and any of the pay-TV operators would also help reduce cost pressures.

It makes sense for free-to-air broadcasters and pay-TV operators to join forces because they are not direct competitors.

Over in Hong Kong, TVB - which is both a national broadcaster and pay-TV player - has the World Cup broadcast rights.

This is why many matches will be available for free compared with the four in Singapore that will be aired by MediaCorp, which sub-licensed them from SingTel.

By submitting joint bids with NRK in Norway and DR in Denmark, pay-TV operator TV2 halved its costs although it would not disclose the price it paid. As such, it could price the matches affordably in Denmark and provide free viewing for all matches in Norway.

Over in Hong Kong, a TVB spokesman told The Straits Times that it was prepared to lose money on the games. "We may or may not recover the entire costs for broadcasting rights and production...partly because of the pay channel."

The station relies mainly on television advertising for revenue. As such, it can offer free viewing of 22 matches to secure the TV ads.

TVB may also have a political agenda. It has been trying to win public support for its court appeal against the granting of a new free-to-air TV licence in Hong Kong.

Here, even if the national broadcaster is not interested, another way to keep prices down is for a joint bid to be submitted by SingTel and StarHub. This was a point StarHub did not fail to highlight when SingTel announced on March 12 that it had sealed the exclusive deal with Fifa to broadcast the World Cup matches here.

StarHub complained about being spurned by SingTel. StarHub said it made a "sincere offer" to SingTel to submit a joint bid just like the last World Cup in 2010. But SingTel went ahead to propose to Fifa an exclusive deal. SingTel later explained the two operators were unable to agree on a joint offer that would "meet the content rights holder's expectations".

It is not surprising that they could not agree on the terms of a joint offer. After all, they compete head-to-head for business.

But in fact, SingTel and StarHub had submitted a joint-bid for the 2010 World Cup. Some critics ask why they could not work together again for the public's interest.

It's easy to forget that circumstances have changed since 2010.

Then, SingTel and StarHub were probably more desperate to seal the deal than they were this year.

Back in 2010, World Cup rights holder Fifa had learnt about SingTel's reported $400 million bid for the 2010 to 2012 season of the English Premier League (EPL) in 2009. Singapore reportedly forked out a sum equal to more than a tenth of what the world paid.

With negotiations heading into extra time on the 2010 World Cup that kicked off in June, SingTel and Starhub had to join hands to meet Fifa's demands - reportedly in the region between $40 million and $100 million - or risk the wrath of fans here. A deal was eventually sealed, albeit 35 days before the first match in South Africa kicked off.

But this time round, there was ample time for either SingTel or StarHub to plan their moves.

SingTel did, and outflanked StarHub with its exclusive bid for the 2014 World Cup screening rights. It wanted to use the content to sell more EPL subsciptions.

As a standalone service, World Cup matches can be watched for $112 by pay-TV viewers on both SingTel and StarHub's platforms. The content is exclusive, and as such, has to be available on both platforms under the Media Development Authority's cross-carriage rule.

But it is thrown in free for those willing to sign up for or extend their existing EPL contracts with SingTel for two years.

As Mr Ramakrishna Maruvada, head of South-east Asia and India telecoms research at the Daiwa Institute of Research, put it: "SingTel has taken the most effective route to ensure revenue stability for its pay-TV business."

SingTel was essentially using its World Cup content to sweeten its EPL offerings, which fans had complained were expensive. A basic EPL package now costs $59.90 a month, almost twice the $34.90 sports bundle SingTel used to offer that came with EPL and other premium content like Uefa Champions League and Spanish La Liga.

By throwing in the World Cup, SingTel is better able to convince subscribers to part with their money. It is not a small sum; each subscriber pays a total of more than $1,400 over two years.

The guaranteed income will be music to the ears of SingTel shareholders as SingTel has been trying to make money from its pay-TV business.

Hong Kong's TVB paid HK$400 million (S$65 million) to secure the broadcast rights and programme production. It is unclear how much Denmark and Norway paid.

It is also not known how much SingTel paid for this year's World Cup rights. But extrapolating in part from the 2010 joint bid by StarHub and SingTel where they paid about $20 million combined, the amount cannot be too far from this.

Could SingTel have offered less? It could, but Fifa would probably reject it, and fans here would be deprived of the World Cup.

"Fifa has the upper hand being the only supplier of the World Cup. It's Economics 101," said CIMB regional economist Song Seng Wun.

Mr Greg Unsworth, consultancy firm PricewaterhouseCoopers Singapore's technology, media and telecommunications industry leader, said: "The TV business model is under pressure with Internet video streaming. Sports content is the only reason why people would be glued to the TV. This is why the value of sports content is going up."

Theoretically, MediaCorp should be interested as well but it may be restricted by content acquisition budgets that would not permit bidding for football rights. Moreover, MediaCorp may have broader societal objectives competing for the same budget.

Other commercial forces are also driving up the price of football content. "There is celebrity factor in football, with football players and club managers demanding more money," said Mr Unsworth.

World Cup rights are sold through Fifa agents, who customise prices depending on what they think a market can afford to pay. Singapore has shown it can afford to pay with EPL.

Someone has to pay for football content. Some people think the Government should foot the bill.

There might be reason to make this demand, in countries like Denmark, where each household pays 2,414 Danish kroner (S$560) in TV licence fees, and in Norway, 2,680 Norwegian krone (S$560). But in Singapore, households no longer pay such fees.

There are also no compelling reasons why taxpayers should pay for football matches that are enjoyed by a minority. Nor is it reasonable to expect SingTel, a listed company, to make a loss in the name of "public interest".

If any organisation has public interest to cater to, it would be Singapore Pools, the only legal lottery operator here established by the Government.

The football betting money it collects can perhaps be used to fund the football content itself. This is not unreasonable and perhaps the most feasible way to make football content affordable for all.

This story was first published in The Straits Times on April 4, 2014