NATIONAL SOCCER LEAGUE SUBMISSIONS

on

THE DRAFT WHITE PAPER ON AUDIO AND AUDIOVISUAL CONTENT SERVICES POLICY

FRAMEWORK: A NEW VISION FOR SOUTH AFRICA 2020

15 February 2021

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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................ 3

PART I: CONSEQUENCES OF INTERVENTION IN THE SALE OF SPORTS BROADCASTING RIGHTS ............................................................................................................ 6

PART II: LISTING OF SPORTS EVENTS IN THE NATIONAL INTEREST ............................... 11

PART III: REGULATING THE SALE OF BROADCASTING RIGHTS FOR LISTED EVENTS 14 Adverse impact on sports bodies ......................................................................................... 14 Jurisdiction .............................................................................................................................. 16 Regulation of competition ..................................................................................................... 18

CONCLUSION .............................................................................................................................. 20

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INTRODUCTION

1 On 9 October 2020, the Minister of Telecommunications and Digital Technologies

(Minister) published a Draft White Paper on Audio and Audiovisual Content Services

Policy Framework: A New Vision for South Africa 2020 (White Paper). The Minister has

invited comment on the White Paper from members of the public and interested persons,

the deadline for which was extended to 15 February 2021.

2 The White Paper addresses certain issues that are of relevance to the National Soccer

League (NSL), a private organisation trading as the Premier Soccer League (PSL). The

NSL was established in 1985, and is a Special Member of the South African Football

Association (SAFA). Since 1996, the NSL has been the only body in charge of

professional soccer in this country. As such, it is the owner of all broadcasting rights to

the PSL matches.

3 As the Minister will be aware, some of the matters addressed in the White Paper that are

relevant to the PSL have also been the subject of separate processes conducted by the

Independent Communications Authority of South Africa (ICASA), in which the PSL has,

and will continue to, actively participate as an interested stakeholder.

4 The PSL has been actively engaging with ICASA throughout the course of the consultative

process that has been conducted concerning the proposed amendment of the Sports

Broadcasting Services Regulations, 2010, by way of the draft Sports Broadcasting

Services Amendment Regulations, 2018 and 2020 (Amendment Regulations).1 The

1 The PSL has made both written and oral submissions in the course of this process.

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central question of relevance to the PSL in this context is what events ought to be listed

as national sporting events.

5 The manner in which, and duration for which, the broadcasting rights to sports events are

sold has also been one of the issues raised in the context of ICASA’s Inquiry into

Subscription Television Broadcasting Services (Inquiry).2

6 The White Paper addresses similar issues under section 5.2.9, which is titled “Competition

and Access to events and sports of national interest on free-to-air platforms.” This

document sets out the PSL’s comments on certain of the proposals contained in this

section of the White Paper.

7 These comments are structured in three main parts.

7.1 In the first part, we provide context to the potential implications for content rights

owners, including sports bodies such as the PSL, of regulatory intervention in their

ability to commercialise their rights generally.

7.2 In the second part, we set out the PSL’s comments on the approach proposed by

the White Paper to the listing of national sports events in the public interest.

7.3 In the third part, we set out the PSL’s comments on the approach proposed by the

White Paper to regulating the sale of broadcasting rights for such events, with a

focus on:

2 The PSL has similarly made various submissions to ICASA during the course of the Inquiry,

including both written and oral submissions.

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7.3.1 the commercial implications of the proposed approach;

7.3.2 the issue of jurisdiction in seeking to regulate the sale of broadcasting

rights in this manner; and

7.3.3 the extent to which such regulation seeks to regulate for competition,

rather than for access to such events in the public interest.

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PART I: CONSEQUENCES OF INTERVENTION IN THE SALE OF SPORTS BROADCASTING

RIGHTS

8 The sale of broadcasting rights for its matches comprises the primary source of revenue

for the PSL. As a private organisation, the PSL receives no public funding and therefore

depends heavily on revenue from the sale of broadcasting rights and the sponsorships

linked to that broadcasting in order to fund its activities – including supporting the

numerous stakeholders that depend on the PSL for their commercial viability or livelihoods.

This is a common feature across all major sports bodies.

9 As the owners of the rights to broadcast sporting events, sports bodies are entitled to use,

enjoy and exploit these rights as they see fit. This means that the PSL, for example, has

been able to determine the manner in which it structures and offers these rights for sale to

broadcasters, thereby allowing it to achieve an optimal outcome for itself, its stakeholders

and the broader public. The PSL’s current model has been crafted in a manner that allows

it to realise the fair commercial value of its rights by encouraging competition for these

rights, and also by balancing the need for exposure across platforms (to maximise related

sponsorship revenue) with the revenue derived from offering content to subscription

broadcasters on an exclusive basis.

