Removal of geo-blocking could have significant consequences for the accessibility and affordability of sports content for EU citizens, but could also damage the financing of sport and thus the quality of the spectacle
Matt CainMatt Cain is head of consulting at Oliver & Ohlbaum Associates, the London-based strategic advisers to the global media, sports and entertainment industries. He has advised a range of sports clients from both strategic and investment perspectives.
The European Commissions’ digital single market initiative ultimately aims to ensure all consumers in EC markets have the same access to online products and services, and their associated prices.
As such, the Commission instinctively questions the way TV services, and especially premium sports services, divide up national markets based on price and content mix. So while audiovisual content, including sport, was originally excluded from the geo-blocking legislation (along with retail financial services and transport), the Commission is now considering this again.
We were asked by the Sports Rights Owners Coalition (SROC) to examine what this could mean for the European sports market.
More than one price for the same product (and where the cost of servicing customers is equal) doesn’t seem fair to consumers
The Commission’s objectives make sense. After all, why should my hotel booking be priced differently depending on the country from which I book? More than one price for the same product (and where the cost of servicing customers is equal) doesn’t seem fair to consumers. The internet has helped make this form of price discrimination possible, but it is also easy to fix; as per the European Commission’s ban on unjustified geo-blocking in December 2018.
In the audiovisual market, the physical barriers to accessing sports content from broadcasters in other territories (e.g. the need for a set top box) historically meant that, even if licensing laws allowed it, consumers’ choice was limited to their national broadcasters. The rise of IP delivery removes this issue and so market segmentation is instead supported through geo-blocking.
I can access my Sky Sports and BT Sports subscriptions elsewhere in Europe while on holiday (this is called ‘portability’ and was subject to a separate debate), but non-UK citizens may not sign up to access these UK services in their home countries.
But what might happen if they could? Or, indeed, if I could sign up for sports services from other European countries?
That’s essentially what our report sought to test, and it turns out the removal of geo-blocking could have significant consequences both for the accessibility and affordability of sports content for EU citizens, but it could also damage the financing of sport, the underlying investment, and thus the quality of the spectacle which EU citizens currently enjoy.
The thing is, sports content is not the same product in each market – and so the same justification doesn’t apply. Different sports have different popularities between territories; they are perceived differently by consumers, who often attach disproportionate value to their domestic events, while also enjoying access to international and multinational events.
The sports rights market has developed so that local broadcasters offer consumers sports coverage, which is tailored to national interests, and at price points which reflect that local value.
If the Geo-blocking Regulation were extended to include audiovisual services, all European sports rights licences would be pan-EU, despite the vast majority of European broadcasters serving only their domestic market. Broadcasters would naturally respond to protect their business models. Instead of competing for rights and viewers with only their domestic competitors, they would be competing with broadcasters across Europe. So in devising their bids, they would keep a close eye on what these competitors might charge consumers for access.
In practice, come the next rights auction, broadcasters in territories where consumers value a particular sport highly would be incentivised to outbid competitors from other territories. They may continue to bid for rights at close to the current domestic level, provided this included pan-EU exclusivity - ensuring that the same content could not be offered more cheaply by a service based elsewhere. This could result in a highly fragmented landscape for sports content.
A total of 103 million people in 11 territories could be exposed to higher prices to access coverage of top-tier sport from overseas
Consumers in any given market would not have access to significant sports from overseas via their domestic provider, which would disproportionately focus on sports of domestic importance. As such, consumers would need services from multiple territories, including taking multiple subscriptions, to retain access to the breadth of sports coverage they currently enjoy.
As well as suffering from a fragmentation of access to sport, our analysis found that a total of 103 million people in 11 territories – which are not home to top-tier competitions – could be exposed to higher prices to access coverage of top-tier sport from overseas. This consumer harm would be felt disproportionately by those in smaller, typically lower income countries, which currently benefit from prices which are tailored to their market.
Furthermore, the industry could lose €2 billion ($2.2 billion) annually, representing 15 per cent of rights revenues on average – though smaller sports could lose up to 26 per cent. This would ultimately damage investment at grassroots level, and the quality of sport available to consumers.
Our full report is available here.