12 Days of Christmas Date published by Sportcal: 5 March 2015

Listed events: pay-TV revenues and sporting success influence lists while soccer remains prominent By Sam Limbert, Tom Padmore and Daniel Smith

Almost unlike any other content on television, sport is able to command huge audiences and bring viewers together to create moments of national importance. With the growth of pay-TV services, steps have been taken the past two decades to ensure these moments can be seen by a large audience, with a number of countries drawing up a list of events that have to be shown on free-to-air television.

In Europe, the EU’s Television Without Frontiers Directive, which was amended by the Audio Visual Media Service Directive, is the basis for members of the European Union to decide on listed events that are deemed to have major importance to citizens of the country. No EU member is obliged to have such a list, but all the major Western European nations have lists that are designed to protect the main sporting events from being exclusive to pay-TV. Similar criteria for listed events are used in other countries outside of Europe.

In this Insight, we will look at the key issues of potential pay-TV revenue for sports events measured against the exposure of free-to-air television and the changing of listed events due to sporting success, along with exploring the differences in soccer’s inclusion in protected lists.

Revenue vs exposure

The benefit of increased revenue versus increased exposure is a key argument that crops up whenever discussing listed events. It is important to consider and address different stakeholders’ views, namely governing bodies and spectators/potential participants. Generally, placing events behind a paywall typically incurs greater media revenues while significantly reducing its exposure due to the smaller number of pay-TV subscribers. By comparison, remaining on free-to-air television allows a much greater audience, but lower media revenues, in line with free-to-air broadcasters’ funding models, coupled with fewer competitors for the rights.

The case of the and Wales Board (ECB) and , England and Australia’s national governing bodies for cricket respectively, provides an interesting comparison. English cricket experienced a renaissance in 2005, claiming its first ‘Ashes’ series victory over Australia since 1987. Cricket fever swept the nation with a huge upsurge in cricket interest and participation. But the 2005 series was the last to be broadcast live on free-to-air television following the removal of England cricket’s national team home test matches from Ofcom’s ‘A list’ of listed events. Sky, the

12 Days of Christmas Date published by Sportcal: 5 March 2015

British pay-TV broadcaster, purchased exclusive live rights initially from 2006 to 2009 for £220 million, an increase of £185 million over the previous package acquired by , the commercial free-to-air broadcaster, albeit for one year less between 2003-2005. In contrast, Australia’s home test matches were cemented on free-to-air television in January 2006 with the introduction of the revised Anti-Siphoning list by the Australian government.

The ECB and Sky have continued their exclusive broadcasting arrangements for live rights with the current package, worth £65 million a year, running from 2014-2019. England’s national teams, both men’s and women’s, have also enjoyed unparalleled success during this time with World Cup victories, significant wins over Australia and the men’s team reaching number 1 in the test world rankings in 2011. Despite the increased money in cricket and on-field successes, participation has been on a downwards trend – there were 46,900 fewer people participating in cricket at least once a week in 2013, compared to the 2005 figures.

Cricket Australia entered into a seven-year deal with Nine Network, the Australian commercial free- to-air network, in 2005, that has since been extended for an additional five years through to 2018, with the extension worth a reported A$450m. During this period, both the men’s and women’s teams have had mixed success, certainly not to the level dominant Australians had become accustomed to. However participation figures for are continuing to rise with

12 Days of Christmas Date published by Sportcal: 5 March 2015

figures from the 2013-14 National Cricket Census registering 1,106,000 participants in cricket, an increase of 30 per cent over four years.

