How fair are our sports broadcasting rights?

The broadcasting rights to a sports event are owned by the entity which organises that event. This could be the sports body in the country hosting the event (for example, Cricket SA would own the broadcasting rights to the English cricket team's tour to South Africa), or the multi-national or international entity in complex competitions involving teams from numerous countries (for example, the IOC owns the broadcasting rights to the Olympic Games).

However, a sports body only owns the broadcasting rights of its sport if the event is played in its own country. The sale of the broadcasting rights to sports events is a complex process which poses ever-increasing challenges to the sports rights holders. Sport and the broadcasting of sport are increasingly becoming global industries, which only serves to add to this complexity.

Obligations and funding of sports bodies

Sports bodies have numerous responsibilities. They are required to develop and maintain grassroots programmes, implement development programmes to address past inequalities, develop and maintain club and provincial structures, as well as a series of national teams, and they have to develop and attract top-class players through coaching and paying the competitive salaries that are associated with professional sport (this also to avoid the exodus of talented players to other countries).

Furthermore, sports bodies must develop and maintain stadiums and other facilities, organise attractive domestic events, host attractive international events, and ensure that South African players participate in events in other countries.

These bodies must ensure, too, that their sport is made available to extensive audiences through affordable tickets and the coverage of events in the media, as they must market and promote their sport and its events.

The revenue stream of sports bodies is derived, in descending order of importance, from the sale of broadcasting rights, sponsorships, ticket sales, merchandising and government subsidies and grants. In South Africa, income from the sale of broadcasting rights increasingly constitutes sports bodies' largest source of revenue, whilst the contribution from government is less than one percent of the total annual revenue of most sports bodies in South Africa (compared with the far higher contribution made by governments in other countries, like Australia).

Broadcast rights: the sales process

In deciding how to sell the broadcast rights to a sports event owned by it, a sports body has to balance its need for income against the exposure of its sport. How this balance is struck may differ at different points in time. The packaging of the sale of the broadcast rights involves numerous variables, including the duration of the commercial agreement, the territory to which it extends (South Africa, Sub-Saharan Africa or the whole of Africa), whether the sale involves exclusive or non-exclusive rights, whether the rights should be sold to free-to-air and/or subscription broadcasting services, the nature of the broadcasting of the event (live, delayed or highlights), whether the agreement will include sub-licensing rights, and the platform on which the event may be broadcast (terrestrial, mobile, satellite, cable, IPTV, radio). Sports rights holders are becoming increasingly sophisticated in how they sell their broadcast rights, and numerous factors determine the price that may be obtained from the sale. They include exclusivity, the size of the broadcasting market, the nature of the regulatory environment, the popularity and image of the sport and of the event in particular (how attractive it is to viewers), the level of competition between broadcasters, and their respective budgets.

Exclusivity is the most important factor

The broadcast rights to sports events are usually sold on an exclusive basis, since this is the best means whereby a sports body can maximise the profitability of that event: the price paid for exclusive content by one broadcaster is generally higher than the sum of the amounts which would be paid by several broadcasters for non-exclusive rights. The "exclusivity premium" is usually worth between 40 percent and 100 percent of the total value of the rights.

Balancing exposure and income

Sports bodies constantly have to balance maximising the exposure of their sport with maximising income. On the one hand, selling the rights to free-to-air broadcasters will enhance the exposure of the sport and the event to potentially large audiences, although it will result in a lower broadcast rights fee. On the other hand, selling the broadcast rights exclusively to a subscription broadcaster, whilst it may lessen the exposure of that event, will result in far greater income.

Striking the appropriate balance is complex and will vary from one sport to another, from one event to another, and at different points in time. Given these constantly changing complexities, these decisions are best made by the sports body itself, as opposed to any outside agent, such as the broadcasting regulator, which cannot be aware of all these complexities.

Listing sports events which must be broadcast free-to-air

Most countries have favoured the self-regulation of this issue (they have allowed the sports bodies to continue to make these decisions). However, in certain countries, the broadcasting regulator has sought to list certain sports events which must be broadcast free-to-air, so as to ensure that the largest possible audience may view those events.

Countries which have opted for regulation include Austria, Belgium, France, Germany, Ireland, Italy, the UK and Australia. With the exception of Australia, those countries have opted for a like-touch approach to regulation.

The approach in South Africa

In 2002/2003 the Independent Communications Authority of South Africa (Icasa) conducted a public inquiry into the broadcasting of national sporting events in the public interest.

In mid-July 2003, Icasa issued regulations in terms of which certain events were listed and were accordingly required to be broadcast free-to-air. Icasa considered international best practice and adapted this to South African circumstances. In doing so, it had to weigh up the competing interests of sports bodies, players, sports as a whole, sports fans, viewers of television and radio listeners, free-to-air broadcasting services, subscription broadcasting services and aspects of the wider South African economy.

Over the past five years, these regulations have worked well. This must be borne in mind in any forthcoming review by Icasa of these regulations. The regulations are an appropriate compromise, and accord with international best practice.

They strike a balance between broadcasting national sporting events free-to-air and the need of sports bodies to generate income through the sale of the broadcast rights to their sports on an exclusive basis.

Amanda Armstrong is the head of the Media and Communications Law Department at Werksmans Inc.

■ This column first appeared in The Media magazine.

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