The Future of IP TV? Belgacom Wins Belgium’s Football Rights

Last month, Belgian courts confirmed the award of the country’s football –also known as soccer- TV rights to fixed carrier Belgacom. The court decision was the outcome of a suit brought by the country’s cable providers, who had contested the award of the rights to Belgacom on procedural grounds. Last May, Belgacom outbid cable and TV companies for the rights to broadcast Belgian football, paying about 36m euros a year for the next three years. The Belgacom win is a momentous one, arguably the first time a telco trumps traditional broadcasters for the exclusive rights to a major sports championship. Still, the question remains; is the Belgacom win truly a glimpse of a topsy-turvy future where telcos will compete with broadcasters for the exclusive rights to premium content, or is it a mere Belgian aberration? The truth, we suggest, is somewhere in the middle.

Telco participation in the bidding for content rights is accelerating the inflation in the cost of premium content. In an environment where the Internet has added to the clutter of content, exclusive, sticky content was bound to appreciate in value. All the same, the involvement of telcos in content bidding has contributed to an acceleration of content costs. In Belgium, Belgacom’s bidding took TV rights to double their initial cost on an annual basis. In France, the rights to French football sold for 60 percent more than under the previous contract; France Telecom’s (FT) participation was not a key catalyst in that rise (the telco dropped out of the bidding, finding the figures excessive), but it did contribute to the overall spiral of inflation. As more telcos seek exclusive content to make their TV offering relevant, the value of content is set to appreciate even further.

It is premature to talk of a revolution that would see telco TV taking over traditional broadcasting. One reason is that the enabling technology –IPTV- is not ready yet. Belgacom won the bidding even though it had yet to launch its TV services; the launch will take place in August, and Belgacom will cede parts of its rights to some TV companies in the regions its services will not reach. Further, Microsoft’s IPTV platform is said to be facing technical difficulties, with companies such as Swisscom and SBC pushing back their roll out targets or considering doing so. Another reason is the reaction of traditional broadcasters. Some Pay TV players have banked their future on exclusive content; these companies essentially fight for their lives during TV rights auctions, and are ready to pay whatever it takes. Without football, the Canal Plus or Sky business models would be severely harmed, while France Telecom need not have football to survive, at least in the short term. As pay TV players struggle to survive, they’ll drive up the cost of content, to levels that telcos would be hardpressed to follow.  So don’t expect a telco revolution just yet, though things may change 3-4 years from now, when basic telco TV programming has established itself.

There are two main models of telco access to exclusive TV content: buy the full rights, or “sublet” from a right-owner. We expect carriers to go after the second option. This path carries less financial risk, and allows operators to enter the content business with some level of caution. In the French market, France Telecom negotiated with rights-holder Canal Plus for exclusive right to deliver French football over broadband, an agreement that purportedly included some revenue sharing. In Italy, Telecom Italia bought its football rights from right-holder Mediaset. The advantage for the rights holder is the ability to generate additional revenue by reselling their rights, though they’ll be cautious not to support direct competitors. The alternative for the telco is to purchase the full rights. The advantage of such a move would be to compel subscribers to adopt IPTV services, with the cost of content dramatically increasing the level of risk.