The drop-off and rise in participation for each nation could potentially be explained by a number of factors, including the host nation’s broadcaster reach and the money received by the national governing bodies through their broadcasting agreements. Removing England’s home international cricket matches from Ofcom’s ‘A list’ had the effect of shrinking the potential audience by nearly 20 million television households. Channel 4 has near universal coverage across the United Kingdom, covering a total of 26 million television households. By comparison, in June 2014, Sky registered 6.5 million subscribers to its seven-channel premium Sky Sports package. During the 2005 ‘Ashes’ series on Channel 4, a peak of 7.4 million viewers witnessed England regain . In the current era of Sky Sports exclusivity, that figure shrank to a peak of 1.92 million viewers for the 2009 series, and just 1.3 million for the 2013 series. These figures outline the dramatic impact that removing sporting content from free-to-air television can have, and certainly suggest a viable explanation for the significant drop-off in participation numbers witnessed. In contrast, Australia’s Nine Network enjoyed peak audiences of 2.3 million for the 2010 home ‘Ashes’ series and 3 million for the 2013 series, in a nation with only 8.5 million television households.

However, the link between participation and free-to-air television exposure is not straightforward. In February 2015 the R&A, the organiser of golf’s British Open, agreed a deal with Sky in the UK for the pay-TV broadcaster to acquire the exclusive live rights to the Open in a five-year deal from 2017 onwards thought to be worth more than £15 million per year. The deal led to criticism of the R&A and fears about a decline in participation with a move away from free-to-air, but the outgoing chief executive Peter Dawson addressed these concerns, stating that it was not possible to make a case that participation is directly linked to television coverage. Dawson added: “On the contrary, golf’s reported recent decline in participation coincides with The Open, Women’s British Open and the Masters Tournament being shown on free-to-air television.”

When the ECB received a £185-million increase from Sky for its first exclusive contract, it would be difficult to suggest that the extra money would negatively impact the participation rate of cricket across the UK. The extra funds would allow greater investment and opportunities throughout the cricketing pyramid to build a stronger national structure. However, pressure now lies with the

12 Days of Christmas Date published by Sportcal: 5 March 2015

national teams to perform, to ensure that they are still providing a premium product that warrants pay-TV broadcasters such as Sky paying the large sums of money for exclusive broadcast agreements. This creates incentives to gear funding distribution towards elite success. The ECB’s concerns over losing pay-TV revenue were outlined in March 2009 when there were suggestions that England’s home international tests would return to the Ofcom-protected events ‘A list’. An independent economic impact assessment demonstrated a probable loss of £137.4 million in revenue for the 2014-17 broadcasting contract, translating to a loss of 48 per cent of expected revenues. The issue came to the fore again in January 2015 with Labour announcing plans to review the listed events legislation should it win the general election in May. In contrast, Cricket Australia have the reassurance of home international test matches being broadcast free-to-air, removing the threat of a withdrawal of pay-TV revenues that governing bodies such as the ECB rely upon so heavily.

The examples of English and Australian cricket demonstrate that there is a relationship between the exposure of a sport and participation in the sport. The revenue stemming from pay-TV broadcasting agreements has appeared to drive up the quality of the product, but led to an inverse relationship at the lower levels of sport, with investment still predominantly distributed to the elite level. It is the combination of these two driving factors that causes problems for sports that are exclusive to pay- TV. The continuation of the trend in English cricket could reach a point where the next generation of elite-level athletes needed for the premium pay-TV products doesn’t exist as the lower levels haven’t been funded sufficiently enough to progress the new talent. This issue highlights the importance of having listed events so sports do not become engulfed in the ‘short-termism’ of pay- TV revenues.

Changing listed events as a result of sporting success

While it is generally accepted that the definition of a listed event is an event of national significance or interest, and therefore traditionally applies to widely popular sports, there have also been examples where sporting success has seen less popular events promoted to the list – generally

12 Days of Christmas Date published by Sportcal: 5 March 2015

because, as a nation becomes internationally successful at an event, it takes on greater significance, through increased coverage, viewership and participation at a grassroots level.

In November 2014, KRRiT, the Polish broadcast regulator, had an order approved by the European Commission to amend the country’s listed sports events legislation, with the changes due to come into effect in December 2015. Among the new additions to the list are volleyball matches of the men’s and women’s national teams at world championships, including qualifying games, men’s volleyball World League matches played in Poland, and World Cup events in women’s cross-country skiing. Other winter sports, handball and athletics events were also added to the list.

