bid for Manchester United
Potential impact on competition
1.1 British Sky Broadcasting plc ("BSkyB")
has announced an offer for Manchester United PLC ("United")
and notified the proposed takeover to the Office of Fair Trading
("OFT") for formal merger clearance. This paper is provided
in response to the OFT's public invitation to comment of 14 September.
1.2 This paper seeks to highlight the potential
detrimental effects on competition that may result if BSkyB is
permitted to acquire control of United. It is submitted that the
potential adverse impact on competition is sufficiently serious to
warrant investigation by the Monopolies and Mergers Commission ("MMC").
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2.1 It is widely recognised that BSkyB is dominant
in the market for pay-tv in the UK. Control of United would enable
BSkyB to reinforce this position of dominance because it would hand
BSkyB even greater control of live rights to Premiership football for
the foreseeable future than it would otherwise enjoy, thereby
seriously undermining the competitive threat posed to BSkyB by digital
terrestrial television, and cable.
2.2 Detrimental effects may in particular be felt in
the following markets within the pay-tv sector; namely, the markets
- Premiership rights
- retail supply of pay-tv packages
- wholesale supply of pay-tv programming
2.3 Before looking in turn at the potential impact
on these individual markets, the following sections explain why both
BSkyB and United enjoy unrivalled positions in their respective
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Corporate structure of BSkyB
3.1 BSkyB's ultimate major shareholder is News
Corporation of Australia ("News Corp"). BSkyB is a publicly
quoted company and is owned as to 40% by News Corp through its UK
subsidiary News International. The other major shareholders in BSkyB
are BSB Holdings and the Pearson and Granada groups in the UK. The
rest of the shares are widely dispersed. Although News Corp does not
own a majority of the shares in BSkyB, its share holding is such that
in practice it can control and manage the BSkyB business almost as if
it were a wholly owned subsidiary. Significantly, Elisabeth Murdoch,
daughter of Rupert Murdoch, the founding owner of News Corp, is head
of Sky Networks, one of three managerial positions of equal rank
immediately below the chief executive of BSkyB, Mark Booth.
3.2 News Corp has various media interests which span
the globe from Australia to Europe and from America to the Far East
and include interests in newspapers, television broadcasting, film
studios and publishing. Its main media interests in Europe are in the
UK, held by News International. News International is the largest
publisher of national newspapers in the UK owning The Times, The
Sunday Times, The Sun and News of the World.
3.3 As such, News Corp controls a powerful and
influential commercial empire, which is especially strong in the UK.
3.4 In Australia, News Corp has attempted to
establish a rival rugby league "super league", by poaching
players from the existing league, because another broadcaster had the
tv rights to the existing league. The result has been poor tv ratings
and attendances for both leagues, whereas before rugby league had
dominated the tv ratings.
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BSkyB's dominance of the UK pay-tv market
3.5 In the UK, BSkyB has established an effective
monopoly over the provision of pay-tv. That monopoly is maintained and
reinforced (in part) by various exclusive broadcasting rights which
BSkyB has negotiated.
3.6 In particular, BSkyB has established an
effective monopoly over a wide range of movie and sports rights, by
means of exclusive contractual arrangements with the owners of those
rights. The ability to offer movie and sports channels are the
financial pillars of pay-tv operations. Rupert Murdoch is himself
reported as saying:
"We have the long term rights in most
countries to major sporting events and we will be doing in Asia what
we intend to elsewhere in the world - that is, use sports as a
battering ram and a lead offering in all our pay television
3.7 The fortunes of BSkyB itself are a case in
point. BSkyB saved itself from financial ruin effectively by securing
live Premiership football on an exclusive basis in 1992.
3.8 BSkyB's acquisition of a significant body of
movie and (especially) sports rights materially impedes BSkyB's
rivals' ability to assemble a package of channels that compares with
3.9 If they are to market their services effectively
against BSkyB's satellite service, rival broadcasters (eg cable
operators and, more recently, Ondigital (formerly British Digital
Broadcasting ("BDB")) -- BSkyB is the only major UK
satellite broadcaster) have little option but to take a significant
amount of programming from BSkyB. In reality, the fees they pay BSkyB
for programming account for a major part of their overall programming
costs. As a result, rival broadcasters are heavily dependent upon
3.10 BSkyB's dominance of the pay-tv sector was
effectively confirmed by the Director General of Fair Trading in his
"Review of BSkyB's Position in the Wholesale Pay TV Market"
of December 1996 (the "1996 Report").
