South African sports need DStv’s exclusive rights

While the sale of exclusive sports broadcasting rights often excludes many South Africans from accessing certain matches, stakeholders from both the broadcasting and sporting industry camps believe it is essential.

This is largely due to the additional revenue the sale of exclusive rights generates, which sustains sport in South Africa.

“Selling rights exclusively maximises the income to sports bodies, and without this income, sport in SA cannot be sustainable,” MultiChoice told MyBroadband.

“Losing the ability to sell exclusive rights is likely to impact their ability to pay players competitive salaries, fund international tours to and from South Africa, grow their player base, fund development of their sport and maintain facilities.”

A South African Rugby Union (Saru) spokesperson agreed with this view, saying that roughly half of the money made from selling broadcast rights funds the playing and development of men’s and women’s rugby in the country.

The spokesperson explained that removing broadcasting rights exclusivity would starve the industry of the revenue needed to keep the sport attractive to broadcasters.

“Removing exclusivity impacts the value of those rights, which in turn impacts the sport’s income, impacting the ability of the sport to deliver world-class performance, affecting the sport’s attractiveness to broadcasters,” they said.

“It’s a downward spiral.”

Therefore, it is up to Saru to ensure enough money is invested into South African rugby so that it remains in demand by viewers and, thus, broadcasters.

A large chunk of this money comes from selling broadcasting rights, which the sports bodies would ideally want to maximise, given the importance of the revenue to the sport’s longevity.

The PSL made this argument in previous comments submitted to the Independent Communications Authority of South Africa’s (Icasa) inquiry into subscription television broadcasting services.

It said its two main revenue streams at the time were sponsorships (35%) and broadcast rights (59%), with sponsorship revenue depending on television exposure.

Therefore, the more exposure it can get on TV, the more it can gain from sponsorships.

A research paper by David Martimort and Jerome Pouyet, “Why is exclusivity in broadcasting rights prominent and why does simple regulation fail?” argues that allocating rights to a dominant firm allows for maximum revenue.

This is largely due to the dominant firm, such as MultiChoice in South Africa, earning more revenue than a firm with lower viewership rates would lose if it was not granted access to the rights.

By allocating exclusive rights to the dominant firm, this firm can increase its competitive advantage, enhance market power, charge higher prices, and, thus, generate more revenue for the industry.

This also means the sports body allocating the rights has more incentive to choose the dominant firm if it will guarantee higher viewership numbers.

Similar to how not granting exclusive rights to broadcasters causes sports bodies to experience a downward revenue spiral, giving broadcasters exclusivity can offer a positive reinforcement loop for their revenue.

However, this creates a dilemma for sports in South Africa, where many citizens can’t afford access to the dominant firm because of the premium it can charge for its competitive advantage — sports exclusive to its platform.

South Africa’s newly-appointed minister of sports, arts, and culture, Gayton McKenzie, brought this to the country’s attention in September while the Springboks were gearing up to take on New Zealand in Johannesburg.

McKenzie negotiated a deal with MultiChoice to sub-licence the media rights to the SABC, allowing the entire nation to access the game without cost.

“I have been clear that it will be unfair of government to expect SuperSport to show matches for free, matches that they have paid for,” McKenzie said at the time.

“It is our task to make sure that we as government play our part in making sure our people also get to watch their national teams.”

MyBroadband asked Saru whether it believed that this revenue maximisation model would affect South Africans more as pressure on the average household purse increases.

“Paying for goods and services and entertainment is obviously something that we take for granted in our daily lives, as we know the producer has to incur costs to produce those goods and services,” it said.

“The idea that a sport should provide its goods and services (matches) for free or at a discount is a notion that cuts across that principle and is one that would gradually lead to a sport that no one wanted to watch.”

eMedia and SABC taking on MultiChoice

eMedia and the SABC have been battling MultiChoice’s sports rights exclusivity, including live matches featuring South Africa’s national rugby and cricket teams.

The fight centres around restrictions MultiChoice placed on the rights it sub-licenced to the SABC.

Under the terms of their most recent deals, the SABC was not allowed to broadcast Springboks and Proteas matches to its channels on eMedia’s Openview platform during their respective World Cups.

When eMedia and the SABC cried foul, MultiChoice explained that without the restriction, the sub-licence would have been more expensive.

eMedia took the matter to the Competition Tribunal on the grounds that it was anti-competitive, which granted an interdict blocking MultiChoice and the SABC from enforcing or abiding by agreements that included this restriction.

By the time the interdict was granted, the Rugby and Cricket World Cup tournaments were already finished.

However, when Ireland played the Springboks in a test series earlier this year, the SABC announced at the last minute that it would no longer be able to broadcast the matches.

The South African Rugby Union (Saru) issued a statement casting eMedia as the villain in the story.

Saru said eMedia wanted a free ride, while MultiChoice provided substantial financial support to South Africa’s sporting teams.

eMedia took issue with this, saying it made a significant financial offer to MultiChoice to broadcast the Ireland test matches in Pretoria and Durban, which MultiChoice rejected.

It also complained that MultiChoice had only opened a tender for free-to-air broadcasters to bid for sub-licensing rights a little over a month before the tournament commenced.

The broadcaster said the late posting of the tender meant bidders likely wouldn’t receive confirmation until less than two weeks before kick off.

“eMedia views the issuing of these late invitations to tender by MultiChoice as undermining fair competition and ignoring a recent Competition Tribunal order designed to prevent such restrictive practices,” it said.

However, MultiChoice issued a statement shortly afterwards saying it had rejected eMedia’s offer because it was too low.