Lagardère | ‘Crazy’ African gamble looks set to pay off

  • Lagardère has the most important African football rights locked down until 2028
  • The agency’s $1bn investment was considered a reckless gamble when signed in 2015
  • The chances now look good that the company will turn a profit but there are clouds on the horizon

Who is the ‘godfather of sports marketing’? In England, they would probably suggest Patrick Nally. In Germany, it might be the late Horst Dassler. Across the pond, the late Mark McCormack would get the nod. In France, and large parts of Africa, however, the title would undoubtedly go to Jean-Claude Darmon.

The legacy of the one-time Marseille dockworker, now a 60-something investment player, is the main reason why Africa will not provide the commercial windfall it might have done for major sports-rights agencies like WME/IMG, Wanda Sports Holding and MP & Silva.

The ‘Africa rising’ narrative is well known. Home to 1.2 billion people, many of the continent’s 54 countries have been enjoying GDP growth of more than five per cent for at least a decade. There are now over one billion mobile subscriptions. Pay-television and internet penetration are expanding rapidly but each still has a huge margin for growth. External investment is growing, with China alone having pledged $60bn (€57bn) last year. And by 2050, Africa will have a larger and younger workforce than either China or India.

Imprinted on the DNA of the African people is football. It is not just the No.1 sport on the continent; it is the No.1 in every single country – although some fans of cricket and rugby in South Africa might question that. Football in Africa is lived with a visceral passion that matches anything in Europe or Latin America.

Put the two together – burgeoning economy and passionate fan base – and it ought to scream opportunity. But in the football business, the crown-jewel commercial rights – for the biennial Africa Cup of Nations, its qualifier matches, and the CAF Champions League – are in the hands of the Lagardère Sports and Entertainment agency through to 2028. The market has been cornered.

So, when Vincent Aboubakar scored Cameroon’s winning goal against Egypt in Gabon on February 5 to deliver the Cup of Nations to the country for the fifth time, Lagardère could already start planning for the 2019 competition in Cameroon, the 2021 event in the Ivory Coast and the 2023 event in Guinea safe in the knowledge that it would be delivering those competitions, and at least two more, to the world.

Darmon’s legacy

Which takes us back to Darmon. Lagardère’s sports division was built upon the Sportfive agency, created through a 2001 merger of three agencies: the RTL-owned Ufa Sports, the Canal Plus-owned Sport Plus and Group Jean-Claude Darmon. This gave Sportfive a toehold in Africa. Darmon had been working closely with Issa Hayatou, the president of the Confédération Africaine de Football, since the early 1990s. He brokered the $50m deal for all CAF commercial rights, from 2001 to 2008, which Sportfive inherited. 

Darmon left the company when Sportfive was bought by private equity house Advent in 2004, but his legacy remained in the shape of his former assistant Idriss Akki, who has gone on to become Lagardère’s ‘Mr Africa’. When the Chinese-backed Infront Sports & Media tried to muscle Lagardère out of the contract in 2015, one of the reasons it failed, according to several local industry experts, was because Infront “don’t have Idriss”. The Moroccan’s relationship with Hayatou, and with broadcasters and sponsors across Africa, was seen as critical to the outcome of the process.

Lagardère sees off aggressive Infront

In June 2015 Lagardère put up a minimum guarantee of $1bn over 12 years, from 2017 to 2028, an average of $83m per year, for the media and marketing rights to all CAF competitions. This was over four times the value of its previous deal, from 2009 to 2016, which was worth about $18.75m per year.

At the time, rights experts were lining up to hammer the agency. The investment was “desperate” and “crazy”. The most expensive sports-rights deal ever concluded in Africa would cost the agency millions in losses, whereas it made a profit of over $80m on the last cycle.

Lagardère had been pushed to such lengths because Infront, with its new Chinese backers Wanda, had designs on Africa and the deal was the perfect gateway to the continent. At one stage in the negotiating process, Infront was tabling a $62.5m-per-year bid, against one worth $50m per year from Lagardère.

But the early signs are that Lagardère did not get its numbers wrong. To date, the agency is understood to have agreed deals for media and marketing rights worth $850m. Most of this income relates to the new eight-year cycle, from 2017 to 2024, but some of the media deals run until 2028. Once all sponsorship and media deals are completed for the 12-year period, the agency expects to bring in more than the $1bn it guaranteed. It shares revenue above the minimum guarantee with CAF.

Sponsorship revenues rise

According to Sports Sponsorship Insider, the sister publication of SportBusiness International, it has secured over $400m from just two sponsorship agreements: with oil and gas company Total and telco Orange. Both are French companies largely targeting Francophone African markets. The final figure for the cycle will be substantially higher. The agency is currently in talks with multiple companies including global brands, Chinese brands, pan-African brands and companies in individual African countries.

In July 2016 Total agreed to pay $250m over the eight years, or $31.25m per season for all CAF events, with an option to extend for a further four years, from 2025 to 2028. In December Orange agreed a deal thought to be worth about $160m over the eight years, or $20m per season, to be an official sponsor. Orange was the title sponsor in the last cycle, paying between $8m and $10m per season, but was refusing to meet the agency’s price for the new cycle. Negotiations continued for 18 months without a breakthrough. The telco is understood to have been taken by surprise by the announcement of the Total deal. It quickly re-entered negotiations, paying a much higher fee than it had done in the previous cycle.

