Sport and broadcasting rights: adding value

April 2013

By Rafael Ferraz Vazquez, Intellectual Property Lawyer

Without broadcast technology, many sports fans around the world would not be able to share in the excitement of major sporting events. Broadcasting technologies have transformed the spectator experience, making the many thrilling performances featured in top-tier sporting events available on multiple platforms and in multiple formats.

The sale of broadcasting and media
rights is a key income stream in the
business of sport. (Photo: istockphoto
Laura Young)

The Olympic Games were first televised in Berlin in 1936 and broadcast to an estimated 162,000 people using just three cameras, only one of which was capable of live transmission. Zeppelins were used to ferry news reels around Europe. Just over 75 years later, thanks to major advances in broadcast technology, an estimated 4.8 billion viewers were able to tune into seamless coverage of the 2012 London Olympic Games in high definition and 3-D formats, along with a dazzling array of angles, effects and tools to view and review every detail of the event.

The sale of broadcasting and media rights has become a key income stream in the business of sport. The sector has benefitted in multiple ways from the huge injection of financial resources derived from the sale of these rights. It has created opportunities to nurture the potential of talented athletes and to boost the long-term financial viability and performance of teams that are then better placed to attract the best athletes. Such is the importance of broadcast revenue that some sports have sought to attract broadcasters and viewers by adapting their rules. For example, volleyball has adopted a new scoring system that makes it easier to predict the duration of matches. Similarly, the tie break was introduced in tennis matches, along with yellow tennis balls to make it easier for viewers to follow matches on television.

Media revenue overtakes ticket sales

Broadcasting and media rights sales income already surpasses ticket sales as a primary source of revenue in most sports. Many clubs, including, for example, Spain’s premier soccer team, Real Madrid C.F., have experienced a shift away from ticket sales toward sponsorship and television rights as principal revenue sources. In the 2011/2012 season, the club received over 512 million euros (some US$664 million) in revenue from the sale of broadcasting rights.

The critical importance of broadcasting rights as a means of funding major sporting events is most evident with respect to top-tier global sports events. The sale of broadcasting rights for the Brazil 2014 FIFA World Cup has already generated some US$537 million. From 2009 to 2012, Olympic broadcasting revenue amounted to US$3.914 billion.

Broadcasting rights also help boost other revenue streams, such as in stadia advertising, corporate sponsorship deals and naming rights, all of which acquire added value because of the visibility that broadcasting affords.

Negotiating rights

From the viewpoint of broadcasters, as the most expensive type of broadcast content, sport is a highly prized TV product.

(Photo: istockphoto Vladimir Kolobov)

Broadcasting rights may be negotiated as a single bundle for one territory or may be split according to the type of rights and media involved, for example, for television, or mobile or Internet broadcasts. Even when a single package is negotiated, sublicensing can result in the fragmentation of rights. Rights may be divided as follows:

live broadcasting – the most important and valuable right. This attracts the highest TV audiences, but interest falls abruptly once the event concludes;
Webcasting – live streaming on the Internet is gaining audiences. Many events – including the Olympic Games, Formula 1 and tennis events – are webcast live and in high definition in many territories;
delayed broadcasts/streaming – this format still attracts large audiences;
packaging of highlights – commonly used for informational purposes, this has become a popular source of online content. Online users can view their preferred highlights on demand.

Rules of the Game

The intellectual property (IP) laws governing broadcasting vary significantly from country to country. This can make it difficult for those organizing and selling broadcasting sports rights, insofar as their room for maneuver in negotiating deals may be affected by the degree of exclusivity enjoyed by local broadcasters.

The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations of 1961 establishes minimum standards of international protection for broadcasting organizations. Under the Convention, broadcasting organizations have the right to authorize or prohibit certain acts, namely,

the re-broadcasting of their broadcasts;
the fixation of their broadcasts;
the reproduction of fixations of their broadcasts; and
the communication to the public of television broadcasts if such communication is made in places accessible to the public against payment of an entrance fee.

Olympic Games Broadcast Revenue (US$)

Rome 1960: 1.2 million
Tokyo 1964: 1.6 million
Mexico City 1968: 9.8 million
Munich 1972: 17.8 million
Montreal 1976: 34.9 million
Moscow 1980: 88 million
Los Angeles 1984: 286.9 million
Seoul 1988: 402.6 million
Barcelona 1992: 636.1 million
Atlanta 1996: 898.3 million
Sydney 2000 1,331.6 million
Athens 2004 1,494 million
Beijing 2008 1,739 million

Source: International Olympic Committee (IOC)

Although the Rome Convention provides a basic level of protection, it is silent on a number of issues, such as cable broadcasting, that have become relevant in today’s digital environment. Recognition of the need to modernize the IP protection available to broadcasters prompted a review of existing international standards by WIPO member states as far back as the mid-1990s. This issue remains under negotiation in WIPO’s Standing Committee on Copyright and Related Rights (SCCR).

