Pay-TV duel: EPL fans win some, lose some

This story was first published in The Straits Times on May 9, 2013

THE battle over football screening rights in Singapore seems to have become more exciting than the game itself.

It started last October when SingTel scored a pre-emptive goal by securing the broadcast rights to the English Premier League (EPL) before the rights were supposed to be auctioned.

But the Media Development Authority (MDA) has now considered the move to be an offside offence.

Thus, SingTel is required to share the broadcast rights for the next three seasons of EPL - starting in August - with rival StarHub under the media regulator's "cross-carriage" rule.

This is the second time the MDA's cross-carriage rule has kicked in. The first time was last year, when StarHub won the exclusive rights to screen the Uefa Euro 2012 matches on its cable TV service but SingTel's customers were also given access to all the live matches on their mio TV box.

However, this is the first time the cross-carriage rule is being challenged - ironically by SingTel, which benefited from the rule during the screening of Uefa Euro 2012.

SingTel took the auction for EPL broadcast rights in Singapore off the table last November, forcing StarHub to sit on the bench, while the first round of bidding kicked off all around Asia.

It is unusual not to have an auction. Still, SingTel said its deal with the Football Association Premier League (FAPL) was "non-exclusive". This meant two things: StarHub was free to negotiate its own EPL screening rights at some point; and the cross-carriage law - which applies only to exclusive deals - could not kick in to force SingTel to share the content with StarHub.

But things weren't as simple as they were made out to be. StarHub was repeatedly fobbed off by FAPL as the latter was still tying up the loose ends of its broadcast deal with SingTel and could not enter into talks with another local provider.

The loose ends were all tied up on Dec 21 last year. But StarHub did not start talks with FAPL until mid-March for reasons unknown.

StarHub cried foul and forced MDA to examine the SingTel-FAPL deal.

Did SingTel explicitly or implicitly block StarHub from accessing the EPL content?

Cross-carriage origins

MDA'S findings and decision have huge implications not just on how pay-TV operators must procure their content deals in future, but also on whether its highly controversial cross-carriage rule is robust enough to achieve its intended objectives.

The cross-carriage rule was mooted about three years ago to stop the ills of excessive competition associated with pay-TV operators hogging exclusive content to boost their subscriber numbers.

Then, SingTel just wrested the exclusive rights to screen EPL matches from StarHub for three years from 2010. SingTel reportedly paid a handsome $400 million - more than three times what StarHub had paid in the previous cycle.

There was a public outcry. Upset football fans on StarHub's platform - which had more than 500,000 subscribers - could not watch the matches unless they subscribed to SingTel's mio TV service.

So MDA introduced the cross-carriage rule in 2011 to prevent consumers from having to switch to or add another pay-TV operator because it had secured a monopoly on content.

Specifically, the rule requires any pay-TV provider here who buys exclusive content on or after March 12, 2010 to offer the same content to its rival's customers at the same price and terms as what it charges its subscribers.

So one may ask how effective this rule is if consumers are still forced to accept dual pay-TV subscriptions just to watch EPL matches?

Two weeks ago, MDA showed it meant business when it directed SingTel to share its EPL content like a good sport.

The media regulator found that SingTel's supposedly non-exclusive deal - details of which have not been disclosed - existed only in name. It was found to have included clauses that may have been anti-competitive, thus calling for the need to invoke the cross-carriage rule.

Implications of MDA's decision

WHILE the strong signal has been sent to the industry that the regulator will not countenance creative deals to circumvent the law, the question for consumers is this: Are they truly better off?

The answer is both "yes" and "no".

The upside is that those who have both SingTel's mio TV and StarHub's set-top boxes can finally drop one.

With EPL soon to be common on both SingTel's and StarHub's platforms - along with existing common content like ESPN and Star Sports - consumers may have few reasons to hang on to their mio TV set-top boxes. One of these reasons may be to watch Champions League, which StarHub currently does not offer.

Also, some football fans may just be glad to have EPL back on StarHub's platform, with the mio TV freeze frames and blackouts that marred last May's EPL finale live telecast still fresh on their minds.

For that glitch affecting 115,000 households, SingTel was fined a record $180,000 by MDA. It has since upgraded its system to prevent a recurrence.

Still, the immediate future is not all soccer and smiles. For the next three years at least, consumers may have to pay significantly more to watch live EPL matches.

SingTel has warned of an imminent price hike for its EPL channels should it fail in its appeal to the Minister for Communications and Information to overturn the media regulator's decision.

It said it is no longer incentivised to offer subsidies to its customers as it must - under the MDA ruling - also do so for StarHub subscribers.

For starters, it has already stopped selling its $34.90 Sports+ basic pay-TV football package that comes with EPL and other premium content like Uefa Champions League and Spanish La Liga.

While the new rate has yet to be announced, analysts expect SingTel to unbundle EPL from its other sports programmes. It has also been estimated that the breakeven point for screening EPL could be achieved only if each customer is charged about $40 every month.

SingTel may have heavily subsidised its EPL content in the past, but content subsidy cannot go on forever. Even in the absence of the cross-carriage rule, SingTel has to, at some point, raise prices to move its mio TV business into the black to better account to its shareholders.

Either way, consumers will have to pay more eventually as the cost of prized content is rising everywhere else in the world.

Sure, SingTel did the industry a disservice by overpaying for EPL in 2010. But as an underdog in the pay-TV scene, it was counting on premium exclusive content to grow its subscriber base. Prior to snagging the exclusive EPL deal in 2010, its mio TV service had only 155,000 subscribers - a distant second to StarHub's 539,000. Now, SingTel has more than 400,000 mio TV subscribers.

The expensive strategy worked, up to a point.

Once news that Singapore accounted for more than a tenth of what the world paid for EPL in 2010 was out, content owners' expectations shot up. Take the World Cup deal in 2010. It took longer to negotiate, as Fifa had held out for more.

Curbing bidding frenzy

THE swift introduction of the cross-carriage rule in 2011 was timely. It sent the message that Singapore will pay only fair value for prized content.

Business and consumer interests often collide. When they do, it is the job of the regulator to step in and fine-tune the legal framework to ensure that consumers do not suffer unnecessarily.

MDA did just that with the cross-carriage rule. Instead of directly meddling with price - which it cannot do - the regulator sought to discourage local pay- TV operators from entering into a bidding frenzy to hog exclusive content to boost subscription.

Frenzied bidding usually leads to overpayment for content, which gets passed on to consumers. Now that pay-TV operators cannot hog exclusive content to win customers, they will have to take other routes - like local production, content packaging, service levels or creative bundling with other services like mobile or broadband.

They will take time to find the right mix to attract a loyal viewer base.

Meanwhile, there are fears that Singapore viewers may miss out on major events like the World Cup as local pay-TV operators may not want to pay too much for non-exclusive content. Rights owners also may not want to sell to Singapore.

The risk of that though is that some viewers here might be tempted to turn to illegal streaming online.

Perhaps, it is time that rights owners and pay-TV operators quit fighting their territorial skirmishes and tried to win the long-term battle against piracy. Surely, that is the game worth winning.