The business column - Jane Martinson suspects a stitch-up
For 13 years, Sky has monopolised the rights to live Premiership football. At last, it seemed grumbl
What is it about football that makes thinking men and women lose their minds? Take the issue of competition in the lucrative area of televising live top-flight games. Asking most people whether a monopoly is a good or bad thing is akin to asking whether they support under-age sex. So widespread is the view that economic competition is a Good Thing, that the term "monopolist" is used in the same way as "tyrant". Until it comes to football, that is.
Ever since the Premier League was formed 13 years ago, the satellite group BSkyB has owned the exclusive rights to televise all live matches. Premier League officials, whose job it is to get the best deal for fans and clubs, have supported this state of affairs, arguing that exclusivity has given Sky the confidence to invest heavily in the game, more than £3bn to date. Besides, there is no other company that has Sky's geographic reach and can therefore make as much money out of the rights.
Broadcast rivals beg to differ. In figures disputed by Sky, the cable company NTL and broadcaster ITV have argued that Sky's £340m-a-year contract is a bargain. With pubs and clubs paying about £200m a year to show live games and other pay-TV companies such as NTL contributing a further £100m, Sky does not have to charge the more than five million subscribers who take a sports package very much to make a profit. Yet, to watch live Premiership games, Sky subscribers typically pay between £30 and £40 a month.
Such figures have excited the interest of the European Commission's competition officials, who have tried for years to end Sky's monopoly and believed they had managed to do so with an agreement signed in December 2003. Under this agreement, governing the 2007-2010 seasons, the league promised that at least two broadcasters would win a "viable and meaningful" share of the rights. Annoyed at its most recent proposals, however, Brussels accused the league of backtracking on its promises this summer.
Ofcom, the media regulator headed by a former cable boss, also waded in - albeit sotto voce - with research arguing that consumers feel they are not getting a good deal from the monopoly. Such unpublished research is galling to a league that has repeatedly argued that the exclusivity premium has been good for fans. Meanwhile those same executives ignore complaints about escalating gate prices and the soaring cost of kit.
The commission was ready to start legal proceedings to bring about a deal after talks had broken down. Until now. At a conciliatory meeting on 18 October, Neelie Kroes, the European commissioner for competition, discussed "improvements" to the original proposals with Premier League officials.
Industry observers pondered the cause of this change in tone. Of course, the earlier posturing could have been a game of bluff designed to work out a compromise solution. More conspiratorial minds see the involvement of government ministers keen to support a satellite group controlled by Rupert Murdoch.
The Treasury, the target of much of this speculation, says it has remained "studiously neutral" over the issue. A new deal to televise live Premiership football has to be agreed by next August. By then, we will know whether a game defined by competition on the pitch is prepared to put up with a stitch-up off it.
Not all regulatory change has been bad for Sky, of course. The company plans to take advantage of Ofcom's long-running battles with the telecoms group BT to enter the fast-growing world of broadband telephony. Sky is to spend up to £1bn buying its way into a market dominated by BT and the cable companies NTL and Telewest. The market is hugely important, affecting ownership of the direct link into the home. Forget the information superhighway. This is the information doorway.
Ofcom insisted that BT allow rivals to take charge of the crucial copper wire that runs into each home, even though the former telecoms monopoly owns these. In September, at the instigation of the regulator, BT created Openreach to facilitate that competition.
Now Sky, using a proposed £1bn corporate bond issue, plans to buy a broadband company and invest in the technology needed to offer broadband internet access and a telephone service, as well as TV, to each of its eight million-plus homes.
This "triple play" service is perhaps the only area where cable companies, whose underground networks do away with the need for a relationship with BT, have beaten their competitors. It is also a market poised to expand into "quadruple play", with the arrival of more services delivered over mobile phones. And all of these services will increasingly demand content offered by Sky. Further competition can only be welcomed.
Jane Martinson is media business editor of the Guardian
Patrick Hosking is away