Poland has achieved notable success in volleyball and women’s cross-country skiing in recent years, with the men’s national volleyball team being crowned World Champions in 2014 and Justyna Kowalczyk winning a gold medal at the Sochi 2014 and Vancouver 2010 Winter Olympic Games in the 10km classical and 30km classical disciplines respectively, as well as medals in other disciplines across Olympic Games, World Championships and the New Zealand Winter Games.

The decision to add these sports to a list that traditionally included summer and winter Olympic Games, soccer matches of Polish national and club teams in Fifa and Uefa competitions, including qualifying matches, and the semi-finals and finals of soccer World Cups and European Championships, indicates that sporting success has become a deciding factor on new additions.

There are, however, opponents to this method. Marian Kmita, the head of sport at Telewizja Polsat, the commercial broadcaster, has questioned whether picking and choosing based on success actually helps those sports included: “It [the inclusion of women’s cross-country skiing] is the best example of how short-sighted and illogical this legislation is. I would understand this move if both men’s and women’s cross-country skiing were added to the list anticipating Poland’s future successes in the sport. That would be logical – at the moment it is not.”

According to Kmita, the expansion of the list would deter broadcasters from bidding for those rights included in the list, which in turn would lead to a decrease in rights fees that will impact the national and international federations.

It is not just in Poland where success has played a part in what events are included in listed events legislation. In Spain, the Roland Garros French Open is the only one of the tennis Grand Slam tournaments to be classified as a listed event, and as such, the participation of Spanish players in the semi-finals and final must be shown on free-to-air television. Since the turn of the , 11 of the 15 winners of the men’s singles event have been Spanish, as have a total of 14 winners in the last 22 years. Reigning champion Rafael Nadal has dominated for a decade, winning nine times, while compatriot David Ferrer has progressed to at least the quarter finals in each of the last three tournaments.

This compares with just two Spanish men’s champions in the Open Era (1968-69 onwards) at Wimbledon (both Nadal), one Australian Open champion (Nadal), and three US Open winners (Nadal twice and Manuel Orantes). Roland Garros is also the most successful slam for female Spanish players, with three Open Era winners compared to one US Open and Wimbledon winner and no Australian Open victor.

12 Days of Christmas Date published by Sportcal: 5 March 2015

Conditions may be applied to legislation that promotes an event based solely on success. For example, in France, the medal matches of the World Handball Championships are deemed to be major sporting events if the national team qualifies, and participation by the French national team must be broadcast on free-to-air television. This led to TF1, the free-to-air commercial broadcaster, acquiring the sub-licensed rights to the 2015 Men’s World Handball Championships in Qatar from beIN Sports for between €750,000 and €1 million. TF1 recorded an average audience of 9.1 million, and a viewing share of 43 per cent for the final, which was won by France, representing the highest handball audience of all time in the county.

Although the context around these examples differs, the link between them is how success translates to listed events legislation. It is clear that success does play a role because it generates national interest if the national team or an athlete is doing well. Arguments against including events in legislation are varied, particularly when it comes to success, and as such, the key component for deciding listed events is national interest and importance, although this is also open to debate.

Soccer

It’s unsurprising that soccer features prominently in lists of protected events, especially national team matches and major tournaments. Even in countries where soccer isn’t the dominant sport, the Fifa World Cup is usually included, either in full, or just matches involving the relevant national team, along with semi-finals and the final.

Despite it being widely accepted that matches in major international tournaments fill the criteria of being of major importance to society, in 2011, Uefa challenged the listing of the whole of the European Championships in the United Kingdom and Fifa challenged the listing of the whole of the Fifa World Cup in the United Kingdomand Belgium in an effort to maximise the broadcast revenues from the tournaments. The claims from Uefa and Fifa were rejected by the General Court because, in part, the listing of the whole tournament could be seen to be of major importance to both countries by viewing the competition as a single event, rather than breaking it down to individual matches, and rights could also be sold to pay-TV broadcasters on a non-exclusive basis.

