BIDS FOR FOOTBALL BROADCASTING RIGHTS

BIDS FOR FOOTBALL BROADCASTING RIGHTS:

(Impact on consumers): 7.

Mr Zainudin Nordin asked the Acting Minister for Information, Communications and the Arts given the recent successful bid by SingTel to telecast the English Premier League football matches (a) how do the consumers in general benefit from

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the competition among the pay-TV retailers; (b) whether the media market is large enough to sustain such competition; and (c) how does this competition compare to the ill-fated experiment of SPH's MediaWorks and MediaCorp.

8.

Dr Lim Wee Kiak asked the Acting Minister for Information, Communications and the Arts with the competitive bidding for popular overseas sports channels by SingTel and StarHub (a) what is the Ministry doing to ensure that subscriptions to the sports channels remain affordable to the majority of Singaporeans; and (b) whether the Government will consider providing free viewing of selected games on MediaCorp TV during key sporting events, especially World Cup soccer matches.

9.

Mr Calvin Cheng asked the Acting Minister for Information, Communications and the Arts what is being done to address the concern that the exclusive sale of football broadcasting rights has driven up prices and reduced choices, to the detriment of consumers in Singapore.

The Acting Minister for Information, Communications and the Arts (RAdm [NS] Lui Tuck Yew): Mr Speaker, Sir, with your permission, I would like to take the next three questions together.

Mr Speaker: Yes.

RAdm [NS] Lui Tuck Yew: Mr Speaker, Sir, I thank the Members and Nominated Member for their questions and concern for consumers affected by the exclusive sale of football broadcasting rights in the pay TV market.

First, let me address the concerns that are topmost on the minds of sports fans, that is, the subscription cost of the sports packages and termination charges for those locked into contracts with StarHub Cable Vision (SCV).

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MICA and the Media Development Authority (MDA) share consumers' concerns. Hence, following the announcement of the outcome of the EPL bid, the MDA had asked SingTel to provide early clarification on the pricing of their sports packages, so as to assess whether any intervention would be necessary to protect consumers' interests. I note that SingTel announced its pricing plans last week, offering viewers the choice of a standalone EPL channel or a full sports package, both at prices comparable to SCV's current sports package charges. SingTel has also offered their customers UEFA Champions League and UEFA Europa League at no additional cost if they sign up for a one-year contract. Most consumers will thus not be adversely affected as far as pricing is concerned.

Separately, the MDA had also asked SCV to provide clarity on their termination charges for subscribers who may wish to switch subscription plans. SCV has since announced that they will not be charging any early termination fees for subscribers of sports packages who cancel their service after July 2010.

Dr Lim had also raised the question of whether Government will consider providing free viewing of selected games on MediaCorp TV during key sporting events, especially World Cup 2010.

The MDA requires key sporting events to be made available for free-to-air television. These include the Olympic Games and SEA Games. Specific to World Cup, I understand that the terms of the World Cup broadcast rights include the requirement for selected key matches to be made available on free-to-air television. These include the opening, two semi-finals and final matches of the World Cup 2010.

Let me now address the questions raised on competition in the pay TV

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market. Competition in the pay TV market has been evolving ever since SingTel entered the market in 2007. Prior to this, SCV carried a total of 99 TV channels, of which only three were focused on sporting events. Today, with competition, consumers have access to a wider and more diverse choice of programmes available on 179 channels, of which more than 13 are focused on sporting events and this is of course over both SCV as well as SingTel mio TV.

Competition has also, I believe, provided consumers with higher quality and innovative content, as well as more flexibility in viewing choice. High-Definition (HD) content is increasingly being made available on both platforms. Consumers are now able to catch some of the latest episodes of hit Hollywood series as early as 24 hours after their US telecast. Consumers can now choose from a range of viewing options, from subscription tiers to á la carte channels to pay-per-view content and cross-platform access.

The question of whether Singapore's media market is large enough to sustain competition is really one that is best answered and determined by the operators over the course of time. In the case of SPH's MediaWorks and MediaCorp, they decided that the free-to-air television market was not large enough to sustain both players, and hence they made a commercial decision to consolidate. For the pay TV market, the competition landscape is still evolving and so it is inappropriate to conclude at this stage that the market is too small to sustain competition. The operators will continue to be driven by market share and profitability and will no doubt be constantly reviewing their position as the pay TV market evolves.

