High World Cup Prices: Where do we go from here?

In a piece titled “Football, security and striking a delicate balance” on 15 April 2014, the Straits Times’ From the Gallery section observed:

Despite a cross-carriage rule that will mean Starhub subscribers get to enjoy the matches for the same price, Singapore still the most expensive places in the world to catch the tournament beyond the opening match, semi-finals and final.

Source: http://nnennaorg.blogspot.sg

Cross-Carriage

To understand why local football fans are so frustrated over the matter of sky high World Cup subscription prices, a look back at the circumstances surrounding the subscription price of World Cup 2010 for Singaporean viewers – before the implementation of the cross-carriage rule – provides a large part of the answer. The business decision of Singtel to break into the local pay TV market in a big way by bidding an exorbitant amount to win the rights from Starhub to broadcast the English Premier League (EPL) for three years from 2009 sent a crystal-clear signal to FIFA on how far it could go in setting a price for World Cup content for Singaporeans.

Reports have suggested that FIFA asked Singtel for $40m for the exclusive rights to all 2010 World Cup games, after discovering just how much the telco was willing to pay for BPL television rights. – Dodgy football pitch or S’pore own goal? The Business Times, 13 Feb 2010. 

One also has to ponder how different things might have turned out had FIFA not been influenced by the reported $400 million that Singtel paid to be the exclusive broadcaster of the English Premier League (EPL) starting this August. FIFA then saw fit to raise its asking price even higher. – Have a heart, telcos – make your customers happy The Business Times, 7 May 2010

On more than one occasion, Government ministers have stressed that the purpose of cross-carriage rule is to widen the distribution of exclusive content across pay TV retailers like Starhub and Singtel, and not to regulate prices. In practice, the belated introduction of the cross-carriage rule after the World Cup 2010 imbroglio sought to prevent companies like Singtel from sabotaging consumers as the Singtel effectively did in its attempt to break Starhub’s stranglehold of the EPL market. It proved to be a pyrrhic victory for Singaporean consumers, and cross-carriage was the Government’s response to disincentivise telcos for making crazy bids as the same content would have to be offered at the same price to rival telco consumers.

World Cup prices – 2010 vs 2014: More than meets the eye?

Source: football-wallpapers.com

For the 2006 World Cup, Starhub charged subscribers $15 under an early-bird promotion rate. For World Cup 2010, the rights for which were won by a last-ditch joint bid by both Singtel and Starhub, this figure had jumped nearly four-and-a-half times to $70.62 with the non-promotion rate at $94.16.

This time around Singtel shrewdly went it alone and held the early bird promotion rate at $94.16 with the non-promotion rate set at $112.35.

While there was a rise in rates from the 2010 figures, the non-promotional price for World Cup 2010 and the promotion price for World Cup 2014 was identical, a fact which lead some to conclude, not incorrectly, that there had been no real rise in prices, but only if one subscribes early.

These identical rates were more down to a hard-nosed business decision by Singtel, rather than any overwhelming desire to keep costs as low as possible for the Singaporean viewers.

With negotiations heading into extra time on the 2010 World Cup that kicked off in June, Singtel and Starhub had to join hands to meet FIFA’s demands – reportedly in the region between $40 million and $100 million – or risk the wrath of fans here. A deal was eventually sealed, albeit 35 days before the first match in South Africa kicked off. 

But this time around, there was ample time for either Singtel or Starhub to plan their moves.

Singtel did, and outflanked Starhub with its exclusive bid for the 2014 World Cup screening rights. It wanted to use the content to sell more EPL subscriptions…..(the World Cup 2014) is thrown in free for those willing to sign up for or extend their existing EPL contracts with Singtel for two years.

Singtel was essentially using its World Cup content to sweeten its EPL offerings, which fans had complained were expensive. A basic EPL package now costs $59.90 a month, almost twice the $34.90 sports bundle Singtel used to offer that came with EPL and other premium content like Uefa Champions League and Spanish La Liga. – Making football content affordable to all The Straits Times, 4 April 2014.

