Source : National Post

Struggle for TSN puts monopoly issue back at CRTC's door

by Matthew Fraser

Media mogul Rupert Murdoch has called televised sports the "battering-ram" of broadcasting. Mr. Murdoch should know. He has built impressive television assets, thanks largely to his aggressive acquisition of professional sports rights – the Fox network in the United States, the BSkyB satellite service in Britain, and Star TV in Asia.

Sports is unquestionably the most lucrative segment of the broadcasting industry. Sports owners sell major-league seasons to broadcasters for figures in the billions. And broadcasters make more billions through advertising, sponsorships, cable TV subscriptions, and pay-per-view revenues.

In such a rich industry, it's not surprising that sports broadcasting has succumbed to the inexorable logic of
monopoly power. Competition is good for consumers, but for suppliers it tends to drive prices closer to costs.

Sports owners resist competition by selling rights as leagues – and thus act as a cartel. Yet sports owners want market forces to apply to the broadcasters who buy television rights from them. Broadcasters, for their part, are driven by the same monopoly logic in order to keep down the cost of their rights acquisitions. In Europe, for example, a consortium of public TV networks established the European Broadcasting Union, whose main mission is to buy sports rights as a cartel.

Private broadcasters such as Rupert Murdoch and Ted Turner have attempted to consolidate their monopoly power by taking control of major sports franchises. But anti-trust officials are increasingly cracking down on the monopoly tendencies in sports broadcasting. Last month, the British government blocked Murdoch-controlled BSkyB's $1-billion (US) bid for championship soccer club Manchester United.

In Canada, anti-trust alarm bells went off when the CTV Network emerged victorious in a battle against Izzy Asper's CanWest Global for control of the biggest prize in Canadian niche television, The Sports Network. Since CTV already owns channels such as Sportsnet and Outdoor Life, the acquisition of TSN gives the private network a dominant position in the sports rights market in Canada.

Izzy Asper is understandably indignant after losing TSN to CTV. If Asper had acquired TSN, Global would have become a major Canadian player in sports broadcasting. Sports owners, too, would have liked to see Mr. Asper gain control of TSN. A bidding war between Global and CTV for sports rights would have added tremendous value to their franchises, some of which (like the Ottawa Senators) are on the verge of bankruptcy and begging for taxpayer bailouts.

Ivan Fecan, president of CTV, puts a different spin on the story. CTV claims it didn't covet TSN for anti-competitive reasons. It says that TSN's minority owner, Disney-controlled ESPN, had sniffed around at Global TV and didn't like the odour – and therefore asked CTV to make a rival bid. Also, CTV claims Sportsnet and TSN are "complementary" channels that offer distinct types of sports programs – and therefore CTV's ownership of both channels is not anti-competitive.

The blame for this dog's breakfast lies squarely with Canada's broadcast regulator, whose predictable reflex to impose an "orderly market" has once again backfired. In 1996, the CRTC spurned TSN's bid for a second sports licence in favour of CTV's pitch for a "regional" channel, Sportsnet. The regulator's message was contradictory. It denied TSN a second channel on the grounds that it would be anti-competitive. And yet the CRTC insisted that CTV's Sportsnet, by airing mainly college games and regional sports, not compete directly against TSN. The CRTC also failed to understand that, unlike in the United States where college sports is a big business, Canadians are not particularly interested in varsity sports.

Predictably, when CTV's Sportsnet went on the air last year, it immediately began tanking in the ratings. The only solution was to violate its CRTC-imposed mandate and begin competing directly with TSN. Market forces proved to be more powerful than bureaucratic fiat.

After CTV's defensive strike against Global TV, the CRTC is faced with an embarrassing dilemma. It can either accept an unintended market outcome and regulate CTV as a quasi-monopoly. Or the regulator can insist on competition and force CTV to sell off one of its two sports channels.

The Friends of Canadian Broadcasting group has proposed that the federal government issue a directive to the CRTC ordering it to promote competition in the sports broadcasting business. That would give the regulator no choice: It would be obliged to force CTV to divest itself of either TSN or Sportsnet. It's also possible the Competition Bureau, a bureaucratic rival of the CRTC, will step in and remedy the regulator's muddled decision-making with a firm ruling.

It's a safe bet that either TSN or Sportsnet will be up for sale in the near future. It's an equally safe bet that CTV will sell off Sportsnet, since TSN is the richer asset. Whoever buys Sportsnet will likely use the channel to compete directly with TSN. The logic of competition will have repudiated the CRTC's self-legitimizing mythology of an "orderly market."

Matthew Fraser is a professor of communications at Ryerson Polytechnic University. His book, Free-for-All: The Struggle for Dominance on the Digital Frontier, has just been published by Stoddart.

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