- Rebate talks between Uefa and broadcast partners ramp up this week
- One-leg format produced huge ratings but gave broadcasters concrete proof of lost revenue
- Uefa will seek to strike balance between protecting clubs and appeasing partners
After a five-month delay and a few matches shaved off the top, this season’s Uefa Champions League and Europa League have finally come to a close. The one-legged format used from the quarterfinals produced one of the most exciting tournaments in recent memory, prompting Uefa president Aleksander Čeferin to ponder whether Uefa could learn a thing or two for future seasons.
Speaking to Reuters before Sunday’s final, Čeferin said: “I doubt as much as the calendar is now, that we could do a final eight [tournament] because it would take too much time. But a format with one match and a system like it is now? I think it would be much more exciting than the format that was before.”
He continued: “We have seen it as a big success and the viewership over TV has been huge. Maybe it also good because it is August and people are at home – some of them at least – but interesting, interesting tournament.”
It’s no surprise that Čeferin is full of praise for this season’s tournament finales. European football’s governing body delivered premium football to its broadcast and brand partners during a window when no other top-tier football was played, allowing matches to be played on weekends and securing massive viewership in major markets.
Eric Conrad, executive vice-president of sports programming and acquisitions at Univision, Uefa’s Spanish-language broadcaster in the US, tells SportBusiness that Univision has been delighted with how the Champions League has performed:
“We had, in the past couple weeks, the most watched round of 16 match ever, the most watched quarter-final match ever and the most watched semi-final match ever. The return of the most prestigious soccer tournament in the world, after so many months off, helped with that, as did the amount of promotion we gave the property, not just within our sports ecosystem but across all facets of the company.”
However, Čeferin also knows that difficult conversations must now be had with partners about how much of the €3.25bn gross revenue generated by this season’s Champions League and Europa League will have to be returned.
Even for broadcasters that enjoyed record-breaking viewership on a consistent basis, refunds will be expected due to the five-month delay as well as the six fewer Champions League matches and eight fewer Europa League matches eventually delivered by Uefa.
While broadcasters such as Univision may have seen increased viewership on a single-match basis – this year’s semi-finals attracted 30 per cent more viewers than each of the first or second legs of last season’s semi-finals – that increase isn’t enough to replace the inventory from an entirely lost match.
Stronger position than most?
The five-month wait and shortfall in matches has already had partners ask Uefa for a refund, while streaming platform DAZN cited the delay and the reduced number of matches as reasons for its desire to terminate its media rights deal for the Champions League and Europa League in Southeast Asia and Japan.
Telco Altice, which holds exclusive Champions League and Europa League rights in France, is so far the only broadcast partner to have publicly and explicitly demanded its money back.
Back in May, its chief executive Patrick Drahi said: “We already paid €175m in July last year for the first part of the season and we paid in January another €175m for the second part of the season. The problem is that I didn’t see anyone play since mid-March. We’re not [going to] pay the league for something I’m not getting. Basically, I expect some money back, very quickly.”
Unlike most domestic league broadcast contracts, Uefa Champions League and Europa League contracts require broadcasters to pay in two tranches, rather than three or four.
The second tranche is paid in January, meaning that broadcasters had already paid in full for this season’s Champions League and Europa League competitions before the pandemic halted the tournament in mid-March.
It is unclear whether Altice has received any refund – Uefa did not respond to a request for comment – but sources close to the situation say that Uefa has acknowledged to its broadcast partners that a shortfall exists and that compensation can be expected. SportBusiness understands that it is highly unlikely Uefa could have paid refunds prior to the end of each club competition.
The reason for this is two-fold. Firstly, much of the money available to clubs participating in the Champions League and/or Europa League has already been paid out in the form of starting fees. Champions League clubs are paid €15.25m prior to the start of the competition, while Europa League clubs receive €2.92m. There is also fixed prize money for wins, draws and progression, as well as a fixed amount paid to each club based on their position in Uefa’s club coefficient.
Secondly, the total amount owed to each club can only be calculated and paid out at the end of the season. Money paid to clubs from the TV market pool – a tranche of money paid to clubs based on the rights fees generated in their home market and their performance in the competition – can only be calculated once the tournament is finished.
Should Uefa agree to pay refunds to broadcast partners, experts say they are likely to first speak with participating clubs about whether they would agree to cut the amount they earn from the TV market pool (a pot of €292m available to Champions League clubs and €168m available to Europa League clubs) in order to free up cash.
One industry veteran with decades of broadcast rights sales experience said this would allow Uefa to confidently declare a set total amount that they could reasonably refund, having already reached an agreement with clubs as to how much they will give up.
However, this method would disproportionately affect Europa League clubs and especially those from large TV markets. Almost a third of the total amount paid to Europa League clubs (€168m of a total of €510m per season) comes from the TV market pool, compared to about 14 per cent of the total for Champions League clubs (€292m of €2.04bn).
Pierre Maes, a long-time consultant at Belgian telco Telenet and author of Le Business des Droits TV du Foot, tells SportBusiness that despite providing fewer matches than promised, Uefa could be in a stronger position than domestic leagues such as the English Premier League and the Bundesliga, which had to negotiate with broadcast partners to secure outstanding payments.
“I think that Uefa will make a proposition to the broadcasters with a partial refund, but to have an idea of the level of this refund is difficult,” he says. “Regardless, I think Uefa’s position is very strong. They offered a strong product and the money is in their pocket, but they don’t want BT or Sky Deutschland to be angry with them. They will make sure broadcasters don’t leave this with a bad feeling.”
One size fits all, or bespoke?
Industry experts polled by SportBusiness say Uefa has two options when it comes to refunding its broadcast partners, both of which carry their own risks.
One option – as outlined above – is to first receive a commitment from clubs as to how much of their Champions League and Europa League earnings they are willing to forego.
