Mexican TV sports channels: How does the FOX and Disney merger affect Mexican soccer?

This Monday, the Federal Institute of Telecommunications approved the merger between Mexican TV sports channels producing Disney and Fox content, but conditioning the merger, to leave out of this operation Fox Sports channels, a situation that calmed the concern generated in previous weeks by all those involved in the soccer business in Mexico, due to the power that both companies would have over transmission rights.

Mexican TV sports channels FOX and ESPN
Mexican TV sports channels FOX and ESPN

Disney owns ESPN, which, when merged with Fox Sports, would have had a large share of the Liga MX's broadcast cake on restricted TV, thus generating a radical change in the way of watching football in Mexico, which throughout many years, they have been handled by open television in the hands of Televisa and TV Azteca.

If the IFT and the COFACE had given their approval for Fox Sports to join that concentration, now the owners of the unified production company would have had control over the competition when negotiating with a first division club, and even the MX upgrade.

Through a statement, the government agency clarified the reason for its decision, assuring that it was for the good of the competition and consumers:

"With this decision, the IFT reaffirms its commitment to ensure the welfare of consumers and promote free competition and competition in the telecommunications and broadcasting sectors at all times."

Televisa broadcasts the local matches of America, Cruz Azul, Necaxa, Toluca, Pumas, Lobos and Tigres (exclusive by IZZI). And for its part, TV Azteca has the transmission rights of Atlas, Puebla, Veracruz, and Morelia. Both television stations share the Chivas transmissions.

Fox Sports has been gaining ground in the league, acquiring the rights of 5 teams: León, Monterrey, Xolos, Pachuca, and Querétaro. The latter, also transmitted by Imagen TV.

Disney and Fox 'threaten' the poorest

Eighteen senators expressed their concern to the regulators for what they describe as a "mega agreement" derived from the merger between Disney and Fox, which will concentrate content since they argue that it gives rise to monopolistic practices and negatively impacts Mexican football fans.

You will have to pay for a Premium package if you want to see Liga MX teams
You will have to pay for a Premium package if you want to see Liga MX teams

Disney and Fox had informed Mexican regulators in October 2018 about their interest in merging. The first company controls the ESPN channels, while the second has the rights of Fox Sports.

Last November, the senators sent Gabriel Contreras, president of the Federal Institute of Telecommunications (IFT), and Alejandra Palacios, president of the Federal Commission of Economic Competition (Cofece), a letter in which they ask avoid monopolistic practices that would affect millions of Mexicans.

"It is considered important to request them (...) that, in their capacity as responsible bodies in matters of economic competition, they carry out the necessary actions and evaluations in order to prevent millions of Mexicans from being affected by the monopolistic practices that Fox Sports intends to implement.

"Unlike what those operators proposed for the United States and the entire European Union, in Mexico if they are contemplating merging all the sports platforms (all channels of ESPN and Fox Sports)," the lawmakers point out.

Fox has the broadcast rights of five of the 18 Liga MX teams, which will be part of a package called Fox Sports Premium that includes an additional monthly subscription payment on pay television systems, the text said. Tentatively, that channel was going to go into operation last month.

"It is clear that a high percentage of the population of Mexico, notably the one with the lowest income, will be unable to see many Liga MX games," the senators stress.

Last week, Cofece approved the merger in all markets not related to telecommunications and broadcasting.

The approval by the IFT is pending, whose meeting was held on January 24 with representatives of Disney and Fox, who are advised by Ernesto Estrada, former commissioner of the IFT, and by Eduardo Pérez Motta, former president of the then Federal Commission of Competition (CFC), an organization that derived in the current Cofece.

Last Friday, President Andrés Manuel López Obrador said he is concerned that football fans are affected and questioned that a former CFC official participated as an advisor in the process to authorize the operation.

The study "The football hobby in Mexico 2018" of Consulta Mitofsky indicates that 58% of the citizens follow this sport in the country.

Fox has the exclusivity of five teams: Monterrey, which has 4.1% of fans; Santos, with 2.3%; León, with 2.1%; Pachuca, with 0.6%, and Tijuana, with 0.1%, according to data from legislators and figures from Consulta Mitofsky.

Gerardo Soria, president of the Institute of Telecommunications Law (IDET), believes that allowing a concentration without conditions will affect the subscribers' pocket.

The pending "authorization by the IFT led [the company] to delay the launch of Fox Sports Premium. But if the IFT is naive enough not to realize this and authorize the operation without conditions, overnight many contents that are accessed today through basic packages are going to be transferred to premium channels that must be contracted separately, which is going to have an impact on a greater expense for fans, "he said.

The 21st Century Fox annual report mentions that the Fox Premium streaming service was launched in Mexico and Brazil in 2018 independently and is "available to subscribers without the need to subscribe to a pay television service."

According to Fox's website, Fox+ or Fox Premium packages cost 199 pesos per month.

Sources close to the merger process of Disney and Fox in Mexico told EL UNIVERSAL that the merger will allow a real competition against open television operators that keep monopolized the transmission market of Mexican football matches.

They also recalled that Televisa has more than 60% of restricted TV subscribers and has the power to determine prices or not to hire sports channels.

According to sources, the joint participation of Disney and Fox audience is 15.6%, but considering only the channels of ESPN and Fox Sports is less than 3%. They mentioned that users are migrating to other platforms such as Internet pay television, services also called OTT.

The restricted TV in Mexico has lost subscribers, going from 30.8 million in 2016 to 28.5 million the following year, and last year the amount dropped to 28.2 million. The Latin American Advertising Council on Pay TV (Lamac) expects the figure to stand at 27.9 million at the end of 2019.

Ernesto Piedras, director of The Competitive Intelligence Unit (CIU), explained that when there is excessive concentration, monopolistic practices are generated in terms of essential resources. In this case, those resources are audiovisual content.

"If Fox says 'they're only going to see football on my platform,' the households of low socioeconomic levels stop watching football," he said.

Federico González Luna, an expert lawyer in telecommunications, says that in places like the United States, the European Union, and Brazil it has been resolved that the concentration between Disney and Fox has consequences for economic competition.

This market force can have unfavorable effects on market competition and lower-income consumers agrees González Luna.

The Disney and Fox channels represent 73% of the programmatic content bar, while between 10% and 12% Televisa has it and from 5% to 6% it is in the NFL and other channels adds the lawyer.

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