- Tie up with MediaCorp to broadcast it on free to air TV. In return, they get a fraction of the advertising revenue.
- Get payment pledges from Singaporeans and the right to deduct up to some fixed amount by GIRO. (Say, with an estimated 250000 viewing households, a $50 maximum payment each gives $12.5M in pledges.) If it all falls through, nobody pays.
- Get advertising pledges. An auction mechanism is to be used for this (say a 2nd price auction with a reserve price, though a combinatorial auction will be more likely). Winners are legally obligated to take the slots they win.
Tuesday, May 17, 2011
The SG World Cup Broadcast Foundation for WC2014 Broadcast Rights
The 2010 World Cup was an embarrassment for Singaporeans. We were fleeced by a FIFA that today (that is, May 2011) happens to be the subject of allegations of corruption (kickbacks to secure Russia's WC 2018 bid).
I'm not sure how much was paid but Wikipedia (via Reuters) records it to be SGD $21M. This is at variance with the hundreds of millions I heard bandied around in the local media. I'll assume that SGD $21M is the right number since with 250,000 viewing households, this comes to about $80 per household, which advertising should, ideally, drive down to $20. Note that the $21M figure is an escalation of about 33% in price v.s. the rights for the 2006 World Cup, again with numbers from Wikipedia.
It would be good if we were no longer victims of FIFA. Let's start a foundation, named the SG World Cup Broadcast Foundation, as a bidder. A few things to do to make this work:
How this works is, if there isn't sufficient popular interest up to a certain amount say up to $12.5M in pledges, no bid is made and the whole thing falls through. If people do not care enough to pay to watch, they shouldn't get to watch.
If there is enough interest, a bid will be made up to what is made possible by promised advertising revenue. To give a sense of what is possible, look at the available advertising slots:
Each match allows 90 min of low key advertising and about 15 min of high key advertising (5min before and 10min during the 15 min halftime). Matches at different stages have different value. Valuing matches only from the Round of 16 (Ro16) onwards, with a Quarter Final (QF) worth twice a Ro16, and having a Semi Final (SF) worth 4 times a QF, and the Final 4 (F) times a SF, we have 640 min of high key time in Ro16 terms. (Note, once more, that these are not actual times, they are value-weighted "time".)
The 640 Ro16 min (225 min in real time) will be for advertisements and the "low key time" will be for one exclusive Main Sponsor to have his logo plastered strategically. That Main Sponsor may also get some special advertisement bidding rights, such as the right to win advertising slots post hoc by just paying the winning price.
The maximum bid that the SG World Cup Broadcast Foundation will make to FIFA will be the amount pledged plus the advertising revenue (minus MediaCorp's cut). If the amount is respectable, it is in FIFA's interest to just give it to Singapore since it only loses money by holding out.
However much is raised in advertising, the important thing is that if money is saved, those that pledged to pay will pay less. That is, a smaller deduction will be made. For example, with 300000 $50 pledges, $10M in advertising and a $20M bid, those who promise to pay will pay $33.34 rather than $50. There will be free riders, but as there really is no answer to that problem, it will be ignored.
Who knows, the Foundation may be able to get the rights for World Cup betting, the proceeds of which it might use, transparently, for good social causes.
While I think the foundation should hold fast to NO PROFIT to avoid any of the unhappiness of the foundation's Exco being paid $5M for their work (which raises costs for everyone else), there might really have to be real work done. Secrecy will limit the number of people doing the work, which may be a full-time affair for some period of time. Due diligence on advertising, media regulations, etc.
The advertising auction itself will be a huge undertaking. A large combinatorial auction does not run itself. In particular, one for 90 10 sec blocks for 64 matches with various considerations such as "match loading" and "premium position" (see, for instance, Channel NewsAsia's advertising prices). In fact, if the combinatorial auction solution succeeds, it could become the model for future "big event" advertising rights.
My proposal is an absolute and a relative payment cap. The absolute cap being a specified amount. The relative payment cap being a fraction of the "surplus" to be redistributed. The two upper bounds should work together to ensure there is no excessive payment.