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5. Predictable effects of the centralization of audiovisual rights
CHAPTER 5
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The centralization and potential value of audiovisual rights in Portugal
In Portugal, several recent studies* estimate that with a centralized model the value of audiovisual rights could increase significantly. Estimates for different scenarios range between 275 million euros and 325 million euros of total revenues, meaning a potential increase between 56% and 85% (vs the current situation). Three alternative scenarios were considered to calculate the potential value of national and international audiovisual rights:
• Best practices - benchmarks
• Single operator scenario
• Single channel scenario
The maintenance of a solution similar to the current one could generate a value close to 150 million euros, less than the sum of the value of the existing contracts (176 million euros). The adoption of a centralized model for the commercialization of audiovisual rights could lead to an increase in value, thereby being one important tool for the development of leagues’ competitiveness.
The centralization of audiovisual rights creates a range of other benefits apart from the increase in audiovisual revenues, such as:
• Greater ability to adjust content according to the demand of operators and consumers
• Better brand management
• Equitable distribution while rewarding sports performance
• Greater investment capacity and internal competitiveness
• Higher international exposure of competitions and clubs
• Integrated and more effective measures against piracy
Total value of audiovisual rights in Portuguese professional competitions
(values in millions of euros)
Single channel Current value Single operator LaLiga growth Benchmarks
€144m -18% €176m €275m +56% €317m +80% €325m +85%
Source: Graphite (commissioned by Liga Portugal). * Study conducted by Graphite (commissioned by Liga Portugal) and a study conducted by McKinsey (commissioned by Federação Portuguesa de Futebol) predicts potential revenues for the Portuguese football audiovisual rights of between €275 million and €325 million.
Audiovisual rights revenue increase
The adoption of a centralized model for the commercialization of audiovisual rights has a wide range of advantages. These advantages support its implementation in European professional competitions.
For the audiovisual rights owners – football clubs – the centralization of the commercialization of audiovisual rights generates a higher commercialization value compared to individual commercialization, as it currently happens in Portuguese professional football.
Specifically, the adoption of an integrated approach provides a greater bargaining power, and stimulates the commercialization of packages/bundles. This enhances competition and, consequently, the global value of audiovisual rights.
Additionally, the added gains generated by the adoption of a centralized model will result in higher revenues, enabling the implementation of distribution models that are more equitable. Higher income and equality foster clubs’ investment capacity, increasing sports competitiveness and the quality of football matches. Better matches attract a greater share of supporters, boosting the value of audiovisual rights. This will allow the distribution of higher revenues, stimulating the development of a virtuous cycle.
The main professional football competitions in Europe have placed the centralization of audiovisual rights and the focus on the creation of a strong brand as one of the main pillars of competitiveness and financial sustainability of clubs.
One successful example of adoption of a centralized model for the commercialization of audiovisual rights is Spain - considering the disparity of values among clubs before centralization. The application of a centralized model through legislation allowed the increase of LaLiga clubs’ audiovisual rights revenues. National rights grew 80%, while international rights increased by 28%.
In the Premier League, the centralization has been in practice for a long time and has allowed continuous revenue growth (with the exception of the most recent negotiation regarding the domestic market).
Audiovisual revenues evolution in LaLiga and Premier League
(values in millions of euros)
National International
National International
What distributors look for:
Critical mass of content
Platforms require a critical mass of content within the sport to provide a differentiated service and stimulate demand:
• The subscription model is the main monetization method for most of the audiovisual rights owners.
• Supporters want to have as few subscriptions as possible, so bundling is a key aspect.
• “The Home of…” will monetize the sport in a more effective manner.
Tradable assets
Distributors want high quality assets so that they can use them in television and telecommunication services:
• Featured events foster/stimulate engagement and adoption.
• High profile events (e.g., season kick-offs, title matches) are the main focus of marketing activities and drive consumer acquisition.
How centralization helps:
Package structuring - creating consistent and transparent packages allows potential buyers to plan and develop sustainable strategies for the monetization of rights.
Additional content - centralization allows a more effective use of a wide range of extra content (e.g., pre-match and postmatch interviews, social media, multi-device).
Duration of rights – the definition of consistent terms for the use of the rights allows distributors to have more certainty when planning and allocating investment. Exclusivity and ownership - the ability to be associated with a premium asset presents high added value for distributors. Centralized commercialization clarifies the message to distributors and consumers.
Premium branding and specific events – centralization can contribute to the creation of a brand that can be commercialized and sold, which is particularly important in international markets (e.g., Premier League success in Asia versus other properties).
Product
Audiovisual rights owner’s ability to create an offer that suits the preferences and requirements of potential bidders
Competitive sales process
Audiovisual rights owner’s ability to create a commercialization process that attracts multiple bidders
Value creation
Centralization enhances the value of the rights, allowing brand growth and more solid solutions for international positioning
Better brand management and message consistency
From a brand management perspective, the adoption of a centralized model for the commercialization of audiovisual rights also leads to several benefits. By enabling commercialization in bundles, centralized commercialization allows the development of sports channels with content aligned with the preferences of consumers.