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The 1996 Report
3.11 The 1996 Report described BSkyB as having a
"powerful position in the Pay TV market" and added
that "a number of concerns had arisen from this situation".
3.12 In particular, the 1996 Report noted that:
"For a potential competitor to BSkyB to
enter the market it needed to be able to obtain access to
programming rights of sufficient quality to attract a large volume
of paying customers......".
3.13 On the subject of programme rights the 1996
Report confirmed that premium sports and movie channels were the main
drivers of subscription to pay-tv. As regards sports, it concluded
that BSkyB was:
"dominant in the supply of sports channels
in the UK Pay TV market and was at that time the only provider of
premium sports channels with the exception of one specialist channel
(The Racing Channel)".
3.14 As regards movies, it was noted that BSkyB had
pay-tv rights to over 90% of first run major films; in other words,
the films needed for a successful premium movie channel.
3.15 In the event, the DGFT accepted behavioural
undertakings from BSkyB instead of referring the concerns that
resulted from BSkyB's dominance of the sector to the MMC for detailed
investigation. This decision was influenced by the belief that the
advent of digitalisation might act to weaken BSkyB's position.
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Developments since 1996
3.16 The importance attached to digital terrestrial
television as a potential source of competition to BSkyB's position of
dominance was confirmed by the Independent Television Commission
("ITC")'s decision that BSkyB would have to sell its one
third stake in BDB for BDB to be awarded a licence to operate a
multiplex on digital terrestrial television. The ITC was concerned
that BSkyB would have too much power over a rival delivery platform.
3.17 BSkyB's dominance of premium sports and movie
channels has continued. For instance, with the exception of The Racing
Channel, BSkyB's three sports channels remain the only premium sports
channels on offer in the UK. Eurosport is a dedicated sports channel
but it is a free-to-air channel. Unsurprisingly, the content of its
sports programming in no way compares with BSkyB's offering.
3.18 BSkyB has retained control of most, if not all,
key pay-tv movie and sports rights. For example, BSkyB currently holds
exclusive live rights for:
- Premiership football
- rugby union internationals held at Twickenham
- boxing involving Frank Warren's stable of
- England's overseas cricket tours, including the
forthcoming Ashes tour, together with Benson & Hedges Cup and
Sunday League cricket and
- Ryder Cup golf
3.19 Therefore, whilst Ondigital is a second
alternative platform to BSkyB's satellite service (the first
alternative being cable), Ondigital will, like cable operators, have
to continue looking to BSkyB for significant parts of its programming,
particularly sports programming.
3.20 Consequently, BSkyB's overall dominance of the
pay-tv sector, and in particular as a provider of the key sports
programming, has not significantly weakened since the 1996 Report,
even following the introduction of digital terrestrial television.
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United's pre-eminence off the field
4.1 United is a pre-eminent football club, both in
England and elsewhere. This is evident from its (arguably) unrivalled
following in the world of football. United is estimated to enjoy the
support of 18% of all British fans. A survey of 14 million homes in
the UK by the promotions group Team Marketing during 1996-7 showed 10%
of the population (ie including those who do not regard themselves as
"football fans") support United.
4.2 United has over two hundred supporters clubs.
Although these clubs are mainly located in Britain (104) and Ireland
(74), a significant number are still to be found overseas (24),
including in Australia, Canada, Germany, Hong Kong, Japan, Malaysia,
Mauritius, New Zealand, South Africa and the USA, as well as in
Scandinavia. This geographic spread illustrates the unique global
nature of United's following. In contrast, Arsenal has only a hundred
4.3 Furthermore, United is Britain's biggest selling
monthly sports publication with average monthly sales of between
120,000 and 140,000. In contrast, Arsenal's equivalent magazine sells
only around 50,000 copies -- less than half as many as United.
Moreover, around 40,000 copies of United are sold in Thailand (in
Thai) each month, and a Malay version is available in Malaysia.
(ii) Attendance levels
4.4 Attendance levels for matches at Old Trafford
also illustrate the size of United's following. United have enjoyed
the highest average home crowds in 25 of the last 30 seasons (since
1968). In two of the remaining five seasons (1971-72) and (1992-93)
ground capacity was badly restricted by rebuilding work.
4.5 United still managed to attract the highest
crowds even during the season they were relegated (1973-74) and during
the following season (1974-75) in the second division, when the
highest average home gate of 48,389 was 2,000 higher than the next
best in the entire league, Liverpool.