9.1 Sponsorship revenue is essentially driven by the PSL’s ability to achieve a level of

television exposure that will be attractive to its sponsors. However, an increase in

exposure does not necessarily generate additional sponsorship revenue that can

offset a reduction in the revenue derived from the sale of broadcast rights on an

exclusive basis. The value that sponsors attach to a product does not depend

simply on the number of viewers that see the relevant content, but also on the

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specific profile of those views and the quality of the content they consume.

Furthermore, value to sponsors will be reduced if certain rights packages: (a) are

not acquired; or (b) are sold to broadcasters that do not competently broadcast the

content. The PSL therefore tailors the packages of broadcasting rights that it offers

for sale accordingly.

9.2 The PSL has, since 2007, followed a competitive tender process through which it

invites various parties, including broadcasters, to bid for the rights.3 This has

allowed the PSL to realise a fair market value for its rights, which has in turn allowed

it to: (i) fulfil its obligations towards, and increase its support for, the various

stakeholders that it supports; and (ii) increase the quality of the content that it offers,

as well as the breadth of coverage by broadcasters.

10 Regulatory interventions which restrict the PSL’s – or indeed any other major sports body’s

– ability to freely determine how to exploit the rights to broadcast its content, would distort

this process and potentially place the sports body’s principal revenue stream at risk. For

example:

10.1 Any interference with the PSL’s ability to balance its need for exposure, on the one

hand, with its need for revenue, on the other, would threaten professional soccer in

South Africa. The need for this balancing act by the PSL is critical for its commercial

and financial viability and hence, in much the same way as other sports federations,

the PSL is best-placed to make the determination of how to sell its rights.

3 The PSL did in one instance, due to financial difficulties, temporarily extend an existing contract that

it had awarded through a competitive tender process for a further period of two years, before a fresh tender process was conducted. Refer to paragraph 13.2 below for further details in this regard.

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10.2 The PSL has also offered its content for sale for a duration that it has determined

would meet its prevailing commercial needs and imperatives, including because

such periods are attractive to bidders and allow for the investment required to

develop and deliver a high quality product.

11 This balance has been achieved by the PSL while also ensuring that a significant portion

of its content is available to the public on a free to air platform. The PSL has deliberately

developed and adopted a funding model that is tailored for the unique history and context

of professional soccer in South Africa. The model developed by the PSL may not be

suitable for any other sports body operating in South Africa or internationally. But it

achieves the PSL’s objectives in light of its particular circumstances. And the PSL’s

flexibility and discretion to develop and adopt such a model has been, and continues to

be, critical to its ongoing viability and success.

12 The process by which sports bodies sell the rights to broadcast their content should not be

prescribed. Different sports bodies may need to structure the manner in which they sell

their rights differently, depending on their own unique circumstances – including, for

example, the extent of interest that the particular sport may attract, the exposure it requires

to generate sponsorship revenue, the investment required in order for the sports body to

deliver its content, the investment required by a broadcaster in order to appropriately

broadcast the sport, and the general financial position of the sports body itself.

13 Commercial requirements may vary significantly between sports bodies and over time, as

market circumstances change. For example:

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13.1 The recent COVID-19 pandemic has had a severe impact on many major sports

organising bodies, which has created a need for some of these bodies to seek

longer-term financial commitments from broadcasters in order to ensure their

continued financial stability. The ability to sell broadcasting rights for longer terms

than might otherwise have been the case, is one mechanism by which sports bodies

can secure such financial commitments.

13.2 The PSL itself has previously, due to financial difficulties, had to temporarily extend

an existing contract that it had awarded through a competitive tender process for a

further period of two years, before a fresh tender process was conducted. In 2017,

the PSL temporarily extended for a period of two years the existing contract that had

been awarded to SuperSport in 2012. This action was necessitated by financial

difficulties that the PSL and its clubs were experiencing at the time, which required

an immediate cash injection. With the adoption of the Club Licensing and

Compliance Manual, in addition to the NSL Handbook by the NSL and its clubs,

added financial burdens were placed upon the clubs to comply with its requirements.

The clubs subsequently mandated the Executive of the NSL to urgently raise

additional funds to ensure a smooth transition towards achieving the standards

required for the implementation of the Club Licensing and Compliance Manual and

the NSL Handbook. This was to ensure the financial viability of the clubs at a time

when the clubs were taking financial strain. These financial difficulties could not

previously have been foreseen. Having the flexibility to respond commercially to

these difficulties, and temporarily adjust its rights sales process, enabled the PSL to

ensure its sustainability and the continued viability of the league and its clubs.

