The Bidding Game The Acquisition of Sports Rights in the 21st Century

Ladies and gentlemen,

The bidding game is a really interesting title for this part of the conference as this alliteration reflects perfectly the situation of the position of sports rights in the beginning of the 21st century.

It is a game with all the necessary components. There are players, certain rules, certainly upcoming new developments or changes of the match with new players entering the game, nearly no predictability concerning the results, changing alliences and finally - there are winners and losers and the winner takes it all. The playing grounds are phones, e-mails, fax-machines, mobil-phones, conference centres. The most popular tool of the game is MONEY.

Ladies and gentlemen, by now you all know what Im going to talk about, the acquisition of sports rights for broadcast purposes at the beginning of the 21st century.

The teams involved are like in any team sport: First , the referee: This are the national or international sports federations, organisers of sports events and rights holders. The players are the agencies and ........ in good old days known as broadcasters today with the internet companies on the market the term has to be understood in a much wider sense , i.e. the programme providers.

From my standpoint as representing the senior players, the broadcasters, I consider the referees in the most comfortable situation. The federations and rights holders are the ones to decide upon the start of the game, the rules and the content of the game which means the definition of which matches or events are in the basket for sale. And finally they decide when the game starts and when itis over.

However, to complete the picture and to be fair, it has to be stressed that this comfortable situation was not always held by the federations. When public broadcasters were in a monopoly situation in Europe some 15 or 20 years ago, negotiations were different with other rules, set by the broadcasters. But I do not want to be misunderstood. I am not complaining!

The generation where I belong to grew up in a competitive environment. We want this competition and we want to win. Now, due to the fact that the number of broadcasters and competitors interested in the acquisition of sport rights is becoming bigger and bigger, it is the federations and rights-holders controlling the game, at least bas long as their product is attractive to the market.

And to be clear: The number of federations or sport events of interest to the market is growing with new technologies and new means of distributions like digital programmes, Pay-TV, Pay-Per-View or internet or even with programmes watched via your mobile phone. To own content in the 21 century is an increasing value.

Those, needing the content for their programmes are the players. They are competing each other, sometimes building groups of the interest sometimes competitors. You can fin all kinds of astonishing alliances in this game.

Sometimes the biggest competitor are acting jointly in other fields they are competing each other heavily. Bertelsmann and Kirch-Group some of the big players in Europe, probably worldwide of importance are suddenly united in the interest to acquire and separate the rights or ITV and BBC, TF1 and France 2/3 , ARD/ZDF with private competitors or all of them with some agencies. The names of the players can not be listed or named completely, but the biggest are anyway known to the audience Murdoch, the Kirchgroup, Bertelsmann, Belusconi, theagencies like CWL, Octagon, ISL, IMG and, and, and... and finally the broadcasters acting individually or via their agencies or jointly as public broadcasters do it in the broadcasting union EBU.

As I was introduced to you as representative of the EBU, please allow me to outline basically this organisation in order to make you understand where we are playing and to which team we belong to. The European Broadcasting Union (EBU) is the largest professional association of national broadcasters in the world. It is the union of national broadcasters in Europe acting together in various fields of TV-programme as sports-, news- and culture-programme.

It's headquarter is based in Geneva. The organization is working on behalf of its members in the European area. It negotiates the broadcasting rights for major sport events and operates the Eurovision and Euroradio networks a cable and satellite system all over Europe which allows members but also non associate broadcasters to use it for exchanging or only receiving programme material for their programme purposes. At its offices in Brussels, the EBU represents the interests of public service broadcasters before the European institutions. At the time being, there are 69 active member of broadcasters in 50 countries in Europe. One of the major criteria for joining the organization is that only broadcasters are allowed to join which reach with their programmes at least 98% of the national audience.

In other words those rights holders signing a contract for the acquisition of sport rights with the EBU have direct contractual relationship with a number of broadcasters reaching over all more than 220 Million homes in Europe and a total potential of 640 Million viewers.