4.6 In the 1996-97 season United became the first
side in English football history to attract at least 50,000 to every
home game. In 1997-98 they became the first side to attract at least
55,000 for every home match.
4.7 Of United's current capacity of just over
55,000, 40,000 is held by season-ticket holders. The remaining 15,000
seats are typically sold out within two days, and the ticket office
regularly rejects about 5,000 applications. However, this greatly
understates the level of demand, since a lot more people would
probably apply if tickets were on sale for longer, or if they expected
to be successful.
4.8 Effectively every league game at Old Trafford
has been sold out for the last five years. The same is thought to be
true for away games.
4.9 United attendance figures now greatly understate
the level of demand for tickets for home games, since effectively Old
Trafford is always full for league fixtures. Last season's figures,
for example, ranged from 55,008 (Southampton) to 55,306 (Wimbledon).
In all probability, in the absence of capacity limitations, Old
Trafford could easily achieve crowds of 70,000 or 80,000, even for
less attractive fixtures.
4.10 For instance, even a third round league Cup tie
against Swindon in 1996, when United effectively fielded a reserve
team - and it was predicted they would do so - attracted a crowd of
4.11 The relative "pulling-power" of
United is illustrated by the fact that when United played Birmingham
City in a pre-season friendly in July 1998, the crowd was 20,700,
compared with just 6,000 when Spurs played a friendly at Birmingham
three days before.
4.12 The increase in ground capacity to 67,000, with
the construction of two new stands, will enable United to smash the
previous average home attendance record for English league clubs - of
57,759, held by United in 1967-68.
(iii) Financial performance
4.13 Deloitte & Touche, in its "Annual
Review of Football Finance" (August 1998), stated that:
"Manchester United could claim to be the
biggest club in the world in financial terms".
4.14 At the domestic level, Deloitte & Touche
"Manchester United dominated the financial
performance of all clubs; their pre-tax profits exceed the whole
turnover of Division Three, and the club's operating profit is about
30% of all total Premier League operating profits".
4.15 The information set out in the table below is
extracted from the financial information collated by Deloitte &
Touche. This information demonstrates that on virtually any selected
financial measure, United significantly out-performs its Premiership
4.16 A major contributor to United's financial
success is its revenue from merchandising. In the last financial year,
United's merchandising wing had turnover of over £28.5 million. The
level of merchandising revenue is such that United has taken direct
control of the production of merchandise and constructed several shops
adjacent to Old Trafford. It also runs a highly successful mail order
business, maintains a permanent office in Hong Kong and has a
department which devotes its time solely to developing new products
and services to be marketed under the United "brand". In
all, one hundred and fifteen people are employed to run United's
commercial operation. The high level of revenue that United derives
from merchandising activities is another strong indication that United
enjoys a very strong following.
4.17 The strength of this following has made United
into a very powerful "brand" in its own right, as is evident
from the remarkable merchandising deal that United has managed to
secure with Umbro, the sportswear manufacturer. This deal is rumoured
to be worth an unprecedented £40 million over six years. The strength
of the United "brand" has also led:
Sharp, the electronics company, to sign up to a
sponsorship agreement worth £10 million and
VCI, the media group, to acquire the rights to
United's videos and fan magazines for £10 million, at the same
time guaranteeing United annual royalties of £350,000
4.18 The development of United as a
"brand" is reflected by the fact that United has registered
168 new trademarks since 1991, as compared to having only the club
crest registered as a trademark between 1970 and 1985.
4.19 Birthdays are a nationwide chain of 450
card-shops, who also sell football merchandise in their bigger stores.
The chairman's office of Birthdays confirm that 40% of this football
merchandise is related to United.
4.20 In summary, therefore, the strength of United's
following (and the United "brand") is almost certainly in a
league of its own when compared to rival clubs.
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United's pre-eminence on the field
4.21 United has been extremely successful on the
field. In six seasons since the start of the Premiership in 1992,
United has been by far the most successful club in English football,
winning the Premiership four times and finishing runners-up by only
one point in both the other two seasons. In both 1993-94 and 1995-96
they also won the historic Double of League and FA Cup - achieved on
only six occasions this century - and became the first English club in
more than a hundred years of professional football to win the Double
twice. In 1993-94 they only failed to win an unprecedented domestic
Treble by one match when they lost the League Cup final at Wembley.