Once this has been agreed, Uefa could formalise the amount each broadcaster is owed according to certain criteria such as the amount paid, viewership, estimated losses as a result of the five-month delay, estimated losses from the smaller number of matches played, and whether a broadcaster will remain as a Champions League and Europa League broadcaster beyond the 2020-21 season, when the current media rights cycle ends.
Broadcasters could either accept the amount they would receive from this programme or reject the offer and enter private negotiations. This method could mean a delay to broadcasters receiving money back while Uefa negotiates the total amount with the clubs.
The second option is for Uefa to immediately begin private negotiations with each of its broadcast partners and create bespoke solutions for each in an attempt to save as much money as possible. It would then return to the clubs with an estimate of how much they would have to pay back.
Daniel Cohen, senior vice-president and head of global media rights consulting at Octagon, says that a Uefa-led, standardised rebate programme would be unlikely to work for the rights-holder or its broadcasters.
Cohen tells SportBusiness: “I don’t think a one-size fits all solution works. I think each broadcaster is going to have a unique position on their discussions with Uefa and a lot of it has to come down to how much revenue they were able to recover and generate off of these 30 matches. I think it’s market-specific but, on the whole, I don’t think that Uefa are in a position to play hardball. I don’t think that would be in their best interests whatsoever.”
Cohen has spent the past five months advising rights-holders in their discussions with broadcasters over refunds and believes bespoke solutions should be sought wherever possible – both to reduce the cash amounts being paid out by rights-holders and to deepen existing partnerships between the rights-holder and broadcaster.
Mitigating the damage
By creating individual refund packages with each broadcast partner, Cohen believes Uefa can far more accurately calculate its partners’ losses while potentially mitigating its own.
“We’ve been doing a lot of work to look at the cost of lost inventory and if it cannot be defined, then the lawyers come in. But in most cases, it’s the commercial guys who end up resolving it and calculating what losses they are willing to share,” he says.
“You look at production – who was responsible for it, what the sunk costs were, where the rights-holder and broadcaster can find optimization, and where savings may lie moving forward. Then you look at advertising. In some contracts, advertising inventory is owned by the rights-holder.”
“You then need to calculate and quantify both the true value of that inventory or asset in a Covid-19 environment against the original value as it was intended. And of course, you need to consider the subscription revenue impact.”
Experts say that calculating lost subscription revenue on a property-by-property basis has been the toughest part of rebate negotiations between broadcasters and rights-holders. Cohen says that several points are considered when trying to determine this loss including an assessment of how the property contributed to average revenue per user prior to Covid-19, as well as the impact of its absence on affiliate fees and churn.
Cohen continued: “Once this is done, you can provide the broadcaster with a fair market valuation of the total net loss and begin negotiations earnestly and with all parties well-informed.”
Cohen says that once Uefa and a broadcast partner has agreed upon how much compensation Uefa owes, there can still be plenty of room for a rights-holder to reduce its cash rebate to a broadcaster.
Rights-holders around the world have been reducing the cash amounts they owe to broadcasters by offering them additional digital rights; more live content including more matches to be broadcast in current or subsequent seasons; contract extensions; packages of consumer data collected from a rights-holder’s direct-to-consumer platforms; and sometimes even consultancy and other services that can be offered by other companies under a rights-holder’s parent company.
“My job is to look under every single rock and try to create new value in lieu of a straight cheque; to ask how else we can become a truly ingrained partner to you as a broadcaster by providing you more of whatever more we can offer,” Cohen says.
Due to the comprehensive nature of Champions League and Europa League broadcast contracts, Uefa and Team Marketing have less room for manoeuvre than domestic leagues such as the English Premier League, which could feasibly offer broadcasters a greater number of live matches as a substitute for cash.
Champions League and Europa League broadcasters already receive the maximum possible in live matches and ancillary content from Uefa. After Uefa doubled the amount of group-stage kick-off slots in its current rights cycle starting in 2018-19, it has nowhere to go in terms of expanding the number of matches available for broadcast (at least not without disrupting domestic football leagues).
For broadcast partners such as Altice in France – which has already committed to withdrawing from bidding for Uefa club competition rights in the future – there is very little compensation that could be accepted aside from cash.
For broadcast partners already committed to show the Champions League and/or Europa League in the next rights cycle, from 2021-22 to 2023-24, Uefa may be able to delay the repayment process, smoothing the losses felt by the governing body and participating clubs.
Broadcast partners such as telco BT in the United Kingdom, Nordic Entertainment Group in the Nordics, telco Telefónica in Spain and commercial broadcaster Univision in the US have already acquired rights from 2021-22 to 2023-24, opening up the possibility for delayed or amortised repayments over the coming seasons.
“If you’ve got the rights for a long period of time, you’re going to figure out a way to continue to work together by amortising and whatever cocktail of make-goods and rebates you can think of,” Cohen says. “If I’m coming up to the end of my deal and have perhaps lost the rights, it’s just a straight cash play. You’re not going to be my partner moving forward and it’s all about recovering loss.”
Uefa will now begin this delicate process of calculating and mitigating its partners’ losses. The governing body has taken a huge financial hit due to the postponement of Euro 2020 and will want to minimise the impact of Champions League and Europa League rebates as best it can.
As for Čeferin’s enthusiasm for the single-location, one-leg format in the latter stages of the Champions League and Europa League, Maes believes repeating this would be commercially impossible.
“Playing on a neutral ground has no interest. Playing one game instead of two has no interest. Playing in an empty stadium has absolutely no interest. There is nothing to keep there,” he says. “Here, we are just in an emergency [solution] built by Uefa to keep the vast majority of their 2019-20 TV revenue. If Covid does not reappear, we will never see this format again.”