This unsporting Life

With Sky snatching television rights to all the major sports events, John Owen asks, what hope for terrestrial stations?

With Sky snatching television rights to all the major sports events,

John Owen asks, what hope for terrestrial stations?



The current battle in Parliament over who can buy which TV sports rights

marks the last stand for terrestrial broadcasters as regular carriers of

live and exclusive sporting events.



It is a fight which, according to many observers, is a vain one. What

does this mean for ITV? And should advertisers be worried?



In truth, the ‘save our sports’ campaign has far more to do with

protecting the BBC than ITV. With rugby union hanging in the balance,

rugby league having already departed to Sky, and Formula One snatched

from under the corporation’s nose by ITV, there is little material left

with which to sustain the BBC’s flagship sports magazine, Grandstand.



Over on ITV, World of Sport has long since been dispensed with. The

current philosophy at the ITV Network Centre casts sport in the role of

occasional quality audience grabber, rather than as the backbone of a

mass-audience-targeted schedule. Malcolm Wall, the managing director of

Anglia TV and a member of ITV’s sports management group, explains: ‘The

BBC spreads its money over a vast array of sports. At ITV, we have

decided that our money should be concentrated on three or four top

sports.’



However, only last year, ITV came under fire from agencies for its lack

of sports coverage. With no top boxing and only the dismal European

Champions League passing for quality football action, the network was

practically bereft of high-level sport, they claimed. Just before

Christmas, ITV responded with two spectacular coups. Within a few days,

the network secured five-year, live and exclusive deals for the FA Cup

Final and Formula One motor racing.



At the same time, ITV lost its live coverage of football’s also-rans in

the Endsleigh League, but retained the highlights in partnership with

Sky Sports. The FA Cup deal, too, was a joint arrangement with Sky -

removing the nation’s favourite Cup competition from the BBC for the

first time in its history. While MPs went ballistic, accusing ITV and

the sports bodies of selling their souls to the devil, TV buyers

celebrated. As Graham Duff, the joint managing director of Zenith Media,

points out: ‘All I care about is that advertisers get the best available

audiences, so anything that comes out of the BBC is a good thing.’



But, from ITV’s perspective, question marks still remain. Some say it

may have paid too much. The FA Cup deal cost a reported pounds 15

million per year. It is unclear how much of this came out of ITV’s

coffers and how much out of Sky’s, but doubts are not dispersed by our

table (above), which estimates that the value of the coverage in terms

of advertising revenue, based on station average price for the target

male audience, is only pounds 12 million a year.



If the value to ITV is marginal, the table, compiled for Campaign by

WCRS, shows how much greater it is to Sky. Subscription TV is clearly a

far more lucrative way to exploit live sport.



In the fast approaching digital age, it could well become the only way.

And that’s something Wall is well aware of. ‘ITV now has a backbone of

quality sport until 2002,’ he says. ‘We have bought ourselves time. By

then, we will have the option of an ITV2 on digital terrestrial TV and

charging people for it.’



So will the BBC. And this is the real threat for advertisers. After all,

aside from an ever-smaller audience delivery, who can say how many of

these new channels will operate on a pay-per-view or subscription-only

basis, shunning advertising revenue altogether?



Mark Palmer, the communication strategy director at WCRS, who was

involved in negotiating the rights deal that took the one-day cricket

internationals and the Benson and Hedges Cup to Sky, says the changes

require a complete reworking of marketing strategy. ‘TV is not something

which is there for advertisers,’ he warns. ‘It used to be, because

that’s how it made its money. But it’s a business, and it’s now playing

by a different set of rules. The smart companies have stopped thinking

about just spot advertising. They own things.’



Coca-Cola, for example, owns football globally via a range of local

deals such as our own Coca-Cola Cup. Within the UK, however, the brand

most closely associated with football is Carling.



Jonathan Nye, head of sponsorship at Bass Brewers, whose Carling lager

brand sponsors the FA Premiership, says the pounds 3 million, four-year

deal has delivered double the value of straight advertising. It has

imbued the brand with ‘the stature and vitality of football’.



Likewise, NatWest has benefited from its 15-year allegiance to cricket

as sponsor of the NatWest Trophy. But, according to Alan James, media

director at the sponsorship consultancy, Alan Pascoe Associates, the

benefits of such deals are increasingly dependent on TV exposure. When

striking an event sponsorship deal, he says, ‘determining the TV take-

out for the sponsor will be the most important element, not filling a

stadium’.