The higher income reflects a natural inflation in the market compared to deals agreed in 2007, but is also based on other factors. These include: a rise in the value of television airtime; and expansion in the number of matches included; the switch of the competition in 2013 from even years – when it was vying for sponsor attention with the Fifa World Cup and European Championships – to odd years; the addition of advanced activation programmes, which the agency helps to deliver; and digital content being made available for brand promotion on social media platforms for the first time, for which the agency provides technical assistance.

The two most valuable elements of a main sponsor package are TV airtime and perimeter board space at matches. The title sponsor and the four highest-paying official sponsors are required to acquire as part of their deals a 20-second spot at half time in all matches broadcasts across sub-Saharan Africa and the Middle East and North Africa. This applies to both free-to-air and pay-television coverage. The next four highest-paying sponsors will have first right of a refusal on a 20-second spot during the coverage. In all cases, a partner with airtime will have category exclusivity in any advertising around the match coverage.

The number of matches covered in the new cycle is greater than in the last cycle. This is due to the expansion of both the Champions League and Confederation Cup. In each case the number of matches will increase this year from 30 to 62. 

The main reason that only two major deals were agreed in time for the 2017 Afcon is that the agency came to the market late. Its deal with CAF was agreed in principle in June 2015. However, it is understood that the long-form agreement was not signed off until June 2016.

The agency has agreed lucrative deals for the pay-television rights to CAF competitions with two broadcasters: SuperSport for sub-Saharan Africa and beIN Media Group for the Middle East and North Africa. For Afcon 2017, it also agreed deals for free-to-air coverage in 18 countries.

Outside Africa, broadcasters include: Eurosport (UK, Ireland, Spain, Portugal), Fox Networks Group (Italy, the Netherlands, Asia-Pacific), beIN Sports (France, the US), NHK (Japan), Televisa (Mexico), ESPN (South America, ex-Brazil) and Sony (Indian subcontinent).

Clouds on the horizon

Money talks in sport, but it’s also an industry where human relationships count for a lot. Lagardère’s relationship with Hayatou, CAF president since 1988, is one of the company’s most important. So, the agency will have been carefully watching the impending challenge to the Cameroonian’s presidency from Ahmad Ahmad of the Madagascar Football Association in March’s election.

At the time of going to press, Ahmad – who described himself as “the only one who could dare present a candidacy for the change” – appeared to be picking up support from federations who thought 29 years ought to be enough for Hayatou. Even if the 70-year-old incumbent does hold out and win another four years, the chances of him still being in office the next time the CAF contract comes to market must be small.  

Another cause for concern is the challenge to the legitimacy of the Lagardère deal by the competition authorities in Egypt. On January 4 the Egyptian Competition Authority accused CAF – which is headquartered in the country – of anticompetitive practices and the abuse of a dominant position in awarding the rights. Its main focus of enquiry is thought to be Lagardère’s deal with beIN Media Group for the rights in Egypt, but the investigation is also expected to examine the original sale of the rights to Lagardère, which took place without an open, transparent tender. At least one company, the Egyptian media company Presentation, claims to have been unfairly excluded from the process.

Both CAF and Lagardère insist that they did nothing wrong. Caf said that its deal with Lagardère did not “contravene national or supranational legislation, as established by categorical legal opinions in this regard”. Lagardère said: “Any allegations that the agreement breaches local Egyptian competition laws are wholly unfounded and we have clear and categorical legal advice to that effect.” The case continues.

And while the $850m revenue for commercial rights sounds impressive so early in the contract, agency rivals argue that it contains all the low-hanging fruit. One argued that hitting the first 80 per cent of income was “relatively easy”. He predicted that the last 10 per cent – or $100m – would present the agency with a very steep climb.

Improving rights fees outside Africa and securing market value for free-to-air rights in sub-Saharan Africa remain long-term challenges. With just days to go to the start of Afcon 2017, the free-to-air rights remained unsold in major markets such as Angola, Kenya, Nigeria and Uganda. Outside France, with its large African population, deal values remain low in Europe. Eurosport picked up the rights for 2017 and 2019 in the UK and Ireland for less than €600,000, according to TV Sports Markets, a sister publication of SportBusiness International. In Italy, Fox paid about the same for the same rights.

But audiences are growing for the competition and the explosion of social media platforms is creating new opportunities to monetise the rights, especially through enhanced sponsorship deals. Lagardère said of the 2017 competition: “This year, we have counted more than 20 million users committed to all the content produced at the end of the competition and 45 million views on the videos posted. On average, social network statistics have increased tenfold since the previous edition and the official hashtag #CAN2017 (and other hashtags related to the competition) exceeded six billion impressions through Facebook, Twitter and Instagram.”

Lagardère’s $1bn bet on African football was always going to contain an element of risk. But you would be hard-pressed to find an expert calling the company “crazy” right now.

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