French Football crash : What's next ?

Media - Paris - Wednesday, December 23 2020 -from Interview by News Tank Football

Canal+ has a unique opportunity to close the market for several years. We can therefore imagine that they will take advantage of this opportunity to do so at an amount that is convenient for both parties. They can kill three birds with one stone (obtain advances in other fields, choose the price, and close the market) and they won't let this opportunity go by.

said Arnaud Simon, CEO and founder of In&Out Stories, a consultancy firm for national and international sports organisations, to News Tank Football on 21/12/2020, about the LFP TV rights that will be put back on the market since the exit settlement agreement signed with Mediapro has been validated by the Nanterre (Greater Paris) commercial court on 22/12/2020.

"The ideal scenario for the League would be to secure its financial future with an offer from the Canal+/beIN Sports alliance for 70-80% of the amount and to allow itself the possibility of bringing in a new digital player such as Amazon or DAZN for the additional 20% or 30% that it will otherwise cruelly miss. It is this historical broadcaster/pure digital player split that we find in football today in England, Germany and Italy. The danger for the League is to find itself too dependent on Canal+.

"Ligue 1 paid for being behind. It went into a frenzy with Mediapro to catch up (with the other Top 5 leagues), in a kind of collective rush. It was reckless and short-sighted about the deal signed in 2018. It had also been passive about its branding work and international strategy, ultimately relying too much on Paris Saint-Germain and old distribution models. This has to change and it can't wait for the next rights TV cycle in 2024 because by then the delay would become irretrievable," added the former Eurosport France CEO and Discovery Sport Europe SVP, who answered questions from News Tank Football.

"The LFP must regain control of its international and digital destiny, absolute priorities for its development "

What do you think about the resolution of the conflict between LFP and Mediapro?

In the very short term, it is the right solution. Mediapro was not the right partner either in what it proposed as a solution for the fans, nor in its business model, nor in its attitude and ability to assume its investment. There was an urgent need for the League to recover the rights, to limit the damage as much as possible, to save the clubs from bankruptcy, and to be able to regain control of its destiny. The €100m in compensation negotiated by Vincent Labrune (president of the LFP) is a lesser evil (than staying in conflict with Mediapro). It was absolutely necessary to get out of the rut and this was done with a lot of calm and skill. Unfortunately, it remains a real industrial disaster with human suffering, I'm thinking of the Téléfoot employees, but also of the people involved in the production. We mustn't forget either that Euromedia and AMP had been pushed out of this market by Mediapro. Perhaps they will be able to return soon.

The agreement seems to be favourable to Mediapro, which will not even pay an amount equivalent to the matches broadcast...

“ Ligue 1 will probably be relegated to Ligue 2 on an international level ”

Admittedly yes, but the League could not afford to hang around, it had to reclaim its rights. In a way, this is giving a blessing to Mediapro's lack of ethics, but with each passing day, millions of euros are being lost and the future is becoming a little darker. Ligue 1 was already not one of the most attractive championships in Europe and it will probably be relegated to a secondary league on an international level. It's going to take two or three seasons, or even a full cycle, to recover from all that. Waiting would only made the problem worse.

“ Mediapro's image has been damaged internationally ”

For Mediapro, they are doing well (in the settlement) in the French market in terms of the amounts involved, but their image has been damaged internationally. The sports and media industry is vast, but at the same time it is a microcosm. I can hardly see anyone who can trust them after what has just happened.

What's next for the League ?

There will probably be discussions by mutual agreement with Canal+ and beIN Sports. If the League wants to remodel its original lots, I imagine it will have to go through a call for tenders again in the medium term. The ideal scenario for the League would be to secure its financial future with an offer from the Canal+/beIN Sports alliance for 70-80% of the amount and to allow itself the possibility of bringing in a new digital player such as Amazon or DAZN for the additional 20% or 30% that it will otherwise cruelly miss. It is this historical broadcaster/pure digital player split that we find in football today in England, Germany and Italy. The danger for the League is to find itself too dependent on Canal+.

“ Canal + is less dependent on football and Ligue 1 than it was a few years ago. ”

This is the risk for the League, especially since Canal+ is less dependent on football and Ligue 1 than it was a few years ago. The group is now positioned as an aggregator and not just a content publisher, thanks in particular to the agreements signed with Netflix and Disney+. Despite everything, I don't see Canal+ not finding an agreement with the League, because they are part of the French political and economic ecosystem and they will surely be able to negotiate counterparts in other areas such as media chronology and VAT. And Canal+ also has no interest in the League being too economically penalised because it would weaken their product, so if Amazon or DAZN can put in €100 to €200m as they do in England, Germany or Italy, that's not such bad news for them either.

“ A quasi-monopoly situation is never very healthy ”

At the same time, Canal+ has a unique opportunity to close the market for several years. We can therefore imagine that they will take advantage of this opportunity to do so at an amount that is convenient for both parties. In another era, Canal+ has already found itself in a quasi-monopoly situation thanks to their lobbying, but if they find themselves in this (quasi-monopoly) situation again, it is thanks to the good strategic decisions they have taken recently, even if a quasi-monopoly situation is never very healthy. To illustrate and summarise things, they can kill three birds with one stone (obtain advances in other fields, choose the price, and close the market) and they won't let this opportunity go by.

You mention DAZN, but they also seem to be in financial difficulty at the moment: is it really credible for Ligue 1 in the short term?

Concerning DAZN, there are points of vigilance and points of promise. The point of vigilance is obviously cash. They were focused on taking market share, taking the lead, winning subscribers without aiming at short-term profitability. It's a kind of headlong rush, but it's a fairly classic strategy in the digital sector that has proven its worth. They came close to disaster with Covid-19 and are currently reviewing their strategy, better segmenting their markets. In addition, their worldwide launch with a boxing offer has been successful, even if it was postponed because of Covid from May to December (2020).

