Digital Video Rights Are Going The Way of Exclusive TV Rights and The Only Real Question For Digital Sites Is How Much The Courts Will Let Them Get Away With

Philip M. Stone July 3, 2007

Digital video rights are going the way of exclusive TV rights, and the only real question remaining is how much the courts will allow those digital sites without any rights contracts to push the envelope and show as much video as they can.

Note two recent events in the US that show what is going on. The National Basketball Association (NBA), coming off the lowest TV rated finals series in its history suddenly signs a huge new contract with ESPN-ABC and TNT at 20% more than the previous contract. Bad ratings and a higher fee – what’s going on here? Easy answer – the new contract allows the rights holders to show the games also on such digital platforms as the Internet and mobile phones. And you just know that having paid a fortune for those rights they are going to guard very jealously against what video others will put on their sites.

And then there’s the National Football League (NFL) The days of web sites running unlimited video of players and coaches are over. It is now limited to 45 seconds of video per day and that includes news conferences, interviews and field reports. The NFl’s reasoning is that it is protecting the web sites of its 32 teams.

And let’s not forget how NCAA (collegiate) officials threw a reporter out of the press box at a recent baseball playoff game because he was producing a live text blog play-by-play of the game and they said that type of coverage infringed upon ESPN’s rights. The media howled at that and the NCAA has backed down, saying it will permit non-video blogging.

Media groups, of course,  say all of this is in violation of freedom of the press, but the sports rights holders merely see this as extending the value of their franchise -- an extension of the rules governing TV exclusivity that now are applied to digital. The courts on both sides of the Atlantic have generally ruled that the sports rights holders do have the ok to sell coverage rights, so it basically boils down to either paying the piper or seeing what one can get away with.

And the “what one can get away” angle is on play very much on the opposite side of the world – in Australia, and digital operators globally should keep a close eye on what the Australian courts rule.

Sports rights holders are trying to enforce a 45-second rule on the amount of sports footage shown by the rights holder that then can be broadcast digitally by others. Usually in Australia TV stations function via the “three by three” rule which means they can show up to three minutes of highlights of an event three times a day.

“We don’t think online should be treated any differently from free-to-air broadcasting and certainly it should not be treated disadvantageously,” Jack Matthews, chief executive of Fairfax Digital, told The Australian newspaper.

The Australians are looking particularly at what their digital sites will be able to show from the Beijing Olympic Games next year. And already the skirmishing has begun beforehand with another digital venue -- coverage of Australia’s National Rugby League (NRL) games.

Giant telephone company Telstra’s exclusive rights to broadcast those games on the internet and mobile phones is not at issue, but rather how much of those games can also be shown on rival digital sites. Telstra asked the Federal Court to impose the 45-second rule but the judge refused saying that TV networks were airing up to two minutes of coverage and he saw no reason why digital should be treated harsher than that.

So now the TV networks are beginning to question the “three by three rule”. If the Internet and mobile phones can show two minutes of footage whenever it is called up then why shouldn’t TV be able to show two minutes of footage as often as it wants?

The question really boils down to a definition of “fair amount”.

The Olympic Games, of course, is THE major sporting event, and winning TV and digital rights does not come cheaply. So it figures that the International Olympic Committee (IOC) and the rights holders do everything they can to stop “ambushes”.

In Australia, for instance, the 7 Network has paid A$76 million ($64 million, €47 million) for Australian free-to-air, pay TV, online and mobile broadcast rights. What with production costs and the like it will need around A$100 million of advertising to make a profit.

So the last thing it really needs is for a competitor to send around 30 people to Beijing to operate basically a 24-hour video and audio site containing interviews, news stories and the like. Now of course that site won’t have rolling coverage of the sporting events themselves, but it will make full advantage of just how much it can “get away with”. The IOC and 7 Network will watch it like a hawk but if the Australian courts make a ruling beforehand that does allow that site to contain the two best minutes of a day’s  play and show it on demand then does 7 really get what it paid for?

Back in the US, now that the NBA has made its deal and shown how much money can be earned from digital rights then it doesn’t take rocket science to figure out that other sports organizations are going to do the same. It’s basically down to the simple concept of “follow the fan”, and where the fan wants to get the most information up-to-the-second on a sporting event then the rights holder will be right there eyeing the $£€.

In the US the digital limitations seem to focus on video whereas other international sporting organizations are trying to restrict international news pictures (International Rugby Board for this year’s World Cup, and also the Australian Football League) .

NFL spokesman Greg Aiello told the Washington Post the big problem sport rights holders have is balancing friendly media relations, and the good those relations can do to the bottom line, against the new bottom line of making big money on digital rights. “We’re trying to balance protection of our business assets with the equally important need to receive extensive news media coverage and communicate with as many fans as possible on a regular basis. We have no interest in controlling or limiting what news Web sites do, except limiting the use of video that undermines our own Internet operations. We have important business interests on the Internet, and we have to be careful about that.”

For web sites not affiliated to rights holders It all really boils down to what is considered “reasonable” – the term the NFL used before it gave the more precise 45 seconds definition.

How important is digital? Sports marketing consultant Neal Pilson told Mediapost, “The media tends to focus on ratings. But in every meeting we have, our talks focus on digital.”

For the 2008 Olympic Games GE’s Bob Wright told a recent seminar that NBC would show 2,400 hours of live coverage, including more than 1,000 hours of live streaming covering 24 sports.  That means not just terrestrial and cable broadcasting but the Internet and mobiles.

And with NBC being the IOC’s largest customer ($3.5 billion for US rights to the summer and winter games from 2000 to 2008) you can bet there will be very stringent rules on what video anyone else in the US can use.

For competing digital media sites there really isn’t very much they can do on the video front. The battle lines are still drawn for still pictures and even text, and that’s why keeping an eye on the Telstra case in Australia as well as the negotiations with the International Rugby League are all important to seeing which way the digital rights wind blows.

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