The centralization of audiovisual rights enables the implementation of a structured and clear communication and a internationalization strategy under a common brand (e.g., Premier League, LaLiga, Liga Portugal).
As a matter of fact, the centralization of audiovisual rights enables a more consistent approach to the market, because in commercialization agreements there may be clauses that promote the standardization of the brand’s content and communication.
In Spain, the Royal Decree 05/2015, which determined the centralization of audiovisual rights, established that 1% of the amount raised from the commercialization of the audiovisual rights goes to the competition’s organizer, LaLiga, for the promotion of professional football competitions in the national and international markets.
After the centralization of the audiovisual rights, LaLiga has worked extensively on communication and brand promotion in international markets, increasing the number of followers worldwide.
Changes in the commercialization of audiovisual rights allowed LaLiga to invest heavily in the promotion of Spanish football, leading to an increase in its fan base. The design and implementation of strong communication and promotion strategies, combined with a sophisticated audiovisual production, fostered the attraction of not only avid football fans, but also of sports and football casual supporters and entertainment fans.
Improvements in brand management and message consistency make the audiovisual product more attractive to potential buyers, leading to an increase in its value.
Key aspects
• Analysis of potential unique selling points (foreign fans, international players)
• Analysis of existing commercial practices and offers
• Benchmarking and best practices analysis
Potential buyers
• Analysis of key international markets, currently covered geographies and existing gaps
• Analysis of the different markets segmentation possibilities, while checking whether it is preferable a direct approach or through an agent
Go to market
• Identification of audiovisual product main strengths and areas for improvement
• Review of proposals and commercialization processes, identifying areas for improvement
• Benchmarking and best practices analysis
The centralization of audiovisual rights promotes greater competitiveness of internal competitions, mainly because it allows the adoption of more equitable distribution criteria, linked to sports performance.
In the main European leagues, the distribution of audiovisual revenues follows a set of criteria that seeks to guarantee competitiveness and equality among the different clubs. It is important to state that the amounts earned by clubs at the bottom of the classification are clearly higher than the average revenue earned per club in Portugal, and in some cases above the amounts earned by the major Portuguese football clubs. In Spain, it is established that 90% of the rights value goes to clubs participating in the first division, with the remaining 10% going to clubs in the second division.
In the first division, the Royal Decree 05/2015 establishes a rule for allocating revenues based on the rank position. This allocation rule takes into consideration the classification in the previous five seasons, with the last season weighting 35%, the preceding 20% and the remaining ones 15% each. In the second division, only the last season is taken into account. A compensation fund allocates 3.5% of the rights value to relegated clubs. The charts below demonstrate the impact of the centralization of audiovisual rights in LaLiga. There was not a drop in the audiovisual rights revenues of the two clubs with the highest revenues (Barcelona and Real Madrid), and all the other clubs saw their revenues growing significantly and progressively - from the positions at the top of the table to those at the bottom (5.6% Tier 1 versus 179% Tier 6).
LaLiga audiovisual rights revenue distribution in the 2019—20 season shows that the process of solidarity and equitable distribution has evolved, as there is currently a greater proximity between clubs with higher revenues and the remaining.
LaLiga audiovisual rights revenue distribution before and after centralization
(millions of euros)
Variation Variation
(millions of euros)
Position Position
A more equitable distribution did not mean less income for clubs with higher revenues from audiovisual rights. On the contrary, Real Madrid and Barcelona increased revenue by 13% and 20%, respectively, between the 2014—15 and 2019—20 seasons.
However, the weight of the amount received by the two Spanish clubs in the total value decreased by around 17 percentage points.
All the medium and small clubs registered increases in audiovisual revenues. It is important to note that in the 2019— 20 season, the audiovisual revenue of the club at the bottom of the Spanish league was higher than the average revenue of the top three clubs in the Portuguese league.
In the Premier League, around 50% of the audiovisual rights value is distributed equally among all clubs. To this value it is added a conditional amount, which is linked to sports performance which is calculated based on the club position in the league ranking in the last season.
English clubs also receive facility fees, which is an income item based on the number of broadcasted live matches. The live broadcasting of at least 10 matches per season is guaranteed to each club.
Until 2020, revenues from the commercialization of the Premier League international audiovisual rights were distributed equally among the clubs. From 2020 onward, the additional value obtained from the subsequent negotiations will be distributed based on sports performance.
(millions of euros)
Premier League: greater investment capacity and internal competitiveness
The centralized commercialization of audiovisual rights is essential to increase commercial return and clubs’ competitiveness. More specifically, the strengthening of the negotiating power from a centralized model allows an increase in the audiovisual rights received by clubs and establishes a set of criteria that guarantees an equitable distribution of resources.
