Football OFT investigation: TV free-for-all could lead to a breakaway

The Future

COMPARED TO Rupert Murdoch's controversial takeover of Manchester United, the Office of Fair Trading's case against the Premier League has received almost no attention. That is surprising, because the landmark court case has much wider implications for the future of the multi-million pound industry that is British football.

Indeed, Sky would probably have never felt the need to spend pounds 623m of its shareholders' money on Manchester United if it was not worried that the case could end its stranglehold on the rights to screen top football matches - a major reason for its phenomenal success over the past six years.

If the OFT wins its case, however, Manchester United will only be the first club to end up in the hands of large corporate owners - provided the Monopolies and Mergers Commission clears the deal. NTL, the US cable television operator, has already secured an option to buy Newcastle United. And media giants such as Carlton, Time Warner and United News & Media are all poised to pounce.

This rush of corporate interest is down to broadcasting rights. If the OFT wins, each Premier League club will be free to negotiate its own television deal. And buying the club is the best way for broadcasters to make sure the rights are tied up for good.

According to the OFT's opponents - of which Sky, incidentally, is one - this free-for-all will open up a huge wealth gap. The largest clubs will tie up all the juiciest deals, helped by the introduction of pay- per-view technology, while smaller clubs will struggle to find anyone interested in their rights.

The results could be disastrous. Contrary to popular belief, the country's 20 largest clubs are collectively not a rich bunch. According to Deloitte & Touche, the accountancy firm, the Premier League clubs reported a combined pounds 9.5m loss in the 1996-97 season. Some smaller clubs are already struggling to cope with players' soaring wage demands. With the loss of a few million pounds a year of guaranteed income from Sky, so the argument goes, some clubs could be facing financial ruin.

However, the argument is not that simple. Mark Oliver, a partner at Oliver & Ohlbaum Associates, a media consultancy, points out that small clubs will control the rights to show all their home matches - including the ones with the large clubs. "This gives the small clubs some leverage because they can trade rights to their away games in return for the rights to home games," he says.

Geoffrey Hamilton-Fairley, the executive behind the Newcastle takeover and an OFT witness in the case, points out that Sky's monopoly on Premier League rights has prompted it to drive up prices rather than make the matches available to the largest audience.

"Only 18 per cent of the population take Sky Sports. But we know the appetite for football on television is much greater," he argues. "There is no reason why any Premier League club won't make as much money - if not more - in the event of an OFT victory." Other media companies - keen to break open Sky's monopoly - support that view.

This argument assumes, however, that the league does not disintegrate. So far, the evidence is unclear. In Italy, where football clubs recently won the freedom to negotiate their own rights, the larger clubs are threatening to exclude some clubs by reducing the size of the league.

This lends some credence to the view, expressed by a number of Premier League officials, that an OFT victory would swiftly lead to the ten largest clubs forming a breakaway league in order to make sure they captured the largest possible share of the television revenues on offer.

To be fair, an OFT victory would not be the final word on the matter. The Premier League has already indicated that it would be likely to mount an appeal. And if that failed, it could make a direct plea to the government to pass legislation giving sport an exemption from normal competition rules. That is the situation in the United States, where sports bodies have been granted immunity from anti-trust laws provided they make some games available on normal television.

And, in the end, this is what the case is all about. Should football, which is now a multi-billion pound business, organise itself according to the accepted rules of business? Or is the link between football clubs and their fans so fundamentally different from a normal relationship between a company and its customers as to warrant a unique approach? The argument has only just begun.