This fact alone offers a lifeline to terrestrial TV. Above and beyond

their sporting associations, what Coca-Cola, Carling and NatWest also

have in common is a lasting commitment to the mainstream channels. Both

Coca-Cola and Carling have the double benefit of live Sky coverage and

terrestrial TV highlights. And, while some cricket is now with Sky, the

NatWest Trophy, cricket’s equivalent of the FA Cup, remains live and

exclusive on the BBC.



Nye, who struck the deal with the Premiership one year into its current

run on Sky and Match of the Day, admits: ‘We were very keen that Match

of the Day was there.’ And Raoul Pinnell, the director of marketing at

NatWest, says it is unlikely that he would have signed up for another

five years of the Trophy last year if live coverage had been on Sky.



‘As a mass brand in a mainstream market,’ he explains, ‘we want major

coverage.’ As well as fewer viewers overall, the type of viewer Sky

delivers is less appealing to Pinnell. ‘Dedicated sports channels create

what is like a sports section in a newspaper, which people can throw

away without reading,’ he argues. ‘Terrestrial TV gives a mainstream

audience more opportunity to dip in.’



Partly because of sponsor pressure, partly for the profile of the sport

itself, sports bodies themselves tend to take a similar line. Lee

Walker, the controller of broadcasting at the Football League, says the

assurance of highlights on ITV was crucial to the deal he struck with

Sky for the Coca-Cola Cup and the Endsleigh League.



Another important factor was the need to keep what is still a market of

limited buyers competitive. It’s a point which David Elstein, the

director of programming at Sky, readily accepts. ‘It’s rare for all the

rights to be absorbed by us,’ he points out. ‘For the most part, the

rights holder wants to split the rights up to keep the market alive.’



This argument is hugely convenient for Sky at the moment in its lobbying

against the proposed legislation, which would protect the current list

of national sporting treasures, such as the Grand National, the FA Cup

Final and England’s home tests, not only from pay-per-view but also from

subscription TV. Sky contends there is no need for legislation, that

market forces alone will ensure that top sport remains on terrestrial

TV.



Alongside the likes of Terry Blake, the marketing director of the Test

and County Cricket Board, Sky also argues that sports bodies must have

the right to sell their product to the highest bidder.



Blake’s current four-year deal for cricket coverage with Sky and the BBC

has trebled the TCCB’s TV income from pounds 5 million a year to pounds

15 million, while also doubling coverage from 300 hours to 600. The

proposed legislation would have made this impossible, he claims.



In fact, the home tests - which are the only listed element of the deal

- are still on the BBC. But, Blake says, only because that right has

been granted at a price as part of a competitively negotiated deal. ‘I’m

not saying we’d give Sky the live tests,’ he declares, ‘but if Sky can’t

bid, we’re stuffed.’



Some sports - like Formula One motor racing - will probably choose to

stay on terrestrial TV, whatever happens. ‘It’s a sport which relies

heavily on sponsors,’ Palmer says. ‘There is no interest for them unless

they get big exposure.’



Others, like world-class boxing, will be lost to mainstream TV - and

probably to subscription TV as well, as Sky’s proposed pay-per-view

experiment with the forthcoming Bruno versus Tyson fight demonstrates.

Elstein makes no apology for this. ‘Pay-per-view will become a standard

form of payment for TV programming in the digital age,’ he predicts.



However, fears that regular sports coverage, such as Premiership

football, will go pay-per-view are wide of the mark, Elstein believes.

As our table shows, the revenue would be unlikely to match that gained

from current subscription arrangements. But one-off events could well go

pay-per-view in 15 years’ time, Elstein admits, with - you guessed it -

highlights on terrestrial TV.



By then, commercial pressure from all sides will almost certainly have

seen off the restrictive legislation. And - even on ITV’s own terms -

its main free-to-air channel may be devoid of live sport. But, as Wall’s

comments about total inventory reveal, this could lead to major problems

for ITV in delivering the full range of audiences required by

advertisers. If the channel decides that, for this reason, it must

retain live sport, two solutions are at hand.



Firstly, it could charge advertisers a premium for advertising in live

sports coverage, the revenue from which would be used exclusively to top

up funds for acquiring the rights. This policy relies on agencies and

advertisers being prepared to pay more - which, under the current

trading system, is unlikely. As one leading media agency chief asserts:

‘ITV did charge a premium for its Rugby World Cup coverage last year -

and other things came off the back.’



Secondly, ITV could introduce advertiser-supplied sports programming.