4.22 Allowing for different points systems and
numbers of matches played this is the most consistent period of league
success by any side in English history. United's dominance in English
football is obvious when their record in domestic competitions is
compared with other major clubs since the start of the Premiership:
4.23 The unparalleled strength of United's
following, coupled with its success on the field in recent times,
means that United is unquestionably the major force in domestic
football at present.
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4.24 It is apparent from the previous discussion of
United's pre-eminence that United wields significant influence.
4.25 Not surprisingly, the Premier League attaches
great weight to United's viewpoint when deciding upon its commercial
4.26 For example, a few years ago the Premier League
was proposing to sell some of the rights to advertise round the
perimeter of pitches jointly on behalf of all Premiership clubs.
United resisted -- presumably because it expected to generate more
revenue from selling its own advertising rights -- and the proposal
4.27 Similarly, the regulators of football also pay
heed to United's pre-eminence. For instance, since 1993, United has
always fielded what is virtually their second team in the early rounds
of the League Cup (previously known as the Coca Cola Cup and now the
Worthington Cup). Football League rules insist clubs must field their
strongest side, but the Football League (which runs the competition,
not the FA) has been powerless to stop the practice, notwithstanding
that, with the exception of 1993-4 when United actually reached the
final (having resorted to full-strength teams after the opening game),
this practice has led to United suffering early exits from the
competition every season.
4.28 Moreover, United's influence over the Premier
League, and indeed the FA and UEFA, has been greatly strengthened by
Media Partners' proposal for a new European Super League. This
proposal would enable United to leave the Premiership and to join a
separate European football league comprising other major European
clubs such as Juventus, Ajax and Bayern Munich. Since Premiership
football would lose much of its appeal if United were no longer
involved, the Premier League almost certainly has the need to keep
United on-side at the forefront of its mind -- especially in light of
the fact that United would inevitably be joined in such a breakaway by
other major Premiership clubs such as Arsenal and Liverpool.
4.29 Breakaway super leagues (whether domestic or
European) have in fact been discussed by the major clubs for some
time, mostly as a bargaining tool for their dealings with the football
regulators. Media Partners have merely crystallised the threat of a
European super league by putting forward a concrete proposal for its
4.30 In practice, United has mostly refrained from
exerting its power unilaterally, preferring instead to enlist the
support of other major clubs with the potential to participate in the
breakaway super league of the moment, thereby fully exploiting the
pressure to be applied as a result of this threat in order to force
through significant changes in the administration of football. For
example, led principally by United, the major domestic clubs have
forced through the following domestic changes to their own advantage:
in 1983, away teams were deprived of any share
of gate receipts in league matches, to the obvious advantage of
those, like United, who attract large home crowds
in 1988, a tv deal with ITV was agreed which
gave the bigger clubs a much greater share of tv revenue
in 1992, the Premier League was formed by the FA
4.31 Such changes have generally been forced through
at United's instigation. It is not thought that the other major
domestic clubs have sought to force through any major changes with
which United disagreed.
4.32 As the gap in financial clout wielded by United
as compared to other domestic clubs increases, including as compared
to the major clubs (United's turnover is now more than that of
Liverpool and Arsenal combined) so too will United's, already
significant, influence over those clubs.
4.33 Equally, at a European level, United has been
successful, in concert with other major European clubs such as AC
Milan and Barcelona, in obtaining a series of concessions from UEFA.
Leading nations have been permitted to enter a
second team in the European Cup, thereby giving countries such as
Italy, Spain, England and Germany the chance to enter teams such
as AC Milan, Real Madrid, United and Bayern Munich even when they
have not won their domestic championship
The "three plus two foreigners" rule,
which limited the number of overseas players allowed in European
competition, has been abandoned. Maurice Watkins, United's
solicitor and one of its directors, personally attended the
meeting at which this decision was made in order to force through
the change. United's interest in having this rule abandoned was
clear from his comment on its impact on United:
"We have been unable to field the team
we wanted in Europe"
First round losers in the European Cup are now
automatically granted a place in the UEFA Cup
4.34 In summary, therefore, United is a leading
force in both domestic and European football.
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Potential impact on competition
5.1 BSkyB is the dominant player in the pay-tv
sector. United is a leading force in the Premiership and the
Premiership provides programme content of crucial importance to the
commercial success of pay-tv in the UK. Therefore, BSkyB's bid to
acquire control of United raises questions about the potential adverse
impact on competition within the pay-tv sector of BSkyB extending its
vertical integration downstream.