This situation as well as the quality of the production provided by EBU and its members as BBC in England, TV1 and France 2, France 3 in France, RAI in Italy , TVE in Spain, ARD/ZDF - where I come from - in Germany, SRG in Switzerland, ORF in Austria, in Greece in Turkey among others as well as all east European countries including Russia, Poland, Czech Republic makes the EBU to be a well respected player in the game and strong partner to a great number of sports federations which are interested in a broad promotion of their sports and not only in financial aspects.

If a Sports Federation cares for their product, they have to come and see the public broadcasters. Furthermore, we definitively care for sports and not only for a product, that can be exchanged from one day to the other. We have gone with a number of federations through rainy days without turning away.

Our reputation in the public opinion suffered when as a former monopolist some members had to face the loss of some mayor sports contracts. Sometimes I have the impression that EBU as representation of the public broadcasters is understood as an inflexible dinosaur in this speedy, energetic and fast changing environment of the rights acquisition. In other words some might think that Stephen Spielbergs Jurassic Park converted to the field of the rights acquisition should be staged in Geneva. However, the dinosaurs are as active and successful as hardly ever before even in the new Millenium.

In the field of sport rights acquisition EBU and its members managed within in the last month to secure contracts or to sign agreements of understanding with the most important sport federations as for example UEFA for EURO 2004, where the EBU was bidding against all big players on the market including the Kirchgroup. Furthermore the EBU was, is and will be TV-partner of the World Athletic Federation, IAAF for the next World Championships. We have also managed to sign long term contracts with the European Athletics Association, EAA and a number of other sports. This list could be prolong substentionally including Tennis, where the rights for the Grand Slam Tournament Roland Garros will be also in the future in the hand of EBU-members. The samegoes for nearly all major cycling events including the Tour de France where the EBU and its members are holding the broadcast rights for the next years, as well as for Skiing, where among others the World Championships, Nordic and alpine are with the EBU for the years to come.

Last but definitely not least, IOC and EBU are enjoying a very fruitful co-operation for the decades in the past and for the future to come until 2008 at least. The only major loss EBU had to face the last years were the rights for the Football Worldcup 2002 and 2006. FIFA preferred to find the highlight of the most mass attractive football event hiding behind the quarters of Pay-TV and programme providers.

To be successful in the acquisition of rights allows the EBU - members for the presence the provisions of solid stock of attractive programme and transmission hours for the years to come. However, the situation can not prevent the EBU and all other players from a more general reflection on the roll of sports as programme element and as product on a very competitive market. Please allow me to outline some general thoughts which are guiding us in the present negotiations. When I say us , please understand me referring to generalistic programm providers offering a much broader range of programme elements than sports. These generalistc channels have to be distinguished from pay-TV or pay per view offers or free to air thematic channels like Eurosport in Europe.


1. There is a risk of overkill with too much live-sport on TV.

One of the first general remarks is that the peak of transmission time for sports programmes in general free to air channels is nearly reached. In former days it was correct to state, that a soccer match lasts 90 minutes. Since football has become the most competitive programme segment in TV, all broadcasters extended their transmission times dramatically in order to justify the enormous rights fees and in order to offer their commercial partners, official sponsorship messages to refinance the product at least partly. Consequently the transmission of a football match lasts today instead of 90 minutes up to 130 until 140 minutes including the Warming-up before the analyses and interviews after the match.

The development went along with a dramatic increase in the number of matches shown on TV in the last years. And the same development could be stated for other sports, where it was and is a growing tendency to show sport live. Thus in Germans TV-viewers could watch 1985 1.200 hours of sport. In 1991, due to the development of private channels this figure went up to nearly 10.000 hours and reached 1997 about 70.000 hours per year which rises the average of 3 hours sport programme per day (1984) to 48 hours per day (1999) on the German territory. 30% of this time is designated to football, we all know the five most important sports: Football, football, football, formula 1 and football, 20% to motor sport events, 15% to tennis and 10% to cycling. The rest of the airtime is shared among other sports, where it is again EBU and its members guaranteeing the greatest variety of different sports on their territories.

