Levelling the pitch or shifting the goalposts?

A court decision puts satellite TV in the box seat for top sport, says Paul Dacam

BSkyB's recent decision to show the Bruno-Tyson fight on "pay per view", and reports that the Premier League will hold talks about showing games on the same basis, has sparked concern about viewing access to top sporting events. The new Broadcasting Act, which received the Royal Assent on 25 July, may protect the live rights in a short list of "crown jewels" - such as Wimbledon, the FA Cup final, the Grand National, the Olympics and the World Cup - for terrestrial TV. However, a recent, little-publicised decision of the European Court may mean that popular sports will increasingly be shown only on subscription TV.

The cost of exclusive TV rights for major sporting events has risen dramatically. For many years, prices remained relatively low as sports organisers tried to secure wider TV coverage to attract sponsorship and promotion. However, an increased awareness of the value of sports rights, and increased competition for them, has meant big increases in the stakes. It has been estimated that BSkyB's pounds 670m deal with the Premier League, which gives it exclusive live rights until 2001, has a value of pounds 5bn of BSkyB's total capital value of pounds 10bn. The German group Kirch has just paid $2.2bn for rights to the 2002 and 2006 World Cup finals. Clearly, the BBC and ITV will find it increasingly difficult to compete.

Up to now, the BBC and ITV had been able to compete for exclusive rights to major international sporting events through membership of the European Broadcasting Union. The EBU is an association of European TV and radio broadcasters that provide broadcasting services in the public interest, often regardless of considerations of profitability. The EBU negotiates for rights to events for interested members who then share those rights and the fee. Earlier this year, the EBU obtained exclusive rights for the Olympics between 2000 and 2008 for $1.44bn - despite stiff competition from Rupert Murdoch's News Corporation. The International Olympic Committee turned down the News Corporation's higher bid of $2bn - presumably in favour of the higher exposure offered by the EBU members.

In July, however, the ability of the EBU to continue to compete for similar contracts was jeopardised by a decision of the European Court of First Instance. The court annulled an European Commission decision made in June 1993 which exempted the EBU's sports rights activities from the provisions of the Treaty of Rome prohibiting restrictive business agreements. The Commission had found that the negotiation and acquisition of rights jointly by the EBU on behalf of its members restricted competition. However, the Commission agreed to a specific exemption for these activities on the basis that they were "indispensable" for providing benefits such as cost savings and increased choice and quality for viewers.

The European Court was asked to consider this decision and found that the Commission had failed to consider whether the criteria for membership of the EBU were objective and capable of being applied uniformly and in a non-discriminatory manner. In particular, it was clear that a number of companies which had been denied membership of the EBU had characteristics not dissimilar to some of the EBU's members. The court said that the Commission should not have concluded (as it had) that the restrictions on competition for which it granted the exemption, particularly those resulting from the EBU membership rules, were "indispensable" to achieve the benefits it had identified.

The exact impact of the European Court's decision is still unclear. It is not yet known whether the European Commission or the EBU will appeal the decision of the European Court of Justice. However, it is understood that it will now be looking closely at the question of exclusive TV sports contracts generally. Clearly, if the decision stands, the EBU's ability to compete in the future for exclusive rights to major international sporting events will be in serious doubt. It is possible that the EBU might be able to obtain a further exemption from the Commission by tightening up its membership criteria. However, there would be significant practical difficulties and the process would take considerable time, with no guarantee of success.

It is also unclear how the decision affects existing international sporting contracts entered into by the EBU on behalf of its members, including the Olympics contract. Although these are not immediately affected, they may be vulnerable to legal challenges by non-EBU members.

What is clear is that in the area of acquisition of exclusive rights for international sporting events, the balance has been significantly tilted further in favour of subscription television. It seems that public broadcasters will increasingly struggle to bid successfully for the rights to show the most popular events. Their ability to compete to bid may soon be limited to those "crown-jewel" events protected by the Broadcasting Act.

The author is a solicitor in the media group at Lovell White Durrant.