“ Apple may be interested in DAZN ”

But the difference with Mediapro is that they have promising points (in their favour). They have very talented leaders, they are dynamic and have the right approach with their global platform. They also position themselves as a content aggregator since they distribute Eurosport (in Germany, Austria, Spain, Italy and Switzerland). I don't know if they will be able to achieve their goals on their own, but in any case, they have a business narrative that is likely to attract brands and investors. Apple has not yet established its strategy for sports content, it is the Sleeping Beauty of GAFA (Google, Apple, Facebook, Amazon) at this level, they may be interested in DAZN.

“ DAZN and Amazon are on the lookout for opportunities ”

Concerning the Ligue 1 rights, this may be the right time to re-launch the market in the coming months with DAZN on the lookout for opportunities in strategic markets, cash flow permitting, and Amazon, which has acquired premium football rights from our neighbours (most recently the Wednesday night Champions League match in Italy) and which will broadcast the evening sessions of Roland Garros from 2021. The timing is therefore not necessarily unfavourable for the League, even if, I repeat, Canal+ has the opportunity to close the market.

“ The problem is that LFP entrusted Ligue 1's international development to a third party ”

Ligue 1 had already fallen behind its European competitors in several aspects and I fear that this gap is widening. I am thinking of the distribution model with the absence of new international digital entrants in the previous call for tenders, the absence of a direct-to-consumer strategy, and international rights. These international rights are held for a guaranteed minimum of €80m per season by beIN Sports. This is a far cry from the €250m per year for the Bundesliga, the €371m for Serie A TIM, the €900m promised for LaLiga Santander and the €1bn for the Premier League! The problem is not that we chose beIN Sports, which does the job following the signed contract, but that we entrusted the league's international development to a third party who has other priorities.

Innovative competitors

The Bundesliga will set up a commercial company dedicated to the development and management of its international rights. It has launched a consultation process to raise capital. The German League will also, in partnership with Charlton Media Group, launch an OTT platform in the MENA region. It is therefore on the move with room to manoeuvre. For its part, LaLiga has been innovative in launching an OTT platform within which it is aggregating other sports. It has also been very aggressive on YouTube and social networks, especially internationally, with its second division, to connect as many fans as possible to the Spanish football product.

“ The Premier League, LaLiga and Bundesliga have a better understanding of a changing world ”

The Premier League, LaLiga and the Bundesliga are managing their short and medium to long term with more insight and a better understanding of a changing world. Their domestic rights are secure and they can explore new digital and geographical territories more calmly and nimbly. At the same time, Ligue 1 has to bear three economic burdens that its competitors do not have: the impact of last season's disruption (2019-20 season not finished in France), no flexibility internationally with amounts lagging behind, and an industrial disaster domestically with Mediapro.

“ A League must serve the clubs and their development and not only use them ”

Ligue 1 paid for being for being behind. It went into a frenzy with Mediapro to catch up with them, in a kind of collective rush. It was reckless and short-sighted about the deal signed in 2018. It had also been passive about its branding work and international strategy, ultimately relying too much on Paris Saint-Germain and old distribution models. This has to change and it can't wait for the next rights cycle in 2024 because the delay would become irretrievable. A League must serve the clubs and their development and not use them. Otherwise there is a real risk that the locomotives will unhook the wagons and leave the train to go and play in a "Superleague".

“ LFP needs to re-address this issue of international rights with due intelligence ”

I think that we also need to re-address this issue of international rights with due intelligence. There are solutions. Ligue 1 must catch up and it must do so in an accelerated manner. It can no longer fully delegate its international potential to a network. I think that Ligue 1 has remained in too much of a comfort zone and has suffered from a lack of openness and even ambition internationally in its approach, vision and skills. This is what Ligue 1 must correct and I think Vincent Labrune has this in mind. In order to transform themselves, Leagues today need cash, skills and an international vision. Create a commercial company can allow them to move forward. However, it is still necessary to understand what its room for manoeuvre will be and who will be at the helm in the short term, because there is urgency!

“ In the international TV rights market segmentation is becoming increasingly strong ”

What I see in the international TV rights market is that segmentation is becoming increasingly strong and that there are three types of rights that are currently attractive: international super premium rights, niche, and disruptive league rights.

? International super premium rights are those capable of having a real global appeal, such as the NBA, Formula 1, the Premier League, the Champions League... And unfortunately Ligue 1 is not one of them, and yet it is this group that it must target. There may be room for two or three European Leagues at this level, no more.

? Niches are very segmented rights that do not have a global dimension, such as Lacrosse in the United States or cricket and rugby, which are premium rights, but segmented geographically.

? The disruptive Leagues are Formula E, Sail GP, the International Swimming League or Ultimate Tennis Showdown, which challenge established codes and offer a new business narrative, with global potential because they are based on a universal discipline.

“ Non-essential TV rights are being downgraded in the market ”

There is a danger if you don't fit into one of these categories and if you become "non-essential" rights in the eyes of the market, the so-called tier-two, the "nice-to-have but not must-have", which are today in great difficulty and are being downgraded in the rights market. The risk for Ligue 1 is therefore that it will move into the second half of the European football league table and will not be able to access the super premium rights category with its international appeal. This would strongly cap its revenues over a predominantly domestic horizon and for a long time to come.

“ There is still time for Ligue 1, but the situation is serious and urgent ”

There is still time for Ligue 1, but the situation is serious and urgent. As soon as the rescue of part of the domestic rights is done, the absolute priorities are, in my opinion, international and digital with a resumption of control of its destiny in these two areas, without waiting for the next cycle. It would then be definitively too late.

Link to news tank article