The Australian anti-siphoning scheme – will the latest Government review lead to the long-overdue reform?

This was not the only time in the anti-siphoning scheme’s 28-year history that it has seemed like one of the Australian Government’s lower priorities – to the slight frustration of those who are affected by the scheme.  It is, in fact, remarkable that the anti-siphoning rules have survived (largely unchanged) during this period of transformational change to the sports media landscape – and it seems that the prioritisation of other issues (e.g. NBN network, digital platforms inquiry and media law reform) has played a part in this.

Last week the new Labor Government released a consultation paper to initiate their review of the anti-siphoning scheme in Australia.  Many will be hoping that this review is different to previous reviews and leads to the significant reforms that have long been overdue.

For anyone interested in sports broadcasting, the consultation paper is a good read.  It is a comprehensive summary of the history of the anti-siphoning scheme since it was first introduced in 1994 and the significant changes to the sports media landscape since then.  It also raises a number of interesting questions, including the central question of whether the scheme achieves its objective of free access to televised coverage of important sports events. 

In this article, we refer to the events on the anti-siphoning list as Listed Events.  Whilst all of the Listed Event are currently sports events, we note the Government is seeking views on whether it should also include non-sporting events which are ‘nationally important and culturally significant’, such as the ANZAC Day commemorations.

A common misconception

The paper acknowledges the common misconception that the anti-siphoning scheme ensures that all Listed Events will be broadcast on a free-to-air channel.  As we explain below, the scheme does not guarantee there will be free coverage.  Instead it seeks to increase the likelihood of free television coverage of Listed Events and the threshold question is whether the scheme, in its current form, actually does this. 

The fact is Listed Events are often broadcast on a free-to-air channel not because of the anti-siphoning rules, but because it is in the interests of both the owner of the event (e.g. the sports governing body) and the free-to-air broadcaster to do this, and the parties are prepared to enter into binding contractual commitments in this regard (including by way of minimum broadcast obligations).

This common misconception might explain why the anti-siphoning scheme has survived so long without material change.  Politically it would be a high risk move for a Government to amend (and in particular reduce) the scope of the scheme as this might result in an over-simplified narrative that the Government has taken away the sports fan’s right to free coverage of their favourite sports events. 

The need for change

The consultation paper raises a number of issues for consideration and this article does not propose to cover them all.  Instead, we will consider two issues where we consider there is an urgent need for change, being:

• the fact that the scheme does not apply to streaming services and other online services; and
• the disconnect between the acquisition-based rule (and automatic delisting arrangements) which are at the heart of the scheme and the practical reality of how sports media rights are sold.

The regulatory rule at the heart of the scheme

The rule at the heart of the scheme is in paragraph 10(1)(e) of Part 6 of Schedule 2 to the Broadcasting Services Act 1992 (BSA).  The consultation paper refers to this rule as an acquisition-based rule.  It operates as a licence condition for subscription television broadcasting licensees (Pay TV Licensees).  In broad terms, paragraph 10(1)(e) makes it a breach of a licence condition for a Pay TV Licensee to acquire the right to televise a Listed Event unless a national broadcaster (ABC or SBS) or a commercial free-to-air broadcaster (e.g. Nine, Seven or Ten) has already acquired the right to televise that Listed Event. 

A key issue with the acquisition-based rule is that it only applies to a very limited number of ‘acquirers’ within the contemporary media environment.  The consultation paper shows there are currently 35 providers of television and ‘television-like’ services in Australia.  It highlights the prominent role of streaming services, BVOD services and digital platforms as major acquirers of media rights to sports events (including Listed Events).  Most of these providers do not require a subscription television broadcasting licence as the services they provide are not ‘broadcasting services’ under section 6(1) of the BSA.  In fact, it is difficult to name a major provider of sports content in Australia (other than Foxtel) to which the rule applies.