In spite of the operation of the Government-mandated cross-carriage rule for World Cup 2014, Singtel was still able to keep its eyes firmly on unlocking shareholder value, foregoing the prospects of a joint bid with Starhub.

In the aftermath of Singtel winning broadcast rights for World Cup 2014, Starhub complained about Singtel’s conduct in the matter as it had made a “sincere offer” to Singtel to submit a joint bid to FIFA. StarHub’s Chief Marketing Officer Jeannie Ong in an unambiguous media release, lambasted SingTel for going it alone instead of placing a joint-bid.

“We are concerned that customers will have to pay more for 2014 FIFA World Cup…At a time of escalating sports content costs, we made a sincere offer to our competitor for a similar arrangement as the last World Cup. A joint bid would have spread the cost of the content and allowed both operators to offer the tournament at a more affordable price, benefitting all viewers in Singapore. Unfortunately, our competitor chose to acquire the rights exclusively. The higher price our competitor paid for the exclusive rights for this year’s World Cup (compared to 2010 World Cup) exacerbates this trend.”

Would such a joint bid have really reduced prices for the consumer? Should the Government have reined in Singtel earlier and on what basis? Could Mediacorp have also come in to join hands in a private-public bid as well since it is going to pay Singtel to acquire the right to screen the opening match, semi-finals and final of World Cup 2014 anyway? Could FIFA have been persuaded to understand that for World Cup broadcasting in a small country of five over million people, the Singapore Government has mandated that it would no longer be left solely to private sector operators, and hence some financial sobriety is in order? Compounding the questions on the minds of many, no one really knows what is on the agenda when the telcos negotiate with FIFA or their appointed agents for World Cup broadcasting rights, like whether 4am broadcasts can be used as a bargaining chip by local telcos to negotiate a lower price for example.

Minister Lawrence Wong’s reply in parliament on 14 April 2014 acknowledged that a joint bid could have some impact, albeit marginal in the Minister’s opinion, as FIFA is the ultimate price setter in this game. Of course, it remains open to question as to how much of an impact this would have translated into, as information on bidding/broadcast alternatives and strategies are not public information. In fact, many football fans viscerally feel that World Cup broadcasting should be treated like a quasi-public good by policymakers, in view of the popularity of the sport and in view of the profits Singtel makes from its EPL broadcasting rights.

What are the alternatives? 

Source: http://sportsbusinessmanagement.wordpress.com

So, where do we go from here in light of FIFA’s superior negotiating position and Singtel’s EPL gambit which let the genie out of its bottle in the first place and exacted a heavy price on Singaporeans for any future World Cup broadcasting bids?

At outset, it is important to acknowledge that World Cup 2014 broadcasting has gone up 20-40% around the world from the previous instalment in South Africa. Going forward, FIFA will remain in a superior bargaining position, given the logic of supply and demand, even though Singapore fans were already paying $94.16 in 2010, double what fans in Malaysia and Hong Kong are going to pay this year.

Since Singapore cannot totally influence FIFA’s rates, the question before us now is what local strategies can be employed to moderate any rise in prices, or even lower prices for such exclusive content in future, in spite of what happened in 2010. Minister Wong informed parliament that the Government was going to review the anti-siphoning list (any event on such a list requires that it must be available for Mediacorp to acquire), in addition to reviewing cross-carriage measures as well.

Reviewing the anti-siphoning list with a view to expand it (to include quarter-final matches or even second round matches for example) may well be a good place to start as it opens the prospect of more matches to be offered free-to-air for the viewing public. What this would mean is that Mediacorp, the free-to-air provider would have to devote more money for sports-related public service broadcasting towards the World Cup, a potentially controversial move even if the majority of sports fans were in favour. Who would foot the additional costs if any, and which sports would be removed from its list to accommodate more World Cup matches?

A number of readers and football lovers have narrowed in on Singapore Pools, the only Government-sanctioned sports lottery operator which benefits from World Cup punting, to contribute towards subsidising the Singapore viewing public in reasonable proportion to its soccer-related betting collections and payouts. How much the lottery operator actually makes from World Cup related gambling is open to question.