However, this dramatic increase of hours of sports programme will not to be continued. In particular the general channels are devoting about 10% of their programme to sports programme. More is not possible, less probable and probably it is also for the benefit of the sport. Why?

There is a overkill of the interest of viewers with too much live offer on general channels. The consumer, user of viewer will not accept more. European wide we notice stagnation of interest in watching football matches on TV. The better the quality of the match is the more we can reach the higher rating of the past. If the broadcaster want to avoid a collapse as we had it on some markets for example for tennis transmissions in Germany, broadcasters have to limit their interest and to focus on high quality products.


2. TV and federations have to focus the interest on the quality on their products.

Not only the broadcasters have to limit their interest and should focus more on the quality of their products its also on the federations. To invent new competitions and to come in new negotiation rounds with newly invented competitions are to organise competitions for sport political reasons and expect the broadcasters to transmit them I assume does not help the broadcasters,the promotion of the sports in the public and finally the sport. Thus even federations should limit their understandable desire to package in negotiations top quality events with less interesting events, seeking transmission guarantees for everything. What should be the advantage of having even more transmission hours but fewer people watching the events and finally worst case getting the audience sport to see same athletes competing every week. This tendency to create more events and to expect broadcasters to show them all, can be short sighted as TV creates dependencies. The moment a camera is on the spot, the organizer can ask his commercial partner for more money. Than the budget increases. But the very moment the broadcasters stop coming , the budget needed can not be financed any longer and complains are coming up, that TV has destroyed a certain event.

However, concerning transmission hours: the better the event is, the higher the number of transmission hours. In this sense the wish of broadcasters to go live, is without limits. This goes for World- and European Championships of various sports and above all, for the Olympics. In the year 2000 on one of the mayor markets in Europe, the Olympics were broadcast as much as possible. Due to different time zones first Olympics shown live + a summary of 2 hours right after the end of the competitions in Sydney and another 2 hours highlight programme at primetime all on the first channels. In addition to that in a 3rd channel another 6 hours per day Olympia-programme, which brought the German Broadcasters to 25 hours Olympics per day which meant more as 400 hours during the competitions.

But there are also negative experiences f.e. tennis at least on some European markets. There tennis is facing a very difficult situation, reaching less audience than the normal programme with the result that broadcasters turn away from certain events or reduce the rights fees from one year to the other for 50%n sometimes even 70% or more.

Even football has changed. Due to too many live matches offered on free TV, we note a clear decrease in audience figures. For example on matches of the UEFA-Cup due to the extension of the Champions League plus the number of participating teams. In Germany we have today 7 teams playing in the 3rd round of UEFA-Cup which is a nightmare for our programme and I am afraid for
our viewers as well. However, the top matches including the home and away matches of the national team or the Cup competitions are well accepted with highest ratings. Even the European Championship 2000 without German participation has been the most successful coverage of the Championships ever. This brings me to my third assumption.


3. The ceiling for the rights fees seems to be reached, but there are always new players coming up.

A further thought concerning sport as segment of TV programme is, that the ceiling for rights fees for TV purpose seems to be more or less reached. Remember: The whole business of rights fees started in Europe 1948 when British public broadcaster BBC paid 1.500 Pounds for the privilege to show to their audience pictures form the Olympic Games in London. Good old days. The situation has changed since then. Today the broadcasters are facing the increase of up to 7.000% or more for broadcast rights of some sports within the last 10 to 20 years. However, both sides, public broadcasters as well as private ones have come to the limit of their financial possibilities as refinancing is often no more possible and mere political prices are paid for image reasons. To be clear, Im not saying we have reached the absolute peak in TV rights fees. But the increase will be slower for the top events. For other events we are already noting a slight decrease.

Why? In the last 20 years we had in Europe first the competition between public and private channels, which lead to an explosion of rights fees. Some years ago we paid 50.000USD for a match of the German national football team. Today we are close to 5 Mio.USD per match. However , having reached this level, public as private broadcasters have to concentrate their financial means on certain contracts and to try to safe their portofolio on high level events. In this sense the competition between the free TV generalistic broadcasters has become less aggressive.

