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This was supposed to be payday for French professional football. Four years after the Mediapro fiasco, the French professional football league (LFP) had taken all the steps it deemed necessary to ensure the financial prosperity of French clubs. It implemented a commercial subsidiary in charge of managing the broadcasting rights of French professional football (MediaCo). It brought in CVC Capital Partners (CVC) as a minority shareholder of MediaCo for a €1.5bn investment, to help the clubs recover from the financial consequences of the COVID-19 pandemic and Mediapro’s failure. CVC would also provide key experience and resources to maximise broadcasting rights revenues.
Against most odds, the result is so far underwhelming. MediaCo, which publicly targeted a yearly €1bn in domestic broadcasting revenues, is still negotiating to reach a deal worth only half of it. So, what went wrong?
MediaCo is only permitted to sell broadcasting rights of French professional football under specific conditions, including a mandatory public tender process as well as for a maximum term of five years.
A public tender process comes with inflexible requirements, such as setting a floor price. MediaCo showed some ambition, setting the overall floor price at €800m per year. Without competing with the heights of Mediapro’s unsustainable offer (€1,153m per year in aggregate), this floor price still is a 20% increase compared to the 2020-2024 domestic revenues.
One may wonder about the relevance of increasing the domestic broadcasting rights floor price when the trend among the biggest European markets shows that the values are plateauing.
MediaCo’s decision may be questioned but should not be viewed as unsupported. First of all, the 2020-2024 deal was perceived by the French clubs as undervalued considering Amazon came in replacement for Mediapro with a low offer that the LFP could not refuse. Consequently, French domestic broadcasting rights revenues were around 30% lower than in Italy, the second-to-last among Europe’s big five football leagues. Finally, MediaCo may have felt confident that it would be able to secure a more generous offer through the direct negotiation stage which takes place when the floor prices are not met.
Despite eight months of negotiations, MediaCo was only able to secure an offer for the domestic broadcasting rights of Ligue 1 worth €500m per year over five seasons. DAZN, a new joiner on the French market, has been granted eight games per matchday for €400m per year. BeIn Sports, a key player of the French football landscape since 2012, targets the main weekly fixture for €100m per year. The underwhelming overall value of these offers may be an unexpected consequence of the Mediapro fiasco.
In 2020, the LFP sold 80% of the broadcasting rights for the 2020-2024 period to Mediapro for €814m per year and the remaining 20% to BeIn Sports for €332m per year. BeIn Sports later sublicensed its rights to Canal+ for the same amount. Following the early termination of the Mediapro agreement in December 2020, the LFP agreed to sell these abandoned broadcasting rights to Amazon for €270m per year.
Unsurprisingly, Canal+ strongly disagreed with paying more for a significantly smaller portion of the broadcasting rights. This marked the beginning of intricate legal proceedings before the Paris Commercial Court and the French Competition Authority whereby Canal+ (either by itself or jointly with BeIn Sports) sued the LFP for its decision to resell the broadcasting rights previously owned by Mediapro at a much lower price without including its 20% portion. Simultaneously, Canal+ started proceedings against BeIn Sports to escape from its onerous sublicensing agreement. Ultimately, the proceedings were unsuccessful for Canal+ which continued to abide by the sublicensing agreement.
Once again, the LFP had to make a perilous decision. On the one hand, the clubs were in precarious financial health, with a need for short-term cash. To renegotiate the BeIn Sports/Canal+ broadcasting deal would amount to lowering even more the revenues of the French clubs. On the other hand, Canal+ was the historic key player of the French football broadcasting market since 1984 and the exclusive broadcaster of Ligue 1 in France until 2001. In the end, the LFP opted to prioritise the clubs and ruffled some feathers in the process.
Unhappy about the way it was treated and the uncompromising behaviour of the LFP, Canal+ decided not to participate in the public tender process and the ensuing direct negotiations, thereby ending its forty-year collaboration with French professional football. Furthermore, the network went very public about its refusal to bid, which may have generated a lack of competition among potential broadcasters. With the key historical player not participating, bidders may have not felt any urge to bid high. The most stunning example was the strategy of BeIn Sports. Whereas MediaCo originally anticipated a global offer from the Qatari network, BeIn Sports made it clear that it was no longer interested in acquiring all of the domestic broadcasting rights if Canal+ was not interested in a partial sublicense.
The maximum term of the broadcasting agreements permitted by law was extended from four to five years by decree in 2023. This follows the modus operandi of most Big Five leagues: the new deal for the domestic broadcasting rights of the English Premier League expands over four years (rather than three for the ongoing deal) whereas Italy and Spain operate on a five-year basis.
Nonetheless, it has been reported that MediaCo is negotiating early termination clauses with both DAZN and BeIn Sports to exit either agreement after two or three years. This is a first for French broadcasting agreements and reflects how unsatisfied MediaCo is. As the French Sports code only provides for a maximum term rather than a mandatory duration, MediaCo apparently decided to opt for the new maximum term with the objective to maximise guaranteed revenues over commercial flexibility that may come with shorter deals.
MediaCo’s decision may be justified but raises questions over its real chances to secure a wealthy five-year domestic broadcasting deal for a competition which has lost its three worldclass players (Neymar, Lionel Messi and Kylian Mbappé) in one year. Furthermore, French law only allows direct negotiations following an unsuccessful public tender process if “the initial conditions of the market are not materially changed”. It cannot be ruled out that a French judge would consider a reduction of the term as a material change. In the end, the initial decision of MediaCo to launch a public tender process for a five-year period has backfired and may give the opportunity to either broadcaster to terminate its agreement after two or three years.
These offers have created a rift and several presidents of Ligue 1 clubs have voiced their concern over the viability of French football with broadcasting rights revenues as low as currently anticipated. This would be financially similar to the 2004-2005 deal which amounted to €375m (€510m in constant euros) per year, taking French football twenty years back in time.
Moreover, the amounts distributed to the clubs will be even lower than twenty years ago. In 2004, the public tender process was directly managed by the LFP. There was no MediaCo to finance and no minority shareholder investor to reward. The only significant amounts being subtracted from the global amount were the ‘Buffet’ tax (a 5% tax on broadcasting revenues) and the payments to the French Football Federation.
Nowadays, two additional significant payments must be made before distribution to the clubs can happen. Firstly, the operating costs of MediaCo. Secondly, CVC is entitled to a preferred dividend equal to 13% of the distributable profit of MediaCo for each financial year. However, CVC will also receive the preferred dividends for the first two years of its investment paid in arrears. In retribution for its initial investment, CVC should then be paid around €187m at the end of the upcoming season.
Consequently, it is anticipated that the Ligue 1 clubs will see a 45-50% reduction in their share of the broadcasting revenues, whereas the Ligue 2 clubs will settle for a 38% reduction.
The situation looks like Murphy’s law applied to French professional football. CVC, which invested in MediaCo on the basis of a business plan forecasting a distributable profit of €1,011m for the upcoming season (the current projections being around €660m), will certainly not be pleased with the amount of its preferred dividend. The French clubs see their domestic broadcasting revenues, which are key to their financial health, melt like snow in the sun. Finally, the French customers would not be pleased by the all-time record-high price of €40 per month to pay to watch all domestic football next season.
So far, the LFP looks like a Formula 1 driver who stalled on the starting line. Though it does not look good, and definitely makes it start a step behind, it is still driving a race engine and the race has only just started.
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