Tuesday, April 14, 2009

When competition is bad ...

Watch out! Your weekly dose of English Premier League (EPL) could get a lot more expensive next year.

The rights to broadcast EPL are auctioned off every few years. Right now Astro holds the Malaysian broadcast rights until 2010. Bidding for the 2010-2013 EPL rights will commence later this year.

The Edge last week reported that Telekom Malaysia may decide to bid for these rights. Telekom is looking to launch broadband tv. Securing the hugely popular EPL franchise will almost certainly mean a few hundred thousand new subscribers, giving its service a substantial boost.

Conversely, Telekom's gain would be Astro's loss. Astro without EPL would not be very attractive to many.

Which means we could see a very intense bidding war between Astro and Telekom.

Competition is usually good. It is normally the best way to better products and services and lower prices for consumers. But in this case, the winner of any Astro-Telekom competition is not the Malaysian consumer. It is the multi-millionaire EPL footballers, managers and hangers-on. They will enjoy the benefits of whatever expensive price that Astro or Telekom pays. Malaysian consumers will foot the ultimate bill.

Regular readers will know I am all for free markets, competition and transparency. However, sometimes, markets do fail. This is a clear case of market failure, when a few hundred EPL magnates make more millions, paid for by millions of Malaysians who earn just a few hundred ringgit a week.

We have already experienced one round. Astro subscribers may remember sports became a lot more costly in 2007. Prior to that, Astro had a comfortable lock on the rights to televise EPL in Malaysia. That changed in 2007, when Astro suddenly found competition while it was bidding for the EPL rights for 2007-2010. It bid very high to secure the rights, and then raised subscription fees to cover its costs.

When markets fail, higher authorities must step in. Khazanah could play a role, as it is a shareholder in both Telekom and Astro. Could it prevail on the two companies to cooperate instead of compete? In the first place, I don't see how Telekom is going to deliver broadband tv on its decrepit Streamyx platform. Rather than pay so much and giving WAGS even more to splurge on frivolous luxuries, it should use the money to improve its services.

Or if it is too much to ask for Khazanah to arbitrate between two competing companies, the government should set up one umbrella organisation to bid for EPL rights for Malaysia. Since there will be only one bidder from Malaysia, the price should be much lower. This organisation can then sell the rights to Telekom, Astro and any other interested party. Any profits can be deployed to good use – whether charity, public transport, sports development ...


Anonymous said...

Very well suggested - a win-win-win situation here. However, we'll need the two parties to be able to sit down and talk, or for Khazanah to be 'awake' first.

Anonymous said...

Nice to see you are avid fan of EPL. its not market failure, but the Bargaining powers of seller. Bidders can take alternatives, other Premier clubs like SPain and Germany.

Also, Astro is a listed co, shareholders take the risk. Low Income earners can watch for free in coffee house area, or simply switch subscriptions to access free channels - TV1-TV9.


Chi-Chang said...

To Anonymous (Apr 15 9.16am),

I am actually not an EPL fan. And going off on a tangent, I think those people arguing against teaching English in schools should focus instead on weaning Malaysians of EPL. EPL with its uncouth sportsmen and loutish behaviour is a truly evil foreign influence, if indeed there is such a thing.

Back to EPL - it can be argued that EPL is a monopoly since there is only one seller. And since there is only one seller, to even out the playing field, there should be only one buyer representing all Malaysian consumers.

True, Astro shareholders take the risk, but Malaysians end up paying! If EPL rights are cheaper, then even the low income earners can enjoy EPL in the comfort of their own homes.


Marcus Ong said...

HI Chi-Chang,

Its true that Low income earners may enjoy free Astro in mamak stores. But EPL is hardly a monopoly, as they have to compete with many league clubs, not to mention other sports in the industry.

What I love to see, is the break of monopoly power of :
1. Highways by investing in substitutes with more LCC airports, efficent trains, better signages for coastal roads.

2. Break the collusion of 4 AP kings on imported cars, for it doesn't add real economic value. instead a mere economic rent

3. Money supply can only increase if people spends faster - Fisher equation and multiplier effect. so reduce duopoly powers of PERODUA AND PROTON of >70% market share by reduction of duties. If a Honda sells for RM90k as per Langkawi's price, it certainly will ramp up production in M'cca plant-GDP growth.National cars suffer loss and shut down, well that is efficient allocation of resources, then. Good riddance!

4. Competition punishes the dishonest and weak. Case: Protn Exora has a very good body and accessories. But, it uses the Campro engine the same as Gen2 model. Ask around, and you will hear loads of stories from owners, how the engine fails them. A case of good body, failing heart.This GLC never learns.

Solution: vote with our feet, walk away from Proton's showrooms.

Any other suggestions? Iam open.