Either an advertiser buys, or helps buy, the rights; or they fund the

production costs.



It is a strategy that Tim Brady, the head of sponsorship at the ITV

sales house, TSMS, and the man in charge of sports sponsorship deals for

the ITV network, sees as inevitable. ‘Clients must get together with us

jointly to buy rights, or find some form of mutuality,’ he says. ‘It’s

definitely the future.’



Already Texaco has brought Indy Car motor racing from the US to ITV.

Other smaller deals often go unnoticed. And they are not restricted to

the commercial channels. For instance, Alan Pascoe Associates recently

helped Brut to get 30 minutes of primetime coverage for its Brut Olympic

sailing trials on the BBC’s Grandstand, for which Brut paid two-thirds

of the production costs.



Such deals underline the extent to which the ever-increasing

commerciality of both sport and television offer more lateral

opportunities for marketing departments and broadcasters alike. Without

them, advertisers risk losing valuable audiences and ITV - even with its

selective acquisitional strategy - faces a very unsporting life.



The Players



Broadcaster’s view



‘It’s rare for all the rights to be absorbed by us. For the most part,

the rights holder wants to split the rights up to keep the market alive’



David Elstein, Sky



Agency view



‘All I care about is that advertisers get the best available audiences,

so anything that comes out of the BBC is a good thing’



Graham Duff, Zenith Media



Sponsor’s view



‘We want major coverage. Dedicated sports channels create what is like a

sports section in a newspaper, which people can throw away without

reading’



Raoul Pinnell, NatWest



Sports body view



Home test matches are still on BBC, but only because they formed part of

a deal: ‘I’m not saying we’d give Sky the live tests, but if Sky can’t

bid, we’re stuffed’



Terry Blake, TCCB



Value For Money



These annual figures do not represent the actual value of any one event

to any one type of broadcast. They are estimates based on industry data.



WCRS based its calculations on the following number of live

transmissions (number watched by each sports viewer in the satellite

universe under a pay-per-view structure in brackets): Premier League

matches - 60 (10 at pounds 5), Rugby Union matches - 10 (3 at pounds

10), Formula One races - 15 (2 at pounds 10), FA Final - 1 (0.3at pounds

10), FA Cup ties - 6 (3at pounds 5).



------------------------------------------------------------------------

(part one)                     Five Nations    Formula One

                                  Rugby         (pounds)

                                (pounds)

Ad revenue (men at ITV SAP)       17  m           17  m

Subscription revenue at stake*   114.8m          130.4m

Pay-per-view revenue              47  m           41.4m

Footnotes:* It is impossible to break down the specific appeal of the FA

Cup compared with the Premier League** FA Cup Final and one live game

per round Source: WCRS

------------------------------------------------------------------------



------------------------------------------------------------------------

(part two)                           FA Cup            Premier

                                     Final             League

                                    (pounds)          (pounds)

Ad revenue (men at ITV SAP)       3.7m    12m**         80  m

Subscription revenue at stake*     n/a    n/a          165.5m*

Pay-per-view revenue              8.4m    42m**        140  m

Footnotes:* It is impossible to break down the specific appeal of the FA

Cup compared with the Premier League** FA Cup Final and one live game

per round Source: WCRS

------------------------------------------------------------------------



------------------------------------------------------------------------

Major UK sports deals deals of the last five years

------------------------------------------------------------------------

Formula One 1995, ITV, five-year deal from 1997

FA Cup 1995, ITV/Sky, four years from 1998, pounds 60m

Endsleigh League/ Coca- Cola Cup 1995, Sky (live), ITV (highlights), five years from 1996, pounds 125m

Rugby League 1995, pounds 87m sets up Super League on Sky

Ryder Cup Golf 1995, exclusive rights to Sky for 1995, ’97 and ’99 contests

Cricket 1994, BBC and Sky, four years from1995, pounds 60m

Five Nations Rugby 1994, BBC (live), Sky (highlights)

Rugby World Cup 1992, ITV, 1995 finals, pounds 10m

FA Cup and England Internationals 1992, BBC/Sky, five-year deal, pounds 79m

FA Carling Premiership 1992, Sky (live), BBC (highlights), pounds 304m

------------------------------------------------------------------------



------------------------------------------------------------------------

Up For Grabs

------------------------------------------------------------------------

Five Nations Rugby Sky has bid pounds 175m

Olympic Games 2002 Sky has reportedly bid pounds 1.2bn

Premiership football up for negotiation this year

------------------------------------------------------------------------



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