A more equitable distribution of the audiovisual rights revenues makes it possible to ensure that the various clubs are able to invest in talent and infrastructure, consequently improving the competitiveness and quality of their football.
The Premier League is a paradigmatic example in this regard. The continuous and consistent increase of its international projection is based in the development of internal competitiveness, due to the clubs’ greater investment capacity.
Greater internal competitiveness has also been an essential aspect of the internationalization process of professional competitions, assuming a major role in the fan base expansion and in the increase of commercial revenues.
£1,400 million per year
on international audiovisual rights revenue (2019)
1,000 million households
with access to the Premier League worldwide
686,000
international viewers
£555 million
spent by international viewers
Success factors
Strength of the audiovisual offer Highly committed fan base Competitiveness and quality of football
1. Promote vibrant and engaging competitions that enhance attractiveness among the fans
2. Convert fan interest into business results and sustainable growth
3. Distribute resources in an equitable manner, so that clubs at all levels can invest in talent and infrastructure
4. Invest in the development of talent, resources and technologies that foster competitiveness
1. High qualityfootball
4. Improvement andinvestment 2. Commercial success
3. Equitable distribution
LaLiga: increased internationalization of competitions and clubs
Currently, internationalization is a strategic component in fostering competitiveness and commercialization in professional football competitions.
The two leading competitions in UEFA ranking - Premier League and LaLiga - are also the ones with the larger global audiences. The strategy of these two leagues places a significant importance on internationalization. The commercialization of international audiovisual rights is a key component in this strategy. Revenues from both leagues have shown a high growth trend, reaching considerable figures.
The adoption of a centralized model of commercialization of audiovisual rights emerges as fundamental for the competition’s internationalization, as the revenue growth increases the capacity to invest and allocate funds to promotion efforts. In Spain, the Royal Decree 05/2015, which established the centralized model, defined that 1% of the value of audiovisual rights should to go to the promotion of professional football. LaLiga has managed to implement an effective internationalization strategy, which stands out for its value creation and for the diversification of revenue sources, while having a positive impact on the value of audiovisual rights.
LaLiga strategic pillars
1. International expansion
2. Digital
3. TV and audiences
4. Brand awareness
5. International communication
Strategy pillars of LaLiga internationalization
Business development
Brand awareness
Digital development and communication
Development of sponsorship deals Licensing agreements Development and execution of new business models
Improving brand’s reach and awareness in each market Support to local broadcasters Development of new international events New opportunities for LaLiga Foundation
Customized content for each market GLOCAL strategy
Club’s international development
Local support to the development of new markets Consulting regarding new market opportunities Support clubs’ international projects
Institutional
Strategic alliances with leagues, federations and other institutions LaLiga representation at local events
Priorities
Value creation Audiovisual rights revenue increase
An integrated and more efficient fight against piracy to increase the value of rights
The fight against piracy is fundamental when negotiating audiovisual rights. Piracy reduces the economic value to both audiovisual rights owners and also to all other stakeholders surrounding them, namely clubs, fans, competition organizers and the State.
The adoption of an effective strategy to combat piracy safeguards and reinforces the value of audiovisual rights, as the buyers have a guarantee that the acquired assets are unlikely to be targets of counterfeiting.
The fight against piracy is therefore a priority in professional football competitions with large media impact. Investing in anti-piracy technologies is seen as an essential instrument to highly valued audiovisual rights, both in the domestic and international markets.
The two largest football leagues in the world are excellent examples: the Premier League and LaLiga. Both have been investing heavily in solutions to combat piracy by adopting cutting-edge technological tools and creating awareness campaigns focused on the negative impact of counterfeiting in the industry.
The adoption of an anti-piracy strategy is essential to protect and enhance audiovisual rights. The centralization of rights is an important step for this. It allows the release of funds to invest in more sophisticated tools to combat piracy contributing to increase the value that buyers receive.
Additionally, centralization promotes a better identification of acquirers and distributors. It implies having greater control over broadcasting and higher effectiveness to implement strategies against piracy.
The structuring of competitive packages can also result in offering products more in-line with consumer preferences reducing the incentives for piracy.
Estimate* of revenues lost due to counterfeited audiovisual contents in Portugal
(includes more than sports and professional football)
Clubs, channels and theaters Interveners Owner of rights
Content distributors E-commerce (ISP)
Portuguese
(e.g. players, referees, State managers, fans, producers)
Lost revenues*
(estimated values)
Non-declared taxes
(CIT, VAT)
• 55% of the actual annual audiovisual rights value of Liga NOS • Between 30% and 35% of rights value in a centralization scenario
Card sharing
Streaming & IPTV Users
171,000
users
371,000
users
Theater tickets Revenues
€28.1
million
€69.2
million
€12.5
million
€34.9
million
€14.2
million
€6.3
million
