Conroy’s two tier TV strategy still protects free-to-air moguls: Bartholomeusz

Stephen Conroy’s proposal for a revised anti-siphoning list may still be heavily compromised by the desire to protect and pander to the free-to-air networks but it is, at least, less compromised than the status quo.

The current anti-siphoning list, which gives the networks exclusive and hence discounted rights to valuable programming, mainly sports, expropriates value from the sporting codes and severely tilts the playing field for sporting rights away from pay TV. As discussed previously, it is a protection racket and an offensive one, given that about 75% of the events on the current list have never been shown live and many have not been broadcast at all.

There was never any prospect that Conroy would simply deregulate and allow full-scale competition for the rights, with the winner the highest bidder. The free-to-air lobby is powerful and was threatening to run a miners-like campaign if it didn’t retain the core of what it had, directed at the 70 per cent of the population that has no access to pay TV.

What he has come up with is some freeing up of the less valuable rights to less important events while making some concessions to the networks in the process.

Conroy has split the list into two tiers: Tiers A and B.

Tier A contains the core “iconic” events (the Melbourne Cup and NRL and AFL grand finals and the like). The networks will have to broadcast those events live and in full.

Tier B will contain the rest – regular season AFL and NRL games and non-final games of the Australian Open tennis. The networks will be able to show those events on their digital multi-channels, where currently those channels can only show events that have been, or are being, shown on the primary channels. That is quite a significant concession to them and one that could add value to their surprisingly successful launches of extra digital channels.

Importantly the networks won’t be able to simply acquire rights and sit on them in order to deny them to their competitors, including pay TV. If they don’t use them they will have to offer them to the other broadcasters.

For pay TV, apart from the introduction of the “use it or lose it” regime Foxtel’s Kim Williams has long advocated, Australian events that are no longer broadcast on free-to-air TV – the games of AFL and NRL pay TV already broadcasts and less popular overseas programming – will be removed from the list.

That’s quite a significant change, given that at present the networks acquire all the AFL and NRL rights and then offer those they don’t want to show to Foxtel on the networks’ terms. At present that is four AFL and three NRL games a week.

Now pay TV will be able to bid for those games in its own right. Conroy did say that the most important games – in the AFL’s case Friday and Saturday night games – would be preserved for free-to-air, with the mechanism for ensuring the quality of those games yet to be negotiated with the codes.

While the sporting bodies might prefer to retain full control of their broadcast rights the practical reality is that they already have to balance the competing tensions of maximising their television audiences and their revenue bases and it is unlikely they would take all their best games off free-to-air if they had that flexibility. Allowing pay TV to bid directly for some of their rights ought to increase the value of their television rights in the looming negotiations with the networks and pay TV.

Overall the changes to the list aren’t going to completely satisfy any of those affected by them, which probably means that they are a small step in the right direction.

The list still looks too long (some more events, like Twenty20 cricket have been added to it) and the networks have retained too much of a privileged position. The Productivity Commission last year made the point that the protection was in any case unnecessary as, with their mass audiences and advertising revenues, they had the capacity to out-bid pay TV for any rights they really wanted.

The issue wasn’t about the networks and their audience retaining their ability to acquire and watch prime sports programming but rather the cost of acquiring it. The list reduces competition for rights and therefore their cost – and the value received by the sporting bodies which actually create the underlying product.

It is therefore disappointing that the networks will retain so much of their legislated privilege, but at least Conroy’s attempt at a Solomon-style decision is a very small step in the right direction.

This article first appeared on Business Spectator.