A Pools spokesman confirmed yesterday that the gaming operator will purchase airtime “through a combined deal” with both telcos during the June 11 to July 11 tournament. According to sources, Pools will spend $2 million. – Pools to chip in, The Straits Times, 13 May 2010

Minister Wong made the same point in Parliament – that Singapore Pools already contributes. Even so, it would be useful to know the specific contribution Singapore Pools’ makes and whether there is any scope for an increase, in addition to support with regard to some free-to-air coverage. As it stands, the Minister added that Singapore Pools provides support through a wide range of different schemes not just for MediaCorp, but also for Singaporeans to watch the matches at community centres.

A second option the Ministry of Communication and Information could consider is to mandate that Singtel and Starhub and/or Mediacorp conclude negotiations and sign off on an agreement with FIFA 12 months prior to future World Cup kick-offs. This would give the winning bidder or joint bidder enough time to ramp up an advertising campaign to recoup as much monies devoted to purchase content from FIFA, and in turn lower the final World Cup subscription fee for consumers which can be announced shortly before kick-off.

There is an argument that such a 12 month cut-off date will strengthen FIFA’s hand as it knows a mandated negotiation conclusion date is in force. However, the same argument can be made with equal vigour without such a deadline as FIFA’s hand only gets stronger with each passing day prior to kick-off anyway.

With companies and advertisers given the benefit of time to set aside the appropriate budget, they would have more creative flexibility to devote resources, financial or otherwise for TV or related advertising. During the 2010 World Cup, Puma, a leading sporting goods manufacturer reported that it would not be advertising on TV in Singapore during the World Cup as it needed at least four months to produce a TV commercial, while the rights were secured by Singtel/Starhub 35 days before kickoff.

Lobbying for better prices for Singaporeans

I asked the Minister whether the Programme Advisory Committee for English Programmes (Pace) had made any specific recommendation or advised MDA on measures to reduce the costs of watching the World Cup to Singapore consumers in light of the escalating costs from the 2010 experience.

The Programme Advisory Committee for English Programmes (Pace) has a sports fan as a new chairman, and if he has his way, bellowing at your favourite football team from your living room will become cheaper….He echoed the findings of the latest biennial Pace report, which deemed the subscription rates for the FIFA World Cup charged by Starhub and Singtel “high”. – Panel to watch football more closely; Viewers’ interests subjugated in past years: new chairman The Business Times, 8 Sep 2011

The Minister replied while the specifics were not on hand, Pace would have given feedback if it was something that mattered to them. Along with the Government’s upcoming review of the cross-carriage measures and anti-siphoning list, perhaps its time Pace, an advisory body, look into how it can add value on behalf of consumers to the discourse. The telcos are likely to oppose any Government interference in the setting of World Cup prices. And with a large foreign population in Singapore accounting for 36% of the total population, some with very high disposal income to boot, the telcos may feel that they should not be prevented from setting a price it feels Singapore residents can and should pay. Such an approach unfortunately also penalizes average Singaporeans and their choices in deciding whether and where to pay to watch the World Cup.

Conclusion

Source: FIFA

With the benefit of hindsight, there would appear to be some scope for the Government to further explore the prospects of a joint-bid between the telcos and to understand how the free-to-air provider, Mediacorp, a 100% Temasek owned company can enter the fray, even partly, with a view to bring the World Cup to Singaporeans at a more reasonable price. To do this, the Government would need to work with the telcos to better apportion costs for Singaporeans and strategise the issue with the public interest in mind.

For now, unless the Government goes back to the drawing board and addresses the issue from the perspective of the average football-loving Singaporean, FIFA notwithstanding, local commercial interests are likely to continue determining how much Singaporeans pay to watch the World Cup.

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Useful Links

Singapore costliest place to watch World Cup? – http://www.goal.com/en-sg/news/3880/singapore/2014/03/18/4690244/singapore-costliest-place-to-watch-world-cup