'Uncomfortable' rights conversations on horizon as global sport shuts down
By Jonathan Rest
Leagues and federations worldwide must brace themselves for “very uncomfortable conversations” over the next few weeks as broadcasters’ lawyers wade through the terms of rights contracts amid the rapid spread of the coronavirus outbreak that has decimated the global sporting calendar, Sportcal has been told.
English soccer’s Premier League became the most high-profile sports league to suspend its season, further adding to the scheduling problems for domestic broadcasters Sky and BT Sport, and its scores of international rights partners.
Having initially stated its intention to play this weekend, Germany’s Bundesliga announced its suspension late this afternoon, essentially grounding soccer in Europe to a halt, while all the active major leagues in North America [NFL is in its off-season] have been paused. Showpiece tournaments, like golf's Masters and rugby union's Six Nations, have also been postponed.
Speaking to industry executives worldwide on both sides of the contracts, Sportcal has learned that while there is a desire to “tread carefully and show solidarity” as the crisis worsens, “tough business decisions are coming,” as one broadcaster warned.
Leagues appear least at risk of any rights fee clawback demands at present, as they are merely suspended and have all indicated an intention to resume when the health situation improves, but for major events where there is a fixed calendar, most notably Formula 1, where the first four grands prix of the season have been cancelled, the situation is more pressing.
A media rights executive from a leading global agency told Sportcal today: “We are already having some discussions. So far it’s a little bit early to be talking about pro rata terms of contracts. As we are being told by the leagues, these are suspensions, not cancellations. If they stay as suspensions, there shouldn’t be an issue because so long as leagues resume, there is still a way to make good.
“If a broadcaster is taking, for example, two games a week from a league, you could give them four games per week when it resumes, or whatever is needed to fulfil the inventory on the contract.
“Essentially you’re going to see rights owners try to preserve contracted revenues by kicking the can down the street with the promise of extra fixtures.”
Even in the event a league cannot complete its season, the promise of “making good” in future years of the broadcast contract, where applicable, by offering extra games could appease broadcasters, another rights executive said.
The agency executive continued: “When you’re talking about Formula 1 and other season-long series where there is a fixed calendar, it’s a different matter. You’re paying for X number of races and you get X-two or three or four, and there’s no room to squeeze them into the calendar. There are going to be some very difficult conversations there.”
A rights buyer from a broadcaster with operations on three continents highlighted the importance of the terminology being used by leagues.
He told Sportcal: “It’s not cancellations yet. It’s very much being presented to us as suspensions. If they say it’s cancelled, then I think you’ll start seeing calls for rights fees to be partially returned.
“At the moment, we are speaking with the leagues and federations about what we can do together. You’ll begin to see a lot of re-runs and archive content, and I think pay-TV broadcasters are going to have to start opening up their content for free to audiences.”
Indeed, that has already started, with German pay-TV giant Sky Deutschland having announced its intention, prior to today's suspension, to make the Konferenz programme - live action from various simultaneous Bundesliga matches in a single broadcast - available on its free-to-air Sky Sports News HD channel.
In Portugal, Eleven Sports, the international subscription broadcaster, today announced that together with its carriage partners in the country – telecoms firms Meo, Nos, Nowo and Vodafone – there will be no charge for current and new customers to its six premium sports channels for the next 30 days.
It said: “This measure seeks to facilitate all families and sports lovers access to the best unsuspended sports content, at a time when many people are at home, responding to the needs of prevention or assistance to family members, under special conditions of civic responsibility and social exclusion.”
The NBA was the first major sports property to take affirmative action, after a player from Utah Jazz tested positive this week.
The league said it is suspended “until further notice,” taking dozens of matches off the schedules of domestic broadcasters ESPN and Turner.
Publicly the two broadcasters have thrown their weight behind the league.
Turner Sports said it has "a long-standing relationship with the NBA and we're supportive of the actions being taken to help protect the health and well-being of everyone involved. We'll partner closely with league officials to evaluate and determine next steps at the appropriate time."
ESPN and sister network ABC added: "We have great relationships with our league partners and are confident we can address all issues constructively going forward. Our immediate focus is on everyone's safety and well-being."
Prior to a total shut down, the Golden State Warriors played a game behind closed doors, something that has become common place in European soccer over the past week.
One US-based media rights advisor told Sportcal of “grumblings in the market about clawbacks on rights fees due to the product looking less appealing with empty seats” albeit he stopped short of saying such demands had been submitted to leagues.
As well as not having any live sport to show, US broadcasters face difficult conversations with advertisers, which have already booked airtime, if the NBA Playoffs, slated to begin next month, are cancelled altogether.
Richard Greenfield, a US analyst in the media and technology space, who founded Lightshed Partners, said: “The NBA is required to make media rights owners whole over the remainder of their contracts through other forms of value (additional games to air, incremental digital rights). The league makes its media rights owners whole for both lost ad dollars and lost affiliate fees. However, these calculations are complicated and may take a good deal of time for all sides to agree upon.
“The overwhelming majority of NBA national advertising revenues comes from the playoffs, where ratings soar. The loss of regular season games, while painful, will be meaningfully amplified if the playoffs do not happen, impacting both ESPN/ABC and TNT.
“While lost advertising revenue will be recouped, it is unclear how quickly the networks are made whole on that lost revenue and in what way (clearly that will not happen in calendar 2020, meaning estimates for all impacted parties will need to come down).”
The loss of ad-revenue for ESPN and Turner from the NBA suspension has been estimated at between $75 million and $100 million by Patrick Crakes, a media consultant and former Fox Sports executive.
He told CNN: "If the playoffs air, networks could use some of their advertising inventory they hold back to make good on the missing games from the season. It makes things better, it helps, but it probably won't make up for what happened."
A further knock-on effect could be an acceleration of cord-cutting, as customers opt against costly monthly pay-TV subscriptions for non-live content.
However, BT Sport, which holds rights to the Premier League, Bundesliga, France’s Ligue 1 and the Uefa Champions League and Europa League, said today it has no intention of refunding customers while short-term suspensions are in place.
In a statement, a BT spokesman said: “We apologise to customers about the changes to the BT Sport schedule this month due to the impact of Covid-19. The situation is evolving rapidly and we are working with the leagues to continue to broadcast live sport wherever possible and broadcast games when they are rescheduled over the coming months. We will continue to broadcast a wide range of BT Sport content including films and documentaries and we will update our customers as we have a clearer view of the remainder of the season.”