5.2 The adverse consequences that could potentially
result are described below by reference to particular markets.
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the market for Premiership broadcasting rights
5.3 In the 1996 Report, it is stated that:
"we were satisfied that there were no
close substitutes for live Premier League rights. On a hypothetical
monopolist test live Premier League football would constitute a
5.4 This conclusion simply reflects that consumers
much prefer to watch sports as it happens, and that other sports do
not provide an effective substitute for football. Moreover, football
from other leagues -- lower English leagues or foreign leagues -- is
no substitute for Premiership football.
5.5 Therefore, exclusive control of live rights to
Premiership football forecloses a relevant market because live
Premiership football constitutes a discrete market.
5.6 At present, the rights to broadcast Premiership
football are awarded on a collective basis by the Premier League. In
1992, BSkyB was awarded exclusive live rights to broadcast Premiership
football. BSkyB currently holds them until 2001. However, BSkyB argues
that this does not constitute a barrier to entry into the market for
live rights to Premiership football (and thus foreclosure of the
market) on the basis that rights are awarded through a bidding
competition open to all broadcasters.
5.7 The merit of such an argument is debatable. The
dominance that BSkyB enjoys over the UK pay-tv sector, at both the
retail and wholesale levels, means that BSkyB already enjoys revenue
streams significantly beyond those of rival broadcasters. BSkyB, if
need be, could also raise additional revenues by increasing its retail
and wholesale prices for programming. This enables BSkyB to bid for
sports and movie rights at prices which rival broadcasters cannot
readily match. In these circumstances, it is questionable whether
bidding competitions for rights are truly meaningful.
5.8 If BSkyB were to acquire United, the balance of
power in negotiations for Premiership rights would change in a way
that could only reinforce BSkyB's position of strength when seeking to
secure exclusive live rights, thereby reinforcing BSkyB's dominance
throughout the pay-tv sector.
5.9 It is self-evident that a BSkyB-controlled
United would object to live Premiership rights being awarded to any
broadcaster other than BSkyB. Although Premiership rights are at
present negotiated on a collective basis by the Premier League and
United is but one of twenty clubs in the Premiership, the Premier
League (for the reasons explained in section 4) would in practice be
most unlikely to award live rights to a particular broadcaster against
the wishes of United.
5.10 It has recently been reported that Rupert
Murdoch, in partnership with Prince Alwaleed bin Talal and the Italian
company Mediaset, is intending to acquire up to 25% of Kirch, the
German group, as a basis for pan-European expansion. Rupert Murdoch
has already been linked with Media Partners' proposals for a European
super league and Media Partners is linked to Silvio Berlusconi who in
turn controls Mediaset. Against this background, the Premier League
could be expected to become even more wary of the risk of a BSkyB-controlled
United withdrawing from the Premiership.
5.11 Other broadcasters would therefore be at a
significant competitive disadvantage when seeking to secure live
Premiership rights from the Premier League if BSkyB controlled United.
5.12 The negotiating process would be distorted in
BSkyB's favour simply by virtue of the fact that BSkyB would
effectively find itself on both sides of the negotiating table if it
controlled United. United would be in a position to help ensure that
BSkyB's bid was more competitive than those of other broadcasters. The
manner in which BSkyB secured the Premiership rights in 1992 would
seem to illustrate this point. According to David Conn (in his book
"The Football Business") Alan Sugar, Chairman of Spurs,
informed BSkyB of ITV's offer, thereby enabling BSkyB to put in a
higher offer and to secure the rights.
5.13 Even if BSkyB's offer for Premiership rights
was higher than the offers of other broadcasters, competition could
nonetheless be distorted if BSkyB controlled United. United is
(arguably) the most commercially sophisticated of the Premiership
clubs, to whom many Premiership clubs look for commercial leadership.
A BSkyB-controlled United would not look to extract as high an offer
as possible from BSkyB, but simply to ensure that BSkyB secured the
rights. It is conceivable, therefore, that if it controlled United,
BSkyB would be able to secure Premiership rights for less money than
if United was acting independently.
5.14 Moreover, if BSkyB owned United, it would make
it difficult to maintain the quota system which helps the smaller less
popular clubs by limiting the number of times any club can be shown
live in any season.
5.15 Therefore, competition in the market for live
Premiership broadcasting rights would be (even further) significantly
distorted in favour of BSkyB if United were to be controlled by BSkyB.
