Football defies euro crisis

LOOKING FOR a recession-proof business? European football might be a good bet.

By Eric Pfanner (INVESTMENT)

Published: Thu 28 Jun 2012, 9:15 PM

Last updated: Fri 3 Apr 2015, 3:42 PM

Even in tough times, with economies in crisis and politicians squabbling over the euro, football leagues have been scoring in the latest rounds of television broadcast deals.

The English Premier League sold three years of domestic TV rights this month, covering 2013 through 2016, for the impressive sum of £3 billion. That was nearly 70 per cent more than the current three-year deals. Only a few weeks earlier, the German Bundesliga announced a four-year agreement that will lift its take to nearly $3.2 billion, a 52 per cent increase.

‘’This is the jewel in the crown of televised sport,’’ said Tim Westcott, senior analyst at Screen Digest in London. ‘’There is a market for those rights, and anytime that they come up for sale, it seems that there are people who are willing to pay more for them.’’

As with much else in Europe these days, there is a north-south divide in the economics of football. Among the big five football markets of Europe, leagues in the northern countries of England and Germany have struck more lucrative deals than their counterparts in France, Italy and Spain, where the results have been more uneven.

In Italy, the latest round of negotiations has not been completed, though the main television packages have resulted in small increases from the previous deals. In France, overall revenue from television rights is set to fall slightly, beginning next season. In Spain, meanwhile, there is considerable uncertainty, with no TV deals in place even for the coming season.

Over all, the resilience of the market has surprised analysts, some of whom had expected flat or falling revenue from television.

There are several reasons for the spending spree. One is the structure of the television business in Europe, where the vast majority of professional football matches are shown on pay television. While most high-profile sports in the United States remain on free, advertising-supported TV, national markets in Europe are too small to generate sufficient ad revenue to finance multibillion-dollar rights deals.

While TV advertising has slumped during the crisis, pay-TV channels have relied largely on subscriber fees, not advertising, for revenue.

And subscribers have mostly remained loyal, especially in Britain, where British Sky Broadcasting, the main pay-TV company, has more than 10 million customers.

Sky, whose largest shareholder is News Corp., has owned Premier League rights since 1992, using football broadcasts as the backbone of its appeal to subscribers. Until this month, Sky’s hold over the majority of league broadcasts had gone mostly unchallenged. Even after regulators forced it to yield some of the matches a few years ago, rivals were able to pry away only a small share of the games.

That changed this month when BT, the British telecommunications company, stunned the football world by bidding aggressively in the latest sale of Premier League broadcasts, seeking not just the small portion held by ESPN, part of Walt Disney, the US media group, but all 154 games on offer per season.

In addition to BT, there was speculation about interest from several other interested parties, including Al Jazeera, the Qatari broadcaster, which has been building up its international sports business, and perhaps even including Internet companies like Google.

‘’From the standpoint of a lot of media companies, it’s a very seductive product to broadcast,’’ said Simon Chadwick, professor of sport business strategy and marketing at Coventry University Business School in Britain. ‘’Suddenly it’s a much more open and competitive market than it once was, and I think that has contributed to the increase in values.’’ BT ended up with 38 matches a year, including some of the most desirable ones. Sky secured the rest, but it had to raise its price substantially.

“Because these rights form such a central part of the business models of pay TV broadcasters, they have to protect them,’’ said James Marsh, media research manager at Sportcal, a sports news and information service. ‘’This is probably the biggest threat that Sky have had since the Premier League began.’’

BT has been trying to build up its own pay-TV service, delivered via broadband, but so far has attracted only about 700,000 customers. Analysts say it would take a long time for BT to break even on its investment in football, though there may be other benefits. Elsewhere in Europe, telecommunications companies that were hoping to make inroads in television sports are bowing out.

In Germany, Deutsche Telekom, which used to share the rights to Bundesliga matches with Sky Deutschland, another News Corp. affiliate, lost out in the latest round, with Sky taking full ownership under a four-year deal that begins in 2013. In Italy, certain rights packages remain to be sold for the coming season, but Sky Italia, which is owned by News Corp., and Mediaset, which is controlled by Silvio Berlusconi, the former prime minister, will remain the main broadcasters of Serie A. Each agreed to pay slightly more than under the previous round of deals.

In Spain, everything is still up in the air, with football clubs and broadcasters battling over the structure of the market. Spain is the last major European market in which individual clubs control their television rights; elsewhere, deals are negotiated collectively by the leagues. Analysts say, however, that there may be one other intangible benefit to splashing out on broadcast rights. Like a well-drilled football team, the winning bidders have managed to keep their rivals from gaining possession.


More news from OPINION