Compared to the inclusion of international soccer matches as listed events in different territories,

12 Days of Christmas Date published by Sportcal: 5 March 2015

the inclusion of club soccer rights is much more inconsistent.

In the United Kingdom, even though free-to-air highlights of the domestic Premier League are offered, the league isn’t a listed event and therefore has benefitted from huge fees paid by pay-TV broadcasters for live rights, with the recent deals, totalling £5.136 billion, sealed by Sky and BT Sport serving to emphasise that point.

By comparison, in Spain, one match per round from the top-tier La Liga still figures on the country’s list of ‘general interest’ events that must be shown on free-to-air television, despite persistent lobbying from the league and the clubs for its removal. The initial listing was a politically-motivated one and was first approved in 1997, when satellite pay-TV was first launched and pay-TV operator Canal Plus began snapping up club rights.

Since then, however, the list has been gradually watered down. While a 1997 broadcasting law stipulated that a ‘top’ match had to be aired on free-to-air television, a new law, approved 15 years later, called simply for “one Liga match per week” to be broadcast over the air. As a result, all the best matches, including those of league giants Real Madrid and Barcelona, were promptly packaged into premium bundles to be sold on to pay-TV, and the least attractive weekly matches were scheduled for free-to-air broadcast and pushed into a less appealing Monday night slot.

The Liga has lobbied to have the weekly free-to-air match taken off the protected list, but with pay- TV penetration still low in Spain, at about 25 per cent of all TV households, no government has yet dared to take such a potentially politically unpopular move. The Liga is also still hampered by outdated practices governing news access and highlights, which still allow broadcasters to use up to three minutes of clips per match free-of-charge for their popular highlights programmes; Jaume Roures, president of Mediapro, the sport rights agency that presently handles La Liga’s domestic and international rights sales, has said that the lack of exclusive highlights, coupled with the free-to-air match, means the league is losing up to €150 million in potential revenues.

The Liga’s rights are due to be sold collectively from 2016-17, with the best matches parcelled out into various packages and offered to pay-TV. The league is working with the country’s telecoms operators to reduce the incidence of piracy, the single largest impediment to the growth of pay-TV in Spain, according to league president Javier Tebas. Only when pay-TV penetration reaches levels similar to 40 per cent or more, as in the UK, France and Italy, will it become politically viable to remove the weekly Liga match from Spain’s listed events legislation.

In Argentina, rather than making the domestic league a listed event, the government quite literally took things into its own hands by effectively nationalising the television rights to the Primera División through its purchase of the rights in August 2009. This unprecedented move has meant all matches are available through the state broadcaster, but the ready flow of cash, which has more than tripled since 2009, is creating financial problems for both the clubs and the government. Club debt has more than doubled in the past five years, while the government has had to seek extra funds to pay for the ‘Soccer for All’ programme under which the rights were acquired.

12 Days of Christmas Date published by Sportcal: 5 March 2015

While free-to-air coverage of the whole league in Argentina is great for consumers, the financial difficulties highlight the challenging balancing act when selecting listed events. Compared to the successful European models for domestic league TV rights, a strong argument can be made that Argentina is missing a trick financially by having the entire league exclusive to free-to-air broadcasters. While listing one-off soccer events, such as a cup final, can be beneficial given the increased exposure on free-to-air television for events of national importance, the domestic league is more attractive to pay-TV broadcasters, with the consistent season-long content helping consumers justify subscription fees. Preventing pay-TV broadcasters access to any domestic soccer league rights takes a key stimulus away from the pay-TV market, and can put a financial pressure on the clubs themselves.

While there are significant variations on the amount of domestic league soccer available on free-to- air television, the inclusion of cup competitions is much more consistent. National cup finals are regulars on most lists of protected events. Popular national cup competitions have also made their way onto the list in other countries, such as the listing of the English FA Cup in Australia.