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More competition - higher prices

The most popular subject in Talkback (the SCMP's curious letter column that isn't) seems to be problems with Pay TV, and specifically the sports channels.

This is an interesting example of greater competition not having the normal effect of reducing prices.  Quite the contrary in fact - the cost of subscribing to all the sports channels in Hong Kong is much higher now than it was a few years.

There was a time when all you needed was a subscription to Cable TV (and for your building to have Star Sports).  Now you would need Cable TV, PCCW's Now Broadband TV and TVB Pay Vision (Star Sports has, of course, become a pay channel on Now TV).  On top of that, there are now several extra channels dedicated to specific sports (Golf, Cricket, Basketball), and of course they cost more.  If you add all that up it is certainly not cheap - though it's hard to imagine that anyone would have all the extra channels.

Greater competition drives up the price that the channels pay for rights to various sports, and that gets passed on to viewers.  It's happened in the UK, where Sky Sports used to have exclusive rights to the Premier League, but now Setanta have some games, so you need to pay an extra £10.00 for their package on top of £34.00 for all the Sky sports channels.

However, two things make Hong Kong different from the UK

  1. In HK, almost all the sports channels are exclusive to just one platform.  In the UK you can choose satellite or cable and still get all the channels - although cable TV are in competition with Sky, they still carry all the Sky sport and film channels, and a Sky dish will pick up Setanta Sports.
  2. In HK, you have little choice but to sign an 18 month (or longer) contract.  In the UK, most people are on monthly contracts.  If you have an 18 month contract for Now's golf channel you are stuck with it even if they lose the rights to the events you want to watch.

When you consider that there is no guarantee than any given channel (or combination of channels) will continue to hold the rights to any event indefinitely, it's easy to see how you can end up paying for one channel and then have to pay extra because another channel has acquired the rights. 

How many people signed up to Cable TV in March or April last year without realizing that the EPL rights had been won by Now?  A few, I'm sure.  And even if most people do know that Now have a 3 year deal for the English Premier League, and that Star/ESPN have 2 years left on a 3 year deal for the UEFA Big Cup, who knows the position with golf or tennis tournaments or the FA Cup? 

Who knew that Star/ESPN wouldn't have rights to the Rugby World Cup?  Some people are not happy that they need to take out a 12 month subscription for Cable TV just for this one event.

Going back to where we started, the reason it works out like this is that the competition is not really between the channels for viewers (I can't choose to watch the EPL on Now or Cable), but between the channels to get more events.  The main beneficiaries are the organizations selling the rights.  Why did we have 3 Premier League teams playing a tournament in Hong Kong this summer?  Could it be because Now paid an estimated HK$1bn for the rights to the EPL?  I rather think it could.

The choice of sports and the depth of coverage is far greater than it has ever been before.  We have high definition coverage, we have every single game live, but we are paying a great deal more for the privilege.

Maybe PCCW have overpaid, and won't get enough subscribers, but even if that happens it seems quite possible that Cable TV (or someone else) will still pay a lot of money for the rights next time around and will pass that on to their subscribers.

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