5.16 The collective basis on which the Premier
League negotiates rights is due to be considered by the Restrictive
Practices Court ("RPC") in the early part of 1999. It is
possible that the RPC will find that this practice is illegal. If so,
clubs will then be free to negotiate rights to their home games
5.17 It is submitted, however, that the decision on
whether to refer BSkyB's bid to the MMC should be based upon the
current situation of collective bargaining. Merger policy should not
anticipate the findings of another tribunal, in this case the RPC.
5.18 In any event, even if live Premiership rights
were negotiated on an individual basis, competition would still be
BSkyB would, it can reasonably be assumed,
automatically secure the rights to United's home games, which in
themselves are amongst the most lucrative of Premiership rights --
unlike most Premiership rights, they could be used on a
given United's commercial sophistication, United
could be expected (if acting independently) to obtain full market
value for its rights, such that other less commercially
sophisticated clubs would be able to use United's deal as a
comparative benchmark when seeking to negotiate full market value
for their own rights -- without United's commercial leadership,
other clubs would be less able to bargain effectively with BSkyB
(and other broadcasters)
BSkyB could make use of United's influence when
negotiating with other clubs
other major clubs, such as Arsenal and
Liverpool, would have in mind the desirability of being aligned
with the same broadcaster as United if the break away European
Super League came to fruition
the revenue stream from United's home games
would enable BSkyB to offer prices for other rights that rival
broadcasters could not match
5.19 Therefore, whilst BSkyB control of United would
not necessarily lead to total foreclosure of the market if there were
individual negotiation of Premiership rights, it would nonetheless
lead to a significant and potentially harmful level of foreclosure. If
collective negotiation remains, the foreclosure effects are greater
and more certain.
5.20 Foreclosure of the market for Premiership
rights can be expected to have a significant adverse impact on the
retail (and wholesale) supply of pay-tv packages.
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the market for the retail supply of pay-tv packages
5.21 Movie and sports channels are the main reasons
why consumers are willing to make the investment (in both receiving
equipment and/or subscriptions) to receive pay-tv. The 1996 Report
"...BSkyB's premium [sports and movie]
channels had been the driving force behind most consumers' decisions
to subscribe to Pay TV, be it through satellite or through cable."
5.22 Premiership football is the most important type
of sports for a broadcaster to be able to show in order to persuade
consumers to subscribe for its pay-tv package. The 1996 Report stated
"The most important [sports rights] were
the exclusive rights to show live Premiership League football."
5.23 Moreover, United's games account for a
significant share of total viewing of Premiership games. Appendix 1
summarises an analysis by the newsletter TV Sports Markets of BSkyB's
viewing figures for Premiership games during the 1997-8 season. The
following conclusions can be drawn from this information:
20% of all Premiership games shown live by BSkyB
these United games accounted for 26.6% of total
viewing of live Premiership games and
average viewing of United games was 33% greater
than average viewing of Premiership games generally
5.24 It should be noted that these figures in all
probability under-state the attraction to viewers of United games as
compared to games involving other clubs because the quota system
relating to the broadcast of Premiership games imposes a cap on the
number of live United games that can be shown live in a season. Absent
this cap, United games would most likely account for an even higher
shares of all games shown live.
5.25 The relative attraction of United's games to
viewers is demonstrated by the fact that seven of the ten most watched
live football games (on both free and pay-tv) in 1997-8 involved
5.26 The strength of United's following means that
United is one of the few clubs in the Premiership who could expect to
broadcast its home games on a pay-per-view basis profitably. If BSkyB
acquired control of United, therefore, it would be able to broadcast
United's home games exclusively on a pay-per-view basis. The mere fact
that rival broadcasters, unlike BSkyB, would be unable to offer
United's home games as part of their pay-tv package would put them at
a competitive disadvantage as compared to BSkyB when marketing their
services to consumers.
5.27 Competition in the retail market would
potentially be distorted even if BSkyB did not retain United's home
games solely for its own satellite service. The importance of
Premiership football to consumers means that a broadcaster would be at
a severe competitive disadvantage if it could not offer live
Premiership football as part of its pay-tv package. This means that if
BSkyB holds exclusive live rights to Premiership football, then its
competitors (Ondigital and the cable operators) are in practice forced
to buy BSkyB's premium sports channel(s) in order to market their pay-tv
packages against BSkyB's satellite service effectively -- assuming
BSkyB does not sell/broadcast live Premiership programming separately.