Late last year, the MDA commissioned a study on competition issues and are

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currently exploring various short and long term regulatory options.

Let me take this opportunity to share briefly with the House some of the issues that the MDA has to consider in reviewing the various regulatory options. They include foreign content owners' rights, Singapore's obligations to abide by international conventions that protect such rights, and commercial agreements for broadcast of sports events.

Singapore is signatory to a number of international conventions in intellectual property protection which require us to protect the rights of copyright holders, including their exclusive right to authorise their works in the manner they choose. These apply to both content owners

such as the Football Association Premier League (FAPL), and channel providers such as Discovery Asia and the Star Group.

In the case of the English Premier League, the FAPL dictates, to a large extent, the terms of the agreement, including the sale of exclusive rights in Singapore, and the ability of pay TV retailers to share content. The MDA has to give due consideration to these commercial agreements as they involve international content owners who are not our licensees.

The MDA is also monitoring international developments on this issue. Countries such as the UK and France are facing similar issues with content exclusivity in their respective pay TV markets. The UK has, in fact, been holding consultations as to whether to impose regulatory measures in the market since January 2007, and has yet to arrive at a decision. The MDA’s goal remains to find an effective solution that best addresses consumers’ concerns while fulfilling our international and commercial obligations.

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Dr Lim Wee Kiak (Sembawang): Thank you, Mr Speaker. Supplementary question. I would like to ask the Acting Minister : how much did SingTel bid for the EPL rights and in his opinion, does he think that Singapore has overpaid for the rights? Comparing this with the other nearby countries such as Malaysia, Indonesia as well as Thailand, or similar economies such as Hongkong, Taiwan or South Korea, what steps does the Government intends to take to prevent such overbidding from causing the consumers to pay much more in the future?

RAdm [NS] Lui Tuck Yew: Thank you for the questions. First of all, I think the tender returns are actually governed by confidentiality agreements so it is not for me to reveal those amounts, even if MICA and MDA are aware of it. But if you are a shareholder of SingTel, obviously you are in a better position to ask those questions.

As to whether we overpaid or how much we have paid compared to the rest of the countries, again the data on this is vast. The question really is, whether the Government should intervene and how much should the Government intervene and in what areas should the Government intervene? Traditionally, the Government has moved in areas where it concerns the provision of basic essential services and to make sure that this is made available and at an affordable price. This is not the case for the English Premier League, although I am sure consumers may disagree on this, to some extent. Because essentially, it is entertainment and if the Government moves in this area, then in what other areas should we intervene? And so, we have got to do so very, very carefully.

Ultimately, if I may quote from a commentary that was written a week-plus ago, in the Straits Times by one of the reporters, Mr Chua Hian How, and I

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thought it was quite a thoughtful piece and therefore, I want to quote the closing paragraphs of his article. He said: "The greater power lies in the consumers' hands or rather their wallets. If the costs of entertainment (he is talking about entertainment here) outweighs the benefits, perhaps it is time to cancel that pay TV subscription." Those are his words. And this is not something that I am recommending but I think there is a truism here that it is for the consumers to decide for themselves whether that package, be it in sports, be it in entertainment or something else altogether, is appropriate for them.

Mr Calvin Cheng (Nominated Member):

Thank you, Minister, for showing us that competition in the long run would be beneficial to consumers but our experience with MediaCorp and MediaWorks have shown that it is actually in the short run, that competition can be the most destructive, especially during the initial market-entry phases. So, what stop-gap regulatory measures does the Ministry have to ensure that these sort of destructive competitive measures are not prevalent in the short-run and what timeframe does the Ministry think these regulatory stop-gap measures can be implemented?

RAdm [NS] Lui Tuck Yew: In the case of SPH and MediaCorp, as I have mentioned in the reply, that was in the free-to-air market. We understand, of course, over the years, that the landscape for free-to-air versus pay TV had also been evolving with more eyeballs shifting to pay TV, in part because of the variety as well as the quality of content that has come up over the years. And so, the commercial operators, on their own, after a period of time when they were competing intensively, decided that the pay TV market, because of the shrinking viewership, was probably not the most ideal landscape for them to go head-to-head over an extended period of time and

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they made the commercial decision to consolidate their operations.