Illegal retransmissions expand

Although the rights of broadcasters are provided for within national laws, the illegal retransmission and streaming of sports events continues to expand, especially in the online environment.

Digital piracy is the direct result of the combination of two factors, namely, the popular appeal of sport and the widespread availability of low-cost technologies that make it possible for infringers to illegally retransmit broadcasts with relative ease and little investment.

Digital piracy can occur through two main channels of retransmission. First, peer-to-peer networks, where Internet users stream the retransmission carried by peer-to-peer (P2P) networks. The quality of such transmission is directly proportionate to the number of online users: the greater the number of users the larger the number of packets exchanged and the better the quality of the streaming. Second, unicast streaming, where the content is stored on a server and transmitted to each user individually. The quality depends entirely on the technical processing capacity of the server and Internet speed.

Digital piracy poses a serious threat to the economic value of broadcasting rights. In sports coverage, this value is ephemeral. Viewer interest in a contest peaks just before the final result is known. Thereafter, the genie is out of the bottle, and interest falls dramatically. This characteristic of sports content adds urgency to the need to crack down on digital piracy, to ensure that a modern legal framework for right owners is in place and that outdated legislation does not prejudice the interests of broadcasters and sponsors and, ultimately, the financial well-being of sports organizations.

Right owners are concerned about the scale and impact of digital piracy. During the 2010 FIFA World Cup, over 18,000 illegal broadcasts were identified by FIFA during its tournaments. According to Sven Schaeffner, head of the FIFA TV World Cup Office in Brazil, in addition to investing “considerable resources in delivering high-end products to its clients, “FIFA also makes great efforts to protect its rights and the rights of its media rights licensees by putting in place a wide range of monitoring systems, including, without limitation, satellite monitoring, broadcast and Internet monitoring, as well as other measures to safeguard broadcast and other IP rights.”

Digital Piracy during the 2010 FIFA World Cup

18,227 cases of digital piracy
16,426 live user-generated content (UGC) streams (90% of all infringements)
12,638 of the live UGC streams removed in real time

Brazil limbers up for sports bonanza

As the thrills and spills of the London 2012 Olympic Games fade, the focus now is on Brazil. The country is preparing to take center stage in the sporting universe in the run up to the 2016 Olympic Games in Rio de Janeiro - a first in South American sporting history. Over the next two years it will also host the FIFA Confederation Cup in June 2013 and the FIFA World Cup in 2014.

Brazil is currently the world’s tenth largest audiovisual market. Sport has traditionally been an important source of broadcast content in the country and currently accounts for some 27 percent of total weekend air time. As host to major sporting events in the coming months and years, Brazil has taken steps to optimize the economic value of these high-profile events by safeguarding the interests of broadcasters and sponsors.

In 2009, the Brazilian parliament enacted the Brazilian Olympic Act (Law 12,035/2009) and the so-called World Cup Law (Law 12,663/2012) in 2012. These laws, similar to those adopted by other host nations in the past, are designed to combat ambush marketing, regulate advertising in and around official sporting venues and clamp down on digital piracy.

The Brazilian World Cup Law goes much further in protecting the interests of right owners than Brazil’s pre-existing legislation in this area, the so-called Pele Law (Law 9,615/98). For example, the World Cup Law prohibits anyone but the official broadcaster from capturing and broadcasting images of events. However, it does permit use for non-commercial purposes, although this is limited to up to 3 percent of a match, or 30 seconds of a ceremony. It also requires that FIFA or its local broadcaster provide a compilation of highlights up to two hours after each match. Other provisions grant protection of trademarks associated with the event, prohibit unauthorized association with the event’s marks and establish expedited infringement proceedings during the event.

In contrast, the Pele Law establishes, as an information right, both access to venues and the capturing of images for journalistic purposes. In response to a dispute between media organizations and event organizers on this issue, with respect to the 2007 Pan American Games, the Brazilian courts held that the Pele Law allowed media organizations to capture and use images for journalistic purposes. It is, however, unlikely that such an understanding will be forthcoming in relation to the World Cup Law which, notwithstanding the Pele Law, governs access to and use of images specifically in relation to the FIFA World Cup 2014. Although the Brazilian Olympic Act regulates the IP relating to the 2016 Olympic Games in Rio, it remains silent on broadcasting rights.

Whatever the benefits that accrue to Brazil as host to major sporting events in the coming years, it seems clear that IP rights in general, and broadcasting rights in particular, will continue to play a key role in generating the levels of investment necessary to fund these spectacular events. If past experience is anything to go by, Rio 2016 not only promises a raft of new sporting achievements, but also the breaking of new records in terms of revenue generated from the sale of broadcasting and other media rights.