Foul play from Sky
Due to hiked up prices, some licensees are unable to keep their Sky subscriptions and lack of football is causing custom to drop. Tom Sandham takes a look.
The last 12 months have been a bit of a rollercoaster ride for Sky. In July 2003 the satellite broadcasting giant hiked up its prices by up to 22 per cent, causing outrage among customers. A month later, bosses agreed to pay £1.02bn for all Premier League coverage until May 2007. Almost as quickly as they had done that, however, the Association for Licensed Multiple Retailers (ALMR) was on Sky's back, demanding an Office of Fair Trading (OFT) investigation.
In December last year the European Commission (EC) announced it had brokered a deal with the Premier League to allow eight games to be shown on terrestrial television. Some might have believed the EC deal was a chink in the armour, but Sky was unperturbed and back on the pace by the following spring.
By April of this year the OFT had closed its investigation. A month later the terrestrial channels failed to meet the reserve price for the eight games in auction and Sky was back in the game.
As if that wasn't enough, this week bosses revealed their next move - upping prices again, this time by up to 18 per cent.
Licensees are obviously fuming. The news has left many shell-shocked and all the reasoning along the lines of "don't have Sky if it's not financially viable", will never take away the frustration.
Of course the question on the lips of most licensees is: how the hell does it get away with it?
The answer is quite simple really. As a business, Sky will charge a fee it believes to be in line with the package it provides, which, incidentally, it says has been "greatly enhanced" this year.
This comes as no consolation to the licensee who cannot afford the package though, particularly if they need the football to drag in the custom.
Many licensees have had to cancel their subscriptions to Sky in the last 12 months because the cost was not being covered by the custom. But as they had no choice but to cancel, they witnessed a quick drop in trade as drinkers fled to nearby Sky pubs.
"Sky has us over a barrel," said Charlie Way, licensee at the Legh Arms in Knutsford, Manchester. "Sky is essential to me but every day it nibbles into my takings. I cancelled my subscription during June and July and saved £1,000, which pays back what I spent on the last price rise but now it is doing it again. I'm shocked by its audacity."
The ALMR has seen an investigation mount to nothing and now a further increase in cost. Understandably, chief executive Nick Bish is as angry and upset as many of the licensees sure to suffer at the hands of the increase.
"It's a further slap in the face for the trade," said Mr Bish. "It suggests that Sky has precious little interest in its commercial customers.
"Sky may well argue that there are more matches, but there is no getting away from the fact that this is not a good deal for most licensees. We estimate that the average subscriber will see the cost per game increase to £100, meaning most pubs will need to work even harder to cover costs and make the economics stack up.
"In April, the company announced record operating profits of £438m and a 770 per cent increase in profit after task - now we know who is underpinning that profitability."
Surprisingly, the hike comes at the same time that Sky has got itself a very good deal in terms of exclusive rights to the "must see" events. It has paid far less to screen far more games, but this benefit has not been passed on to subscribers. Sky defends the price hike, however, and draws attention to the rise in the number of people going to pubs to watch sports on Sky - which has gone up by 750,000 in the last 12 months.
It also emphasises the new package which offers 33 per cent more live Premiership matches this coming season, giving viewers 88 live Premiership matches - 22 more games than last season.
There are those in the trade who agree and operator Laurel plans to keep plugging away.
"We're absolutely convinced that it is working for us," said Ian Payne, chief executive at Laurel. "All the epos data proves that Sky is big business for us. I believe we now have to make them work harder to offer us more for our money.
"I understand that some licensees lose customers if they give up their subscription, but we have to make sure that when they go to another pub with Sky, that pub is a Laurel one."
Whether others can follow Laurel remains to be seen.
Unauthorised decoders offer no solution
The temptation for many licensees is to look at alternatives to Sky, one being unauthorised decoders. Much has been made of the illegal nature of the decoders, not least by the Premier League who sold the rights to their live football matches to Sky.
Premier League head of legal affairs Simon Johnson has re-iterated that decoders cannot be used.
"Under Section 297(a) of the Designs and Patents Act 1988 it is an offence to possess a decoder, and under Section 297 it is illegal to dishonestly receive a programme with it," explained Mr Johnson. " Sky is the only company to have the rights to show live Premier League games in this country, so anyone broadcasting them live through another medium at any time is breaking the law.
"This is irrespective of the 'closed period', which makes it illegal for Sky to broadcast between 2.45pm and 5.15pm on a day of full league fixtures - a law which protects the gates of the smaller clubs."
Related articles:
Outrage over Sky fee rise (21 June 2004)
Sky retains full monopoly over Premiership (13 May 2004)
OFT closes case on Sky (2 April 2004)
Sky loses football rights (17 December 2003)
Sky gets Premier League football until May 2007 (11 August 2003)
Trade group demands fresh Sky TV probe (7 August 2003)
Anger as Sky hikes up fees (3 July 2003)
