Thursday, January 1, 2009

Two monopolies are worse than one

The monopoly of Sky Sports in broadcasting live games from the English Premier League was broken up as a result of a 2006 ruling from the European Commission. This saw Irish company, Setanta Sports, enter the market in August of that year who along with Sky Sports paid a total of £1.7 billion for six "packages" over three years. Sky purchased four of the packages and Setanta two. In the most recent three year deal Sky to secured five of the packages to Setanta's one. But has this really put a dent in the monopoly power the ruling sought to reduce?

When it comes to each match the broadcaster of that game is still a monopoly. The same match is never shown live by both companies. If a viewer wants to watch a particular game there is still no choice. The viewer faces a monopoly.

In the last season when Sky had sole rights to the games they broadcast 88 games on their Sky Sports channels and 50 games on the pay-per-view channel PremPlus, a total of 138 games. In the first year of the new deal Sky broadcast 92 games and Setanta covered 46, again giving a total of 138 games. (In Ireland Setanta can also broadcast an additional 30 games at 3pm on Saturdays not available in the UK.)

How much would it cost to watch these 138 games?

In the one monopoly regime the consumer pays a monthly fee of about €30 for the Sky Sports package and could buy a "season ticket" for PremPlus for about €80. This gives a total annual outlay of (12 x €30) + €80 = €440.

With the current two monopoly regime the consumer pays a monthly fee to both Sky Sports (c. €30) and Setanta Sports (c. €18). This gives a total annual outlay of (12 x €30) + (12 x €18) = €576.

Putting "competition" into the market has simply increased the cost to the consumer by more than 30%. We must assume this was not what the European Commission intended. If they really wanted to create some competition they should have ordered that the same game be shown by more than one broadcaster. At least then the consumer would have choice.

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