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14 This is an important reason why legislation should not, for example, seek to limit the

duration of sports rights agreements. Such regulation would remove the flexibility that

sports bodies require in order to respond swiftly to changing circumstances.

15 There could therefore be many unintended and unanticipated adverse consequences of

restricting the manner in which, or duration for which, sports bodies are able to exploit their

broadcasting rights, even in respect of listed national sporting events only (as is proposed

in the White Paper). This may include significant harm to the financial viability of the sports

bodies themselves and the state of the sports for which they are responsible, with knock-

on effects for a wide range of stakeholders.

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PART II: LISTING OF SPORTS EVENTS IN THE NATIONAL INTEREST

17 The PSL welcomes the White Paper's attention to the criteria which ought to guide the

regulator in making regulations concerning national sporting events.4

18 In line with international best practice and the criteria highlighted in the White Paper,

ICASA has maintained that national sporting events should be confined to those sporting

events that are national in character and not merely based on the popularity of a particular

activity.5 This was specifically recognised in the context of PSL matches.6

19 The PSL therefore welcomes the criteria proposed in the White Paper, which would require

that a national sporting event:

19.1 involves the South African senior national team (i.e. the most senior official South

African team) or an individual representing the Republic;

19.2 be in a major sport, taking into consideration the number of South Africans who play

it and/or watch it at the venue or on television, or listen to radio coverage;

4 White Paper, para 5.2.9.12. 5 ICASA’s Findings and Reasons Document on the Sport Broadcasting Services Regulations, 2010

published in Government Gazette No 33108 of 12 April 2010 (2010 Findings and Reasons) page 40.

6 See page 40 of the 2010 Findings and Reasons, as well as page 35 of ICASA's Preliminary Findings and Conclusions Document on the Regulation of Sport Broadcasting Rights published in Government Gazette No 32949 of 12 February 2010 – where the Kaizer Chiefs / Orlando Pirates derby is used as a specific example of an event that has high attendance but which would not on that basis alone qualify as a national sporting event.

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19.3 be of major importance to South African society, and not just to those who ordinarily

follow the sport;

19.4 be appropriate to list, given the event’s structure and duration; and

19.5 takes place in South Africa (save for limited exceptions in relation to international

confederation sporting events such as a World Cup or Olympic event).7

20 The PSL supports in particular the proposal that, in order to be listed, a national sporting

event ought to meet all of these criteria. To this end, and in order to avoid any ambiguity,

the PSL recommends that the list be more clearly framed as mandatory – in that the event

“must” meet all of the criteria, rather than stating that it “should”.8

21 The PSL is of the view that these criteria appropriately capture the policy intent behind the

listing of national sporting events in the public interest.

21.1 The PSL submits that the requirement for a national sporting event to involve a

senior South African national team or individual representing the country, in

particular, is an entirely appropriate criterion to impose in order to ensure that only

events which are of a truly national character are listed.

21.2 The PSL has also made extensive submissions to ICASA which demonstrate that it

would not be in the public interest for a wide range of events which do not meet all

of these criteria to be listed, given among other things the significant adverse impact

7 White Paper, para 5.2.9.12. 8 White Paper, para 5.2.9.12.

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that this would have on the sustainability of the PSL and the sport of soccer in South

Africa (and likely also other sports and their respective governing bodies).

22 The PSL accordingly supports the criteria and benchmarking set out at paragraph 5.2.9.9

to 5.2.9.12 of the White Paper. However, since these are broadly consistent with the

established position in terms of the current legislative framework and all final regulations

that have been promulgated by ICASA in this regard to date, the PSL does not consider

there to be a need to amend this specific aspect of the existing legislative framework.

23 The PSL also records its support for the statement at paragraph 5.2.9.14 of the White

Paper, where it is acknowledged that “certain exclusive sports events are critical to the

subscription model.” The PSL would however add to this by stating that certain exclusive

sports events are also critical to the sustainability of sports bodies themselves. ICASA has

previously recognised this, stating in the Sports Broadcasting Rights Position Paper and

Regulations dated 25 July 2003 that:

“The Authority understands that the sale of exclusive rights to broadcast sports

events is an accepted commercial practice. For sports organisers, the sale of

exclusive rights is a way of ensuring the maximum short-term profitability of the

event being organised as the price paid for exclusivity by one broadcaster is

generally higher than the sum of the amounts, which would be paid, by several

broadcasters for non-exclusive rights.”9

9 Page 32.

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PART III: REGULATING THE SALE OF BROADCASTING RIGHTS FOR LISTED EVENTS

24 The White Paper proposes at paragraph 5.2.9.16 that “to ensure fair competition sports

broadcasting rights of listed events must be granted:

• after an open, transparent and non-discriminatory bidding process; and

• for a period not longer than five years to allow broadcasters a reasonable time to

recoup their investment (e.g. broadcasting infrastructure installed at stadiums).”

