Question: some of the most ardent fans of arsenal manchester united...
Some of the most ardent fans of Arsenal, Manchester United, and Liverpool live far from Highbury, Old Trafford, and Anfield, in Hong Kong and Singapore.
Until the 2006-07 season, ESPN Star Sports held the broadcast rights to
the English Premier League (EPL) for Singapore. Then, in late 2006, StarHub
bid an estimated US$160 million to beat incumbent ESPN Star Sports and
telecommunications provider, SingTel, to win the rights for the next three
seasons. The winning bid was reputedly several times the amount that ESPN
Star Sports had paid for the previous rights.
The Singapore government prohibits the reception of satellite TV. Integrated telecommunications and cable TV provider, StarHub, is the only provider of cable TV in Singapore. The government did offer a second cable TV license, but no one applied.
In 2007, StarHub’s major source of revenues was mobile services, which
accounted for 52% of revenues, with cable TV, broadband, fixed network
services, and equipment sales accounting for 17%, 12%, 14%, and 5%
In 2001, StarHub unbundled the basic cable TV package into thematic
basic packages and reduced the price from $32.95 to $20 a month.
Subsequently, it added new channels to the various basic packages without
raising prices. The new channels included CCTV-9, Discovery Travel & Living
and STAR Chinese Channel.
In 2004, StarHub raised the price of the sports package by $7 to $15 a
month. The sports package included ESPN Star Sports. Typically, cable TV
operators pay content providers such as ESPN a royalty based on the number of
subscribers to the content.
Following its acquisition of the English Premier League rights, StarHub
announced price increases. It raised the price of basic packages by $4 to $24 a
month with effect from July 11. It decided to broadcast the EPL on its own sports
channel, which was included in the sports package. It raised the price of the
sports package by $10 to $25 a month, with effect from October.
Mr Thomas Ee, Senior Vice President of Cable, Fixed & IP Services,
justified the prices increases, “Most pay-TV operators around the world increase
prices periodically and StarHub has not done so despite a steady rise in costs
over the years”.
In 2007, StarHub’s cable TV revenue grew by 9% from S$313 million to
S$342 million. ARPU (average revenue per user) rose by 6% from S$48 to S$51,
while the subscriber base increased by 4% to 504,000 as at end December 2007.
Relative to the number of households in Singapore, the subscriber base
amounted to a 45% penetration rate.
In general, use diagrams where applicable; AND, if numerical data is given, try to
quantify responses. You will need to do some additional research to answer
some of these questions.
h) If the statement in (f) is true, why would StarHub choose to spend that
money to acquire the 3-year EPL rights? (hint: you will need to do some
research about what was happening and what happened to the market for
TV in Singapore)
i) After your research for (h), was there a structural change to the market?
(i.e. did it change from one market structure to another?) If so, what was
the change and, what characteristics were different?
j) Ultimately, every firm makes a choice based on the profit maximization
motive. Argue either for or against this choice being strategically
consistent with profit maximization. (I.e. did StarHub make a good profit
maximizing choice or not?)