So it seems the bidding partnership of Nine Entertainment Co and Fox Sports Australia (the monopoly supplier of sports content to Foxtel) have paid up big time for the rights to NRL games. Correcting my blog of yesterday, the final figure of $1.025 bill for the 2013-17 rights for FTA TV (3 games per week), pay TV (5 games per week) and the IPTV and tablet rights is reported as more than double the previous 5 year deal. But what are the interesting things about the deal from a competition perspective? The following points jump out at me:
- First, the bulk of the money has been stumped up by Nine, not Fox Sports, but regulators’ concerns about sports content exclusive rights pertain to pay TV rather than FTA TV
- The pay TV competition competition concerns have traditionally been that to watch football games broadcast exclusively on pay TV, consumers need to take out a pay TV subscription with the pay TV company that holds these rights
- However this bottleneck is clearly breaking down with alternative means of viewing these games now available – on IPTV (T-Box in Australia), tablets, and mobile devices.
Interesting stuff as the new world unfolds, all grist for the mill on where telecoms/media convergence is taking us and the competition implications of this.
The sale of the National Rugby League (NRL) audio-visual rights for the next 5-6 years is proving interesting, as always seems to be the case in the ever-changing telecoms/media world. My observations of convergence-related content market developments, on both the supply and demand sides, suggest to me that the competition-inhibiting effects of exclusive rights to prime A-V content have weakened in recent times. If this is the case, one would expect the value of these rights to soften. With the NRL looking likely to sell the rights for around $1 billion as optimistically hoped for by the code, up from somewhere around $750 mill five years ago if my memory serves me well, this softening may not be happening prime sport may remain king.
Yet the evidence is not without ambiguity. For a start, the mooted $1 bill seems likely to including a fair swag of “contra” value in the form of “free” advertising time for the NRL (i.e. not $1 bill in cash alone), possibly accounting for $150 million. Given this value of the free advertising time must be questionable, perhaps the deal to be done will not be as good as it looks and there has been some softening in the value of exclusive rights after all.
As with lots of things to do with telecoms/media convergence, the world is obviously changing, but it is still too early to know where it is really going!
Now that all the heavy breathing re NBN Co’s revised Corporate Plan and the rejigged roll-out forecasts has passed, it is really time to watch NBN Co’s performance closely. With the Telstra and Optus agreements in place, the roll-out contracts for the next few years signed off and under way, and a new set of targets on the table, there is now no excuse for NBN Co missing the mark over the next 12 months. While the slippage to date might be excused by delays in getting the big deals in place and some nasty surprises re the state of the Telstra network database, there can be no excuses over the next 12 months for sub-target performance. The next 12 months really are the do-or-die time for the NBN Co team. My sincere hopes they live up to, and exceed, the new roll-out and take-up targets.
A piece in yesterday’s Coms Day (16 August 2012) that “The Motion Picture Experts Group is developing a new compression standard which will effectively halve the bandwidth requirement for video transmissions … Ericsson forecast that the new standard could become commercial as early as next year” doesn’t seem to be getting the sort of profile it deserves. This looks to me to be big news, with substantial implications for the cost to consumers of downloading videos going forward, and the technical and commercial feasibility of widespread viewing of audio-visual material – including movies and live sport – on mobile devices.
The recent Optus/NBN Co deal to migrate HFC telecoms customers to the NBN as it is rolled out might just be the final major milestone in the irreversible structural shift in the Australian telecoms sector, from that characterised for all living memory by Telstra’s inherited access network hegemony to a structurally separated model for high speed delivey.
I say this shift is irreversible for a number of reasons. First, there is now an absolute groundswell of industry support for, and transition to, this new model in some form. Telstra has completely changed its focus to competing above the access layer on a common access platform (and of course playing hard in mobiles). Optus has been moving in this direction for a long time now and is working very hard to capitalise on this break point in the sector’s history. ISP consolidation is occurring apace to get critical mass for the new world. iiNet is now a major force for Telstra and Optus to contend with. TPG is adding customers apace by strategic acquisitions and organic growth. The smaller players thinking very hard about if and how they can make a go of it in an NBN world– including dealing with NBN access aggregators.
