Nothing comes for free

Ben Speight, head of SportBusiness Intelligence, breaks down the German TV market – one of the few in Europe where free-to-air spend on sport is higher than that of pay-TV.

As in all the top five markets of Europe, football dominates the TV sports landscape in Germany. The domestic Bundesliga, the country’s flagship property, is the most valuable in terms of rights value.

Sky Deutschland is the dominant pay-television player in the sports rights market and holds the Bundesliga pay-TV rights, the country’s key subscriber driver. Its position has been pretty much unchallenged apart from a brief period when cable operator Unity Media managed to wrest the Bundesliga rights from Sky for the 2006-07 season, before it folded its football service and agreed a deal to hand back the rights to Sky. Sky’s unrivalled position means there is a lack of competition in the pay-television sector, suppressing rights values for the premium properties.

In the last negotiation of Bundesliga rights, the league increased its revenue to $593 million per year, less than two per cent on the previous contract period, such was the lack of competition. The German Football League (DFL) only gained an increase because Sky Deutschland increased its offer amid rumours that Disney-owned ESPN was bidding for the top-tier 1.Bundesliga. In fact, ESPN had only made an offer for 2.Bundesliga. The only potential challenger to Sky is Deutsche Telekom, which has made a relatively small foray into the rights market, acquiring the IPTV rights for the Bundesliga from 2009-10 to 2012-13. Given its customer base in telephony and broadband services, it has the financial clout to knock Sky out of the market but is proving to hold a very conservative approach.

Germany has a unique situation in the top five European markets in that free-to-air spend on sport is higher than pay-TV. Public-service broadcasters ARD and ZDF are big buyers of sports rights, to the extent that their free-to-air commercial rivals RTL and ProSiebenSat.1 have complained about their spending. Indeed, ARD and ZDF invest more in sports rights than any other broadcaster.

ARD and ZDF have taken a tough line in negotiations for Euro 2012 and the 2014 and 2016 Olympics, especially as there is a lack of competition from its free-to-air rivals. For Euro 2012, it paid four per cent less than Euro 2008 and about 20 per cent less than it budgeted for the rights. For the Olympics, they paid eight per cent less than what they paid for the 2010 and 2012 Games.

Unusually for a major European market, the UEFA Champions League is the third biggest football property in terms of fee paid - in all other top European markets it is the second biggest - although it is one of the few properties to have experienced a significant rights fee  increase in the market in recent years. Strong bidding by ZDF beat incumbent Sat.1 to the free-to-air rights from 2009-10 to 2011-12, with fees rising by 25 per cent. Sky Deutschland also paid a 14 per cent increase on its present fee, not because of competition from another broadcaster, but because more German teams will participate in the competition, making the rights more valuable.

While some way behind football in revenue terms, there is a distinct second-tier of sports in Germany, including Formula One, the Olympics, boxing and skiing - some of which are feeling the pinch. The IAAF (International Association of Athletics Federations) has had to agree a deal well below its valuation for the athletics 2011 World Championships with ARD and ZDF and the same broadcasters refused to participate in the European Broadcasting Union’s deal for cycling’s Tour de France from 2012 to 2015 following the doping scandals in the race.

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