Sport rights holder legal action on Sky price control?

[labud]

Sport bodies to fight Ofcom pay-TV plan

Friday, March 26 2010, 13:17 GMT

By Andrew Laughlin,

Sporting bodies in the UK are reportedly considering a legal challenge against Ofcom's plan to force Sky to cut the wholesale price of its premium sport channels.

The media regulator will next week reach a final decision on its pay-TV review, with the expectation that it will order Sky to reduce the price of its premium channels by up to 20% for rival operators.

Sky is widely expected to mount a legal challenge against the verdict and the satellite broadcaster could be joined by some of UK sport's largest governing bodies.

A group of six organisations - the Football Association, the Premier League, the England and Wales Cricket Board, the Rugby Football Union, the Professional Golfers' Association and the Rugby Football League - claim that the approach will cause "irreparable damage" to grassroots sporting investment, and are now reviewing options for a legal challenge.

According to The Guardian, the sport bodies believe that Ofcom's new model will severely impact competition and drastically reduce the amount broadcasters are prepared to pay for sport rights.

The organisations, which signalled their dislike for the plan last October, have now written directly to Ofcom chairman Colette Bowe claiming that the watchdog has failed to properly take into account the impact of its plan.

Should the proposal go ahead as expected next week, the organisations could lodge a legal challenge with the Competition Appeals Tribunal, or apply to the European Court of Justice.

However, Ofcom is understood to be confident that its course of action is backed up by firm evidence after an exhaustive three-year investigation.

In their letter to Bowe, the sporting bodies warned of "serious consequences for the sports sector" as UK grassroots development will be "irreparably damaged through loss of funding".

The correspondence further takes umbrage with Virgin Media, Top Up TV and BT for triggering the investigation in 2007, claiming that "any market failure is a result of their unwillingness to invest and take risks".

The governing bodies say that Sky's rivals will simply buy up its channels at cheaper prices but not invest in rights themselves. In turn, Sky will not be able to spend as much on rights deals due to its reduced income from sports content.

However, BT, Virgin Media and Top Up TV argue that they have been unable to compete with Sky for rights for a long time, yet the broadcaster has still invested heavily in sports content.

The three companies also believe that Ofcom's model will mean that they have additional funds to compete for 'second-tier' rights, such as Guinness Premiership and the Football League.

Speaking about the concerns among sporting bodies, Sky chief executive Jeremy Darroch said that they are "right to worry" about Ofcom's proposed model.

He added: "Fixing the price of sport on TV will make it less attractive to us as a business and undermine competition for rights in the future. That's why the virtuous circle of investment, development and growth could come to an end.

"It's easy to say it would be nice if something was cheaper but that's not a reason for price regulation. A pound a day is a fair price for a product which costs a billion a year to put on the screen. In the long run consumers won't benefit if there is less money available for investment and innovation."