There is also now widespread community expectation that very fast broadband will be available in the foreseeable future – and dissatisfaction being expressed by those the look like getting it later rather than sooner.
Besides, if Labor is returned at the next election, the NBN rollout and forward contracting will be advanced to the point of no return come the subsequent poll in 2016. And if instead the Coalition wins in 2013, it has committed to not tearing up new in-place infrastructure, and honouring existing roll-out contracts.
All this means the new model will prevail in some form or other, even if NBN Co as we know it goes by the wayside. In short, there is now no turning back.
P.S. Mind you, if I was Telstra or Optus, I would only be moth-balling the HFC network as it is made redundant, not scrapping it. Under either an NBN Co model or a more disaggregated Coalition approach, to my mind there are real prospects of this infrastructure being pulled into next generation network. NBN Co’s driver would be to keep costs within budget for NBN Co, and the Coalition has been very clear it will take a “let’s use what we can of what’s already there” approach.
I have just burst into print in the latest edition of the Telecommunications Journal of Australia ((vol. 62. no 3, 2012). Topic is convergence-related changes impacting on the competition implications of exclusive rights to “prime” audio-visual content. Rather than rattle on re what the piece is about, the Abstract is reproduced below, courtesy the TJA’s liberal IP agreement with authors. Happy reading!
Exclusive rights to premium content, and other content-related factors, are identified in the Convergence Review Report as potentially powerful impediments to competition in the rapidly converging telecommunications and media sectors. Substantial revisions to existing regulatory arrangements are recommended in the Report to address this threat. However, it is not apparent that these concerns are justified, or that the dramatic institutional changes proposed are warranted.
Rather, a number of convergence-related developments in premium content demand, availability, and distribution suggest that any market power bestowed by exclusive access rights in the past may be eroding. This paper highlights these developments. It is concluded that, that taken together, they do indeed have the scope to weaken the threat to competition seen in exclusive content rights. Caution is counselled in proclaiming the prospect of emerging content-related threats to competition, and instituting changes to the regulation of communications competition in Australia, until market evidence is examined more closely.
The ACCC Chairman was recently cited in Communications Day (lead article, 15 June 2012) as saying the NBN will result in a competitive telecommunications environment comprised of three “sizable” telcos – Telstra, Optus and iiNet – and a number of smaller players, who will “keep the big players honest”. The smaller players will include new entrants: “ … what very much matters to us is that the barriers to entry are sufficiently low [so that] new players can come in. And in the telco world I think that’ll be the case.” In this context, to my mind the four particularly interesting things to watch as the NBN world unfolds are:
- The stability or otherwise of this initial market structure as time goes on, and the extent the Tier 2 players can – and do – take it up to the top 3
- The extent and strength of aggregator-based telcos/ISPs – will this prove to be a viable business model, or will vertical integration above the access network prevail?
- The extent to which only national players are left standing as things shake out, or whether there will be a market spot for niche local (regional) RSPs who win/keep customers because people like to buy local from someone they know, or they successfully provide locally-relevant services
- The extent to which over-the-top operators (OTTs) offering audio-visual entertainment and other consumer/business services bring competitive discipline to bear on the Tier 1 and 2 telcos/ISPs. This discipline might come from the option they will have with the NBN of providing their services direct to end customers using one of the four ports that will be installed at each customer premises. They can exert competitive discipline either just by delivering their broadband-based services themselves if they think they are not getting a good deal from the telcos/ISPs, or by adding a broadband service (and VoIP) to their core product set. I think Australia Post a key player to watch in this space. It will be looking for ubiquitous customer access for its new electronic mailbox service, and will have the financial and technical wherewithal to go it alone direct to customers if it wants to, by adding a broadband/VoIP service to their offering.