For the scheme to have any chance of achieving its objective of increasing the likelihood of free access to Listed Events, it clearly needs to apply to all providers who are active in the market for the rights to these events, and not only to the limited number of Pay TV Licensees.  Otherwise it is only a matter of time before exclusive rights to a Listed Event are acquired by one of these providers and placed behind a paywall. 

Automatic delisting

There are limited exceptions to the rule that a Pay TV Licensee may not acquire rights to a Listed Event unless a free-to-air broadcaster already has the right.  The main exception is where the Listed Event ‘automatically delists’ which happens 6 months prior to the start of the Listed Event (section 115(1AA) of the BSA). 

The rationale for automatic delisting (as set out in the relevant Explanatory Memorandum) is that Pay TV Licensees should have some opportunity to acquire the rights to a Listed Event if the free-to-air broadcasters are not interested, and the point at which the free-to-air broadcasters are considered to be ‘not interested’ is fixed at 6 months prior to the start of the Listed Event.  Before changes were made to the anti-siphoning legislation in 2017, this period was 12 weeks.

The operation of the acquisition-based rule and the automatic delisting arrangements have always seemed somewhat divorced from the practical realities of how the media rights to Listed Events are sold by sports governing bodies. 

Media rights are critical to sports governing bodies, often constituting their single biggest source of revenue.  To give them some certainty over revenues, sports governing bodies look to secure a media rights partner for a multi-year period - usually at least 3 years, sometimes as long as 7-8 years.  For the same reason, they usually commence the media rights sales process a long way in advance of the Listed Events themselves (often as much as 2-3 years in advance). 

In contrast to the practical reality of how sports media rights negotiations are conducted, the acquisition-based rule and automatic delisting arrangements appear to assume that rights to a Listed Event are acquired on a per event basis in the year or so leading up to the event.  The effect of this disconnect is that it creates a significant amount of uncertainty in the sales process and hampers the ability of the sports governing bodies to plan well in advance and run a strategic process which maximises competitive tension and the prospects of a successful outcome. 

An example of uncertainty with the current rules is the question of what precisely is delisted at the 6-month deadline.  If a sport is offering the media rights to 5 seasons of matches and the rights have not been acquired by a free-to-air broadcaster 6 months prior to the start of the first round of the first season, the better interpretation of the legislation is that it is only the first round of matches (or only the first match) which delists.  So a Pay TV Licensee would be able to acquire the rights to the first round of matches without restriction but would have to wait another week before it was able to do this for the second round of matches.  This is clearly unworkable.

An offer-based rule

The consultation paper refers to an offer-based rule as a possible alternative to the current acquisition-based rule.  An offer-based rule is used in the UK’s ‘listed event’ rules – the equivalent of the Australian anti-siphoning scheme.

Instead of restricting who can acquire the media rights to a Listed Event, an offer-based rule would regulate how such rights are offered.  More specifically, the sports governing body would be restricted from offering the rights to a Listed Event to a ‘pay-provider’ unless it has first offered them to a ‘free-provider’.  As the consultation paper suggests, there would need to be rules around how rights must be offered to free-providers to ensure the offer is bona fide and not tactically designed to discourage interest.  There would be a number of matters to consider in the formulation of these rules, not least whether the Listed Events have to be offered on their own or can be bundled with other events under the control of the sports governing body. 

There would also need to be rules around how long a free-provider has to make a bid for and acquire the rights.  As referred to above, it is more appropriate that the point in time at which a free-provider is treated as ‘not interested’ is determined by reference to when they are given a bona fide opportunity to acquire the rights, rather than by reference the date of the event.  Again, there would be a number of considerations in formulating these rules, including rules dealing with where there a significant mismatch in price expectations, obligations to negotiate in good faith during the relevant period and so on. 

Notwithstanding the challenge of formulating clear and fair rules as to how it would operate, an offer-based rule does have the potential to address the two major issues referred to above.  That is, first, it would mean the scheme would apply to all pay- providers, and second, it would allow sports governing bodies to organise and run their all-important media rights sales processes with greater certainty.

Submissions on issues raised in the consultation paper are due by 6 December.