The French top-flight thought they’d made a huge stride in catching up to the other Major European leagues with a new broadcast package that kicked off this season. Fast forward four months, and the deal has collapsed, with many French clubs potentially looking at the prospect of bankruptcy. We take a brief look at how this has come to pass.
THE BROADCAST DEAL
In 2018, Chinese-owned Spanish media company Mediapro and Qatari media group beIN jointly acquired broadcasting rights for the top two French divisions, Ligue 1 and Ligue 2, in a deal reportedly worth €1.172bn per year. Mediapro covered 80% of the deal, meaning its annual pay to the French governing body of professional football leagues in France, the Ligue de Football Professionnel (LFP), would amount to €830m. This new broadcast package would activate at the start of the 2020-21 season and mean a 60% rise in revenue from LFP’s previous deal with premium French network, Canal+.
The deal was deemed a huge success at the time, believed to be the catalyst that would finally springboard French football right up with its other major European counterparts, who were already enjoying more lucrative broadcast deals. Mediapro alone was supposed to pay the LFP €3.25bn over a four-year period. It all seemed too good to be true.
As it turned out, it indeed was too good to be true..
WHAT HAS HAPPENED
As per the deal, Mediapro were to pay the annual €830m amount in instalments every two months. In August, the company duly paid €172m to the LFP. However, when October came around, Mediapro refused to pay the (as was determined) €172.3m amount, asking for deferrals instead. It again refused to pay the €152.5m for December, leading to forfeiture of its agreement with the LFP. Four months into the much-celebrated deal, Mediapro was €324.8m in debt.
Mediapro blamed its inability to make timely payments primarily to the coronavirus pandemic. However, what’s mostly at fault here is its flaky business model. As it turned out, for the broadcast of French football, Mediapro exclusively launched a channel called Téléfoot, which was offered to the viewers at €25 a month. In order to turn any profit from this deal, which would consequently allow the company to make its payments, Mediapro needed at least four million subscribers. To this date, it barely has 600,000.
In retrospect, this deal looks so bad it begs the question – why it was even allowed to go through? For that, the LFP need to take responsibility, who agreed to the deal without making any rigorous checks on their part. Had they done that, they’d have realised that they would be set up to fail.
This was not the first time Mediapro attempted to venture into football. Before it struck a deal with the LFP, Mediapro had tried to acquire rights for Serie A, an attempt which was denied by the Italian governing body of professional football leagues in Italy, the Lega Nazionale Professionisti Serie A (LNPA), because Mediapro was unable to provide any substantial financial guarantee for its business model. Much to Mediapro’s delight, the LFP did not bother to for any such assurances.
WHAT HAPPENS NOW
The sensational collapse of