5.28 Consequently, competition would also be
distorted in respect of the retail supply of pay-tv packages if BSkyB
is permitted to acquire control of United because the resulting
foreclosure effect on the market for Premiership rights would mean
that rival broadcasters would have to buy BSkyB's premium sport(s)
channels indefinitely, thereby making them heavily dependent upon
5.29 This would be the case even if Premiership
rights in future fall to be negotiated by clubs individually, rather
than collectively as at present. For the reasons set out in paragraphs
5.17 and 5.18 above, the market for Premiership rights would still in
practice be significantly foreclosed such that the live Premiership
rights which rival broadcasters could realistically expect to acquire
would not be as attractive to consumers as the live Premiership rights
forming the basis of BSkyB's offering.
5.30 Moreover, BSkyB enjoys control not only of
Premiership rights, but also over most, if not all, other major sports
events of significant interest to UK consumers. Therefore, even in a
world of individual bargaining of Premiership rights, rival
broadcasters would find it virtually impossible to create a premium
sports channel with content capable of competing effectively with
BSkyB's offering. As a result, rival broadcasters would in practice
still be forced to buy BSkyB's premium sports channels.
5.31 The ability of BSkyB's competitors to mount a
serious long term competitive challenge to BSkyB in the retail market
would be significantly undermined if they are dependent upon BSkyB for
the supply of premium sports channel(s). BSkyB would be able to take
steps to head off any significant challenge from a competitor at the
retail level; for instance:
BSkyB could refuse to supply its premium sports
channel(s) -- thereby precluding its competitor from being able to
offer a pay-tv package attractive to consumers
BSkyB could charge high prices for its premium
sports channel(s) -- in effect forcing its competitor either to
pass the extra cost onto its consumers (thereby making its
offering less attractive than BSkyB's satellite service) or to
absorb the extra cost itself (thereby reducing its profitability)
BSkyB could make supply of its premium sports
channel(s) conditional upon its competitor also buying other BSkyB
channels (eg basic channels)
5.32 The potential abuses open to BSkyB discussed
above are, of course, extreme examples. In reality, BSkyB would not
need to implement such clear-cut cases of abuse in order to put its
competitors at a competitive disadvantage. Given BSkyB's current
dominance of the pay-tv sector, any potential competitive disadvantage
to its competitors is cause for concern.
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the market for the wholesale supply of pay-tv programming
5.33 The wholesale market for the supply of pay-tv
programming is driven by consumer demand at the retail level.
Therefore, the most lucrative types of programming to be able to
supply at the wholesale level are those which are used to make up
premium channels, in other words sports and movie programming.
5.34 On the basis that live Premiership football is
the most important type of sport for a broadcaster to be able to offer
consumers, foreclosure by BSkyB of the market for live Premiership
rights would also have an adverse impact upon BSkyB's competitors in
the wholesale market because it would deny them access to the rights
required to be able to provide an important type of sports, and
therefore pay-tv, programming at the wholesale level.
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6.1 If BSkyB were to be permitted to acquire control
of United, detrimental effects on competition would potentially be
felt in a number of markets; namely those for:
- Premiership rights
- retail supply of pay-tv packages
- wholesale supply of pay-tv programming
6.2 More generally, BSkyB's dominance over the pay-tv
sector, and in particular as a provider of programming, would be
sufficiently reinforced to enable BSkyB to all but eliminate the long
term competitive threat posed by digital terrestrial television and
cable. The scope that BSkyB would have to abuse its position of
dominance, when freed of any constraint on its behaviour exerted by
such a long term threat, is cause for great concern.
6.3 BSkyB's bid for United gives rise to complex and
difficult issues which warrant in-depth consideration; in particular:
6.4 It would not be appropriate to accept
undertakings in place of a reference to the MMC in light of the degree
of uncertainty currently surrounding:
- the structure of the domestic game
- the structure of European club competition
- the outcome of the RPC's investigation
- the onset of digitalisation
6.5 First, it would be virtually impossible to be
confident that a behavioural undertaking would continue to remedy a
particular concern in the future when so much uncertainty exists.
Secondly, it would be very difficult in practice to monitor any
undertakings to check that they continued to be effective.
6.6 For these reasons, it is submitted that BSkyB's
bid for United should be referred to the MMC.
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Independent Manchester United Supporters Association
28 September 2020