In a second step, public broadcasters had to face competition even for B-category sports events, when suddenly thematic channels got interested in this traditional field of public broadcasters. But even here the competition has become less stormy as the claims seem to be defined now and the financial means limited. Furthermore rightholders have noticed that a mere presentation of their sport in a thematic channel without the main TV channels threatens their public awareness. Thus both sides are looking for cooperations.The mayor competition today is where new sports coming are coming up or suddenly new national heroes are showing up. To be named in this context is formula 1, ski jumping, boxing and even biathlon as one of the most remarkable up coming sports on some markets. There we still have jumps of the license fees of more 500% , 600% from one contract to the other.

Thus, the main and most actual competition of the present is not free TV-broadcaster against free TV broadcaster, but against rights agencies or Pay-TV providers. This is known for years in some European markets, but it is a new experience on other markets in Europe, where Pay-TV was traditionally not successful on the market, i.e. Spain, Italy and Germany. However, as there are certain restrictions from various national legislations protecting the interest of Free-TV or better of the public in the sense that important sports events should be watched without additional payments the situation has improved for free to air broadcasters slightly.

More generally can be noted that agencies are playing a more active role in the rights acquisition partly independent from media houses, partly owned by some of the media groups. They sell the rights to certain distribution chains, splitting them up in pay-TV, thematic channels and full service channels. This makes negotiations more difficult for broadcsters like us, but is also a threat to rights holders, who do not know where their product finally ends up.

The latest development concerning competition for sports rights is already to be seen : TV and internet.

The task of the future however will be how to deal with the new media technical developments and to compete against the intentions of other broadcasters to offer streaming videos, live pictures from sport events via internet on full screen. My assumption


4. TV and Internet are complementary offers

It is true, there is a big hype about internet. Very high expectations from the rights holders to get a new, separate way of distribution and thus to be in the position to generate new revenues. But there is also a risk . What TV rightsholders want to protect beyond everything is exclusivity. The very moment a picture from a certain sports event can be watched on internet in the territory of a rights holding broadcaster without ist permission or involvement, exclusivity is gone and high rights fees are no longer justified. Most of the rightsholders are aware of this and hesitating to give these rights away. And that was precisely the reason why IOC for example was so reluctant to allow NBC and Quokka their internet deal. It has been finally approves when it was guaranteed that national boundaries could be respected a 100 %.

Even on the commercial side there was a hype concerning internet. New companies were popping up all over, with apparently a lot of money in their pockets. But the market has cooled down a bit. And some of the companies are already facing financial problems or even closing down as worldsport.com. Because the most important to have is content. And this is as far as moving pictures are concerned very cost intensive, You need a signal ....., staff......Archives ...... and finally promotion. ....broadcaster....complementarity


5. Reactions

In order to be prepared for the future, the players on the market are taking a series of provisional steps. Broadcasters or media houses are trying to become part of the system not only by paying rights fees but by becoming original rights holder on their own by the acquisition of shares from successful clubs. Canal Plus and BskyB and an others can give some examples.

Others are focusing more on the internet future and invest in internet companies. Cable New Media and ISL have agreed upon a joint venture. Murdoch announced some month ago a 250 Mio. Pounds investment programme in order to develop sky.com and skysports.com. RTL announced the new company RTL New Media and Kirch New Media.

The hands of public broadcasters are bound. However, we can offer the best quality of programme for sport and we can offer EBU as union of the public broadcasters with 69 members from 50 countries, reaching 258 Mio. households criteria which were for UEFA among other important international federations the decisive aspect in the giving the TV rights for EURO 2004 to EBU. However , this is not be sufficient. On internet new strategies are about to be developed. And we are in a rather strong position, holding the exclusive TV rights already, having the signals, sitting on huge archives, having staff for bi-medial activities and having a perfect infrastructure. It will be the main task of EBU and its members to work out a schema for a joint complementary exploitation of TV and internal rights. If the broadcasters fail to find an acceptable balance , the role of TV and the meaning of TV rights and their value hat to be completely redefined.


The game is on


Thank you very much