Mobile TV: Content will be King

March 1, 2006

Davina Garrod

Davina Garrod

Convergence makes mobiles into entertainment centres. Davina Garrod and Alana Tervo look at developments as big-screen content migrates to small-screen devices.

Hailed as the next “killer mobile application”, mobile TV is taking off in Europe. 2005 saw the launch of pilot programmes, new handsets and new consumer and audiovisual services. Amongst significant deals brokered, Vodafone linked up with British Sky Broadcasting (BSkyB) and popular channels such as HBO, whilst mobile operator Hutchison 3G, Buena Vista International Television and the Walt Disney Internet Group formed an agreement to give consumers access to hit shows on mobile in the UK. EU trials show consumer demand. The platform has the potential to increase the number of hours that viewers consume — good news for both content rightsholders and mobile operators. However, the slow initial adoption of third-generation mobile technology (3G) in Europe demonstrates that the success of mobile TV depends on the availability of quality content as well as technology. Indeed, regulators and industry players agree that the future growth of mobile TV will be fuelled by the availability of content in competitive conditions.[¬]

EU operators are currently defining their service proposition in particular, and determining “must have” and other types of content. Operators continue to view premium sports as critical content and most are also working with providers of popular shows and channels in order to develop mobile-specific product offerings. The European Commission is taking great interest in the development of mobile TV and, in particular, is eager “to ensure that critical sports content is not held back by anti-competitive conduct during the take-up of new mobile technology[¬]. Thus, the Commission initiated a Sector Inquiry into the provision of sports content over 3G networks (the 3G Inquiry).[¬] The first part of this article looks at the current practices in sports content licensing and the implications of the 3G Inquiry on mobile operators and content providers. This article then goes on to look at other audiovisual content and the Commission’s work in this area.

A game will never be missed again
Sports content is a key driver of mobile TV uptake (as it was for pay TV). In Norway, for example, a mobile TV collaboration between Telnor Mobil and broadcaster NRK will enable mobile TV access to live transmissions from the Turin Winter Olympics, highlights from key Olympic events, and daily recaps of current Olympic events. After Vodafone’s highlights from the Ashes tournament showed strong demand in the summer of 2005, Giles Clarke, the English Cricket Board’s chief negotiator, stated the importance of encouraging mobile TV take-up. For sports rightsholders, mobile provides new opportunities to enhance relationships with fans. With its high market penetration levels and accessibility (anywhere/anytime), mobile TV reaches a much larger audience with greater frequency than is achievable through either broadband or interactive TV. For mobile operators, sports is viewed as an essential content offering, currently driving subscriber upgrades to 3G and expected to attract consumers to spend money on new services.

Ensuring access to sports content is not unduly hindered has been a central theme of recent European Commission statements and investigations. Aside from the 3G Inquiry, Commission officials have made further speeches on this subject and the European Commission has investigated the joint selling of media rights in several significant football licensing deals, including in the UEFA Champions League,[¬] Deutsche Bundesliga[¬] and the English Premier League [¬] investigations. The Commission’s concluding statement in the 3G Inquiry identified four “bottlenecks” (outlined below) which may limit access to sports content on mobile devices. Together with the outcomes of the football cases, this statement provides guidance on how to navigate the legal issues that surround sports content deals on mobile.

Joint selling of media sports rights
Joint selling is the collective sale of individual associations’ media rights to broadcasters and other content distributors. The Commission takes a favourable view of the joint selling of media rights in certain circumstances. In the UEFA Champions League, Deutsche Bundesliga and the English Premier League cases (all concerning the joint selling of football media rights [¬]) the Commission recognised that joint selling provided efficiencies and consumer benefits, in particular by creating a single point of sale for a branded league media product. The benefits of joint selling were re-iterated in the 3G Inquiry. The Commission recognised that both rightsholders and mobile operators broadly support the joint selling of sports rights. The Inquiry concluded that joint selling can enhance redistribution and efficiency in the production of content. However, the Commission stated that, in order to ensure that 3G rights are exploited to the maximum, unexploited rights should revert to individual rightsholders for individual sale if the collective selling of those rights fails.

Cross-platform bundling versus unbundled rights
Cross- platform bundling refers to a practice where the rightsholder sells bundled audiovisual rights for various platforms to one or few operators. In the 3G Inquiry the Commission stated that unbundled rights should be given preference over cross-platform bundling. This follows the cases involving the joint selling of football rights where the Commission requested that mobile sports rights packages be separated from other broadcasting rights to give the new technology fair conditions to develop. TV operators are often at an advantage in purchasing sports rights due to the higher value that TV rights carry compared with 3G rights. Therefore, if rights are sold together, consumer access to 3G sports services could be restricted, especially if TV operators do not allow the rights they purchase to be exploited over mobile networks. Situations where the output of premium sports is limited through the ‘warehousing’ of rights by powerful operators will be targeted by the Commission.

Overly restrictive conditions on rights bought by mobile operators
Restrictions on content rights purchased by 3G operators in terms of the length of transmission or the timing of the coverage (ie live or deferred) are generally unjustified [¬]. In the 3G Inquiry the Commission stated that it will monitor cases where such restrictions apply to establish whether they result in less investment by mobile operators in new technologies. Furthermore, the Commission will target situations where time embargoes limit the availability of 3G content.

