Judging from comments last week, this opinion piece of mine in The Age today is likely to upset many. How dare I suggest that sports organisation might different. Anyhow, read carefully. I am just suggesting that they need to go through the same processes as business to get exemptions from our competition laws and that there is a case to be made. Also, these ideas have a solid research base in sports economics. See, for example, the work of Roger Noll (here and here and here).
No level playing field for TV rights
The Age, 30th July, 2007.
Home teams should sell their own broadcast rights in a competitive market, says Joshua Gans.
THE C7 decision announced on Friday may have looked like a victory for “The Rest of the Media” team against Seven but with $200 million in costs still to be split up and over a year of court time lost, victory is surely bittersweet.
The judgement reads like a schoolyard brawl — fought out under the rules of the Trade Practices Act. In actuality, there were no little guys being protected, and where the consumer really stands in all this no one really knows.
But the issue in the C7 case is not all this. That is really a sideshow to the cause of it all; the prize of rights for NRL and AFL television broadcasts. But the question I have is: why does this prize exist?
In normal industries, when an entity has something to sell, they sell it and compete with similar companies in the marketplace. There is rarely a winner or loser. The companies compete and get a share of the rewards. In the process, consumers and others also get their share. The system works so well that our competition policy’s entire rationale is to protect it.
But sports such as the football codes in Australia don’t fulfil this picture. The natural competitive entities are teams. They are independently owned and managed. They have prices for ticket sales, they have employees (the players) and they have profits to accrue.
But for one of their main commodities, television broadcast rights, they cede control over the marketing and pricing to a supra-organisation. That organisation collectively deals with television and cable networks.
In any other industry, those “consumers” would be screaming about the collusive nature of the cartel. But as the C7 case shows, for some reason, they take the prize as a fact of life and then bludgeon each other in order to win it.
It need not be this way. Picture an alternative arrangement whereby home teams were responsible for selling broadcast rights. Carlton might sell its rights to Ten and Collingwood might sell its rights to Seven. Fans would have more options in terms of watching their favourite games. Teams that could generate the most devoted fans would reap the rewards.
But here is the kicker: broadcast rights could not lock a network out of the game. The likely scenario is that each would get a share. This is precisely what happens in some European soccer markets that do not have these arrangements.
Sometimes it is argued that “equality” is why such arrangements exist, so that the weak teams get some of the benefits. But because rights are with home teams, the weak teams will benefit when the more popular ones come to play.
It is surely time for the Australian Competition and Consumer Commission to take a closer look at these arrangements and sort out if they actually comply with our competition laws.
It may be that there are public benefits to having power over broadcasters — and for that matter, players — that outweigh the loss of usual competitive forces. But to give them a free kick does not seem fair in the world of business. Dare I say it, it may be un-Australian.
Joshua Gans is professor of economics at the Melbourne Business School. He maintains a blog at economics.com.au