For pay TV, I think, we have not arrived at such a situation yet. It is, in my mind, still an evolving landscape and as to whether and when it achieves a certain degree of stability and in what form that will take, it is yet to be seen. Today, you have SCV having a subscriber base of over half a million; you have SingTel having a subscriber base of over a hundred thousand. So, it is quite an unequal market and over the coming years, how that will shape up, we really do not know and so, therefore, they compete intensively on packaging of content, bundling of channels, in order, they believe, to provide the best package for consumers.

The MDA is looking at this carefully. But, as I mentioned in the example of the UK, they have been looking at this over the past three and a half years and have yet to arrive at a decision. Obviously, because the issues involved are actually very, very complicated. But where we have some concerns, is actually, because we have seen the number of exclusive contract arrangements increased over the years – in the early days when only SCV was the provider – there were about 64 channels that were locked in, what I called ECAs and as of October this year, these have increased to 131 channels, to the best of my knowledge. And what it means, I think, is that, with such an arrangement, you actually introduce new barriers of entry to potential service providers and which is something that we hope to see, particularly so, given the next generation nationwide broadband network that we want retail service providers to be able to come in and participate in the market. And too many ECAs may result in barriers to entry that would impede such new companies from

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being formed and from participating in offering innovative services to consumers.

The other problem, of course is, as we have seen in this case for soccer, that there is some penalty, if I may use that term, to consumers. But, ultimately, I think as MDA looks at this and considers what are some of the possible measures that we can introduce to improve the situation, I want to reiterate the point that consumers will have to send their own signals to service providers as to whether they want to continue with the arrangement that we have today.

Mr Zainudin Nordin: Mr Speaker, Sir, thank you very much. If ever anything that we have learnt from the financial crisis was that free market sometimes, do not work. Just like to ask whether MDA has considered a regulated monopoly for such a small market for distribution and maybe, operating on a cost-plus basis? Secondly, I would like to ask whether the issues on the exclusive right actually impede the real free market we are looking for, because in actual fact, we are only guided by one service provider – when we want to buy a product, the product cannot be given by other service providers.

RAdm [NS] Lui Tuck Yew: The MDA is looking at a range of options and we will take time to study these carefully.

Mr Speaker: Mr Sin, last question.

Mr Sin Boon Ann (Tampines): Mr Speaker, Sir, given the great popularity of football matches, I am not sure if a model that is funded by a free-to-air broadcast, sponsored by advertising, could be an alternative that the Government would consider as opposed to an exclusive broadcast of these very popular sports programmes? That way, you can actually have a wider reach and allow more people to have the pleasure of viewing these matches, subsidised by advertising

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revenue, instead of just on a pay-to-view basis that these cable TVs are now charging.

RAdm [NS] Lui Tuck Yew: I think the point would be that, whether you have it on free-to-air TV or pay-per-view, somebody would have to bid for the content and bid at an appropriate price. And whether soccer is more important than anything else that we have to formulate such an arrangement to bid for these content and exclude something else altogether. So, those who are passionate about the arts may say, why not the arts; why not educational programmes and so on? Sir, that is, indeed one of the dilemmas.

Hypothetically, we can tell whoever it is – service providers, in this case on a free-to-air – that you can only charge subscribers a certain amount. So, they would bid accordingly. But bear in mind that the content owner is not obligated to sell to us. And the content owner may say that if other countries follow a similar hypothetical practice that they would run into great difficulties and challenges to be able to pay the transfer fees, to be able to pay the players that they are paying in Europe, in particular. So, the content owner may very well say, "I would not sell to Singapore" and we would be at a greater loss, particularly for the consumers who feel that they are prepared to pay the price for the package. And, therefore, when the Government thinks about intervening in a competitive marketplace, I think they have got to be very careful about what we should do and how much we should intervene. So, that is why, we are taking the opportunity to relook at this, not because of the assumptions that we have made in the past and the considerations from the past were wrong but because the landscape had over the last three years evolved and changed and the number of exclusive arrangements has grown and we are watching these with some concern. And,

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therefore, we are taking this opportunity to take a fresh look at it, consult with other people, including those in the private sector, to determine what is the best approach that we can take – balancing the need for commercial arrangements to proceed; balancing our international obligations and taking into account the needs and the interests of consumers.