Exclusive access contracts for mobile operators
In the 3G Inquiry, the Commission noted that awarding exclusive rights to a mobile operator may be pro-competitive as it may drive the development of this new technology. In contrast, in English Premier League, the Commission requested the Football Association Premier League Limited (FAPL) not to sell all TV rights exclusively to one single buyer. In that case FAPL content had been sold to one downstream operator, BSkyB, since 1992. The Commission considered that a continued exclusive licence to the powerful BSkyB would foreclose access to competing broadcasters [¬]. This means that mobile operators currently have an opportunity: dominant bidders are, to the mobile operators’ advantage, prevented from purchasing all sports media rights, whilst the mobile operators themselves are permitted exclusive access mobile contracts.

Fair tender process
Sports media rights should be sold in an open, transparent and non-discriminatory tender procedure. In addition, sports rightsholders are not obliged to sell the rights to the highest bidder. Qualitative criteria can be more important (including the level of audience penetration of the bidder in the contract territory, acceptance by the bidder of all relevant broadcast obligations, proposed promotional support, production capability and host broadcast expertise, and proposed method of delivery or transmission). Further, sports rightsholders must not otherwise unfairly discriminate in favour of the incumbent national TV operators. One of the main concerns in UEFA Champions League was the foreclosure effects resulting from UEFA selling all Champions League TV rights to a single TV broadcaster per territory on an exclusive basis for up to four years at a time. This reinforced the position of the incumbent TV companies as the only ones with the financial strength to win the bids, as well as leaving a certain number of rights left unexploited. Furthermore, the arrangement prevented the diffusion of UEFA content on mediums other than TV (such as 3G). For mobile operators, who may not have the same financial clout as TV broadcasters, the football joint selling decisions present an opportunity as discrimination in the tender procedure should be minimised. For sports rightsholders, the decisions provide guidance on what types of selling procedures will be permitted.

Contract length
Long contracts should be avoided; three years appears to be the rule of thumb, although the market situation, position of the contracting parties and the scope and nature of the rights should also be considered [¬]. The Commission has often considered joint selling contracts for football rights in excess of three years to be likely to foreclose competing broadcasters/ distributors from lucrative sports content.

Mobile operators and sports rightsholders have already taken the above considerations into account in their licensing agreements. For example, in 2003 Vodafone Group won wireless rights for the UEFA Champions League for three seasons in 12 European countries (a mix of exclusive and non-exclusive rights). The same year mobile operators Hutchison 3G and Vodafone signed a joint three-year deal to cover the FA Premier League. It thus appears that the Commission’s efforts to ensure that the development of mobile technology is not hindered are having success. Unfortunately, the Commission has provided much less guidance on content licensing for mobile TV outside of sports.

Taking the show on the road
In addition to sports, mobile operators and content providers anticipate that music and well-known channels and shows will be attractive to consumers. Vodafone, for example, has made a series of deals with MTV, Eurosport, Discovery and HBO allowing them to offer a range of entertainment and documentary programmes. Consumers will be able to access shows such as Sex and the City in both its entirety and in mobisodes (clips or cut-down versions for mobiles). Content that feeds off existing shows or offers behind-the scenes video is likely to be widely available initially on mobile TV, but eventually there may be bespoke made-for-mobile shows.

Given the relative under-development of non-sports mobile TV content, there is currently less specific Commission guidance in this area. However, it is likely that certain conduct which would cause concern in relation to licensing of sports rights may also cause concern in other content deals, particularly if one party holds a dominant position (under EU or national competition law).  

Television Without Frontiers
Beyond gaining access to content, mobile TV providers need to understand the rules which regulate the provision of content. At the moment rules concerning content provision only pertain to television broadcasting. However, on 13 December 2005 the Commission adopted the legislative proposal for the revision of the Television Without Frontiers Directive [¬] (TVWF). It proposed that the content rules in TVWF should become technology neutral and should therefore apply to all audiovisual services, including mobile TV [¬]. Therefore, instead of the application of rules depending on the delivery platform, they will depend on the nature of the service. The Commission distinguishes between linear (scheduled) audiovisual media services, and non-linear (on-demand) audiovisual media services. The following rules may be applicable to both types of services:

  • protection of minors [¬]

  • prohibition of incitement to hatred [¬]

  • promotion of production and access to European content [¬]

  • identification of the media service provider [¬]

  • identification of advertising and other forms of commercial content

  • prohibition on surreptitious advertising

  • prohibition on tobacco advertising and alcoholic beverage advertising aimed at minors

  • prohibition of sponsorship by and product placement of tobacco products and prescription medicinal products. 

Linear services may also be subject to restrictions on the insertion of advertising spots, as well as their duration, frequency and the proportion of programming they represent. We await the final version of the revised TVWF.

Mobile TV is now a dynamic market in Europe. 2006 is already proving to be an exciting year with the frequent amount of new content deals being announced and the rolling-out of new services. The Commission is working to ensure that this exciting development is not hindered by anti-competitive practices. Guidance now exists on how to navigate the legal issues surrounding the distribution of sports content via mobile TV. The Commission is also revising the rules governing the existing content regime, in conjunction with stakeholders.

Davina Garrod is a Partner in the EU/UK Competition Group at McDermott Will & Emery UK LLP: Alana Tervo is a Trainee Solicitor in that Group.