25 The PSL has a number of concerns with this proposal, in relation to:

25.1 its potential adverse impact on sports bodies;

25.2 whether such regulation would (or should) be within the jurisdiction of the relevant

regulatory authority (even under the amended licensing regime proposed by the

White Paper); and

25.3 the degree to which this speaks to regulation of competition matters, which more

appropriately fall within the remit of the Competition Commission.

26 These concerns are addressed in turn below.

Adverse impact on sports bodies

27 We have outlined above the potential adverse implications for sports bodies of regulating

their rights sales processes generally.

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28 Although the proposals in the White Paper concerning the manner in which sports bodies

ought to sell the right to broadcast their events (where those are listed) are broadly aligned

with the approach that has been followed by the PSL in the recent past, such a process

ought not to be prescribed. To do so would deprive the PSL (and other sports bodies) of

the flexibility and discretion required to develop and implement appropriate funding models

that meet their objectives, and to respond swiftly to changing market circumstances as and

when required. This flexibility is critical to ensuring the ongoing commercial viability of

such bodies. For this reason, the PSL does not support the proposal set out at paragraph

5.2.9.16 of the White Paper.

29 Specifically in respect of contract duration, the White Paper states that the five year period

is intended “to allow broadcasters a reasonable time to recoup their investment (e.g.

broadcasting infrastructure installed at stadiums).”10 But there is no mention of the effect

that limiting the period for which rights can be sold will have on the actual value of those

rights in the first place (i.e. the amount which a broadcaster is willing to pay for them).

30 Both (i) prescribing a blanket maximum period of five years, and (ii) requiring that a

competitive tender process be conducted each time, prevents sports bodies from

responding to these types of changing market circumstances and commercial

requirements – many of which are unforeseen (as was the case with the COVID-19

pandemic).

31 The White Paper does not present any assessment of why there is a perceived need to

impose restrictions on the sale of these rights in the manner proposed, or indeed at all.

10 White Paper, para 5.2.9.16.

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31.1 The White Paper does not advance any justification for the five year limitation

proposed. ICASA has correctly acknowledged in the past that there are legitimate

commercial and pro-competitive reasons for entering into what it refers to as "long-

term contracts".11 However, no economic analysis or objective evidence has been

provided in the White Paper – or indeed in the context of ICASA’s other processes

that address this point – in support of the perception that there is an adverse effect

on competition when a broadcaster purchases broadcasting rights for five years or

more.

31.2 The absence of a competitive "bidding process" also does not necessarily mean that

there is a lack of (fair) competition between prospective purchasers of broadcasting

rights. There are many instances in which prospective purchasers of goods and

services compete vigorously outside of a formal bidding process.

32 For these reasons, the PSL considers that regulation of the sale of broadcasting rights for

listed sporting events in the manner proposed by in paragraph 5.2.9.16 of the White Paper

is not justified and risks having significant adverse effects for sports bodies (and the wide

range of stakeholders that they support).

Jurisdiction

33 The White Paper in paragraph 5.2.9.16 proposes to regulate the manner in which the

holder of the right to broadcast a sports event may make that event available for broadcast,

and the duration for which those rights may be granted.

11 ICASA’s Draft Findings Document in relation to the Inquiry into Subscription Television

Broadcasting Services, paragraph 8.3.4.

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34 Under the current licensing regime, ICASA has no regulatory power over owners of the

rights to broadcast sports events, such as the PSL. Its powers to regulate broadcasting

services under the Independent Communications Authority of South Africa Act No. 13 of

2000 (ICASA Act), the Electronic Communications Act No. 36 of 2005 (ECA), and the

Broadcasting Act No. 4 of 1999 (Broadcasting Act) extend only to broadcasting

licensees.12

35 While the White Paper proposes to extend the scope of the licensing regime to include

providers of audio and audio-visual content services more generally, it appropriately does

not contemplate extending such regulation to the owners of rights such as sports bodies.

36 The proposal set out in the White Paper would have a direct effect on the manner in which

the PSL's broadcasting rights may be sold, and therefore the extent to which it can

commercialise these rights. This would be beyond the jurisdiction of the regulatory regime,

even as amended in accordance with the White Paper’s proposals, which from a policy

perspective ought appropriately to be confined to regulating the providers of audio and

audio-visual content services to consumers, rather than content owners who do not

provide such services.

37 ICASA is the electronic communications regulator. That is its skill set and mandate. It is

not equipped to make decisions which have far reaching implications for sports bodies and

12 Under the ECA, ICASA may grant individual licences for broadcasting services (section 5(2)(b)), and

may, as part of the terms and conditions for licences, include terms and conditions as contemplated in section 8(2) of the ECA. ICASA may prescribe additional licence terms and conditions that may be applied to a licence subject to the provisions of Chapter 10 of the ECA. (section 8(3)).

Similarly to the ECA, the scope of the Broadcasting Act does not extend to the regulation of the manner in which sports organisers, who own content and are themselves not licensees under the Act, supply this content to broadcasters.

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the manner in which they are able to commercialise their property. The same would also

be true of the regulator proposed by the White Paper, albeit that the scope of its authority

would cover a broader range of audio and audio-visual content service providers. Sports

is administered under different laws. To the extent that there are competition concerns,

they should be addressed in terms of the specialised competition legislation administered

by the competition authorities, as proposed in paragraph 5.2.9.4 of the White Paper.

Regulation of competition

38 The White Paper’s proposal at paragraph 5.2.9.16 indicates that it is intended “to ensure

fair competition”. This stands in contrast to the position adopted earlier in the White Paper

to the effect that the Competition Commission is the appropriate body to evaluate and, if

appropriate, address any anti-competitive effects of the processes by which sports

broadcasting rights are sold.13

39 The PSL submits that the latter proposal of the White Paper is eminently appropriate. The

Competition Commission is a specialist body that is well-placed to assess the competitive

effects of the various processes by which content rights owners, including sports bodies,

sell their broadcasting rights. To the extent that there are concerns regarding anti-

competitive conduct, or features of the relevant market which distort or do not allow for fair

competition, the Competition Commission is empowered to investigate this under the

Competition Act No. 89 of 1998 (as amended). The regulator for AAVCS may

appropriately cooperate with the Competition Commission in these efforts, as facilitated by

the memorandum of understanding which the White Paper suggests be concluded

13 White Paper, para 5.2.9.4.

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between them (which will presumably be similar to the existing memorandum of agreement

currently in place between ICASA and the Competition Commission),14 but ultimately

regulating competition is a function best performed by the Competition Commission.

40 ICASA’s determination of which sporting events ought to be listed as national sporting

events is, as stated in the White Paper, intended to ensure access to such national events

in the public interest.15 The listing process – which requires that subscription broadcasters

must not acquire exclusive rights that prevent or hinder listed events being made available

on free-to-air broadcasting services – achieves that.

41 However, the manner in which the rights are sold has no relevance to this question of

access. Put differently, there is no rational connection between regulating the manner in

which rights for listed events are sold and the policy objective identified by the White Paper.

Once a sports event is listed, and on that basis its availability on a free-to-air platform

facilitated, the issue of access has been addressed. Any further regulation of the manner

in which the rights to such events are sold appears simply to be a matter of ensuring fair

competition, which is no different from the other issues identified earlier in the White Paper

as falling more appropriately within the remit of the Competition Commission.

14 White Paper, para 5.2.9.4. 15 White Paper, para 5.2.9.5.

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CONCLUSION

42 The PSL welcomes the White Paper’s attention to the criteria for those national sporting

events which ought to be listed in the national interest. The White Paper's benchmarking

and criteria are in line with international best practice and the regulations promulgated by

ICASA to date. In the circumstances, the PSL does not believe that a legislative

amendment is necessary specifically to legislate the criteria; and does not support such

proposed legislation.

43 The PSL does not support the White Paper’s proposal to regulate the manner in which

rights to broadcast such listed sporting events are sold.

43.1 The White Paper does not appear to have fully considered the impact which such

regulation may have on the ability of sports bodies to optimally commercialise their

rights and therefore ensure the sustainability of their sports.

43.2 The proposed regulation would, and ought to continue to, fall outside of the

jurisdiction of the regulatory regime, even as amended in accordance with the White

Paper’s proposals.

43.3 The proposed regulation seeks to address matters of fair competition, which are

more appropriately addressed by the Competition Commission. The PSL supports

the White Paper's proposal that the appropriate body to deal with competition issues

is the Competition Commission.

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44 The PSL therefore recommends that the Minister removes from the White Paper any

proposed regulation of the manner in which, or the duration for which, rights to broadcast

listed sporting events are sold.

45 The PSL thanks the Minister for the opportunity to submit these comments, and would

welcome any further opportunity to engage with the Minister on their content.