Only days after France’s top football league closed the transfer window to acquire players for the upcoming season last month, its clubs were hit by a bombshell: their new broadcast partner Mediapro wanted to renegotiate its €780m TV rights deal due to the damage wreaked by the pandemic. 

“Covid-19 affects everyone and everything, and football is no exception,” Jaume Roures, co-founder of the Spanish group, told the Financial Times.

“It changes the equation for broadcasters, subscribers, teams and the players, and the product is not the same with no spectators. All these factors must be put on the table and discussed.”

Mediapro has done more than politely request such talks. It skipped a €172m payment to Ligue 1 on October 5 — only the second instalment due for its four-year contract. Mr Roures stunned the clubs when he revealed the move in newspaper L’Équipe, leaving them facing a massive budget shortfall.

Shortly before, heavily-indebted Mediapro had cannily put itself under court protection from its creditors by using a new legal process designed to help companies struggling to pay debts due to coronavirus. The gambit meant the French league was powerless to enforce its contract and instead had to agree to a court-supervised mediation that will run into December. 

“It is an economic catastrophe for the league,” said one club president. “If no solution is found, some clubs will go bust before the end of the season.”

The dispute is being keenly watched by the industry as the first indicator of a painful correction in the multibillion-euro market for European football’s media rights. 

For years, top clubs have grown richer as broadcasters paid ever-greater sums to screen their matches. Revenues in Europe’s top five leagues in England, Spain, Germany, Italy and France rocketed from €7.9bn in 2010 to €28.9bn last season, according to Deloitte.

The pandemic has ended the free-spending era. There have been a handful of cases where TV companies have skipped payments to leagues, resulting in legal battles. A more conciliatory approach was taken by England’s Premier League, Germany’s Bundesliga, Spain’s La Liga and Europe’s Champions League, which granted significant rebates to compensate for spring lockdowns.

French football hanging in the balance

But in France Mediapro has gone further, questioning the value of an existing contract to show matches that are still taking place this autumn, although with no fans present.

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Yet Mediapro may be proven right on the lower value of sports rights. In June, the Bundesliga sold its domestic TV rights for €4.4bn over four years from 2021, 5 per cent less than its previous deal.

“We have reached the peak of sports rights,” said François Godard, a media analyst at Enders Analysis.

The battle could not come at a worse time for French clubs, with revenues from tickets, hospitality and merchandise having slumped. When Mediapro stopped paying, the league took out a €112m bank loan and parcelled it out to clubs.

Not long ago French football regarded Mediapro as a saviour, one that would help it achieve its ambition of taking its income closer to rival European leagues.

In 2018 the Barcelona-based group’s bidding in the auction for the 2020-2024 television rights pushed up the total price by nearly 60 per cent to €1.05bn. It beat Vivendi’s Canal Plus, the league’s pay-TV partner since 1984, to screen most of the best matches, leaving the rest to Qatar-backed beIN Sports. After losing, Canal Plus chief executive Maxime Saada called the price “totally unreasonable” and predicted Mediapro’s failure.

The choice of Mediapro was not without risk. Its parent company is majority owned by Orient Hontai Capital, a little-known Chinese private equity fund. Italy’s Serie A chose Mediapro’s blockbuster €1bn bid for the 2018-2021 rights, but then reversed this decision after a rival broadcaster filed a court challenge casting doubt on the group’s ability to pay.

The wage burden in France tops competitor leagues

Investors CVC Capital Partners and Advent International, who are part of a consortium that is hoping to buy a stake in a new company that will manage the broadcasting rights for that division, are now looking at ways to protect their investment if a rival European super league is launched.

Mediapro was most successful in Spain in the past decade where it beat incumbent pay-TV players in auctions and then cut deals to license them the rights in exchange for production contracts on sports channels. It used such arbitrage to strong-arm telecoms operator Telefónica and beIN to work with them. Outside sports, the group also produced movies and TV series.

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The bare-knuckled approach left them with a certain reputation. “At best, he’s not orthodox,” another French club president said of Mr Roures. “At worse, he’s a pirate.” 

Mediapro is the latest newcomer to dream of conquering European sports. Over the past decade, groups such as the UK’s BT and rich outsiders like beIN have snapped up football rights and sought to rival pay-TV incumbents like Sky. But few were ever able to make profits because of the challenge of signing up enough subscribers to cover the astronomical cost of the rights. 

The big winners were the leagues, who were happy to pit bidders against each other. Clubs used proceeds to build new stadiums and boost player wages.

Football revenues in France have lagged other European leagues

“All the leagues have been greedy,” said Mr Godard. “But the French league has been a bit more greedy, and a lot less lucky.”

The shortcomings of Mediapro’s strategy were exposed when it failed to reach a deal with Canal Plus to license its French rights last year. According to people familiar with the matter, the two sides negotiated for months over a deal in exchange for distributing Mediapro’s new Téléfoot channel to its subscribers. But they could not agree to terms.

Mediapro would have to sell Téléfoot, which is priced at €15 to €25 a month, without the help of France’s biggest pay-TV operator. Instead it signed distribution deals with telecoms groups Orange and Iliad, as well as Netflix and Apple. 

This was before the pandemic plunged football into crisis. France’s top tier was the only one of Europe’s big five leagues to cancel its season in April on government orders. It was forced to take out a €225m state-guaranteed loan to plug the budget hole.

Téléfoot faced a difficult backdrop for its launch. Mr Roures said he tried to negotiate with the league over the summer over changes to the schedule, but things deteriorated quickly. “We wanted a delay to the launch by some weeks . . . as well as discuss other matters,” he said. “We did not get anywhere.” 

Column chart of Ratio of gross debt to ebitda (x) showing Debt leverage increases at Joye Media

It remains to be seen if Mediapro will have more luck in the mediation process. Several outcomes are possible: the league could take the rights back for non-payment or agree to a price cut, according to people briefed on the talks.

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Yet if the league were to resell the rights, it would almost certainly find itself in a weaker position. Canal Plus has little need to pay up since it had “barely lost” any subscribers since Téléfoot’s launch, Mr Saada recently told newspaper Les Echos, and it has “no interest” in overspending on football rights.

When asked if Mediapro would honour its next payment due on December 5, Mr Roures said only: “It will depend on the mediation process.”

It is unclear if Mediapro, which said it had €727m in debt at the end of 2019, has the money to pay the league or if its Chinese owner would contribute. Asked about its ability to pay, Mr Roures demurred but admitted that the business had taken a hit from Covid-19. Orient Hontai did not respond to a request for comment.

Vincent Labrune, head of France’s Ligue de Football Professionnel, said in a recent interview with the Journal du Dimanche: “I expect them to respect their engagements and act responsibly in ending the conflict between us.” The body declined an interview request for this article.

The second team owner predicted that the government would pressure the parties to make a deal to avoid plunging Ligue 1 into severe financial distress. 

“It’s a perfect storm,” said the owner. “You have no stadium revenue. You have sponsors who are unable to pay. Then you have no TV money, which is about 50 per cent of turnover of clubs . . . If you look down the light at the end of the tunnel, it’s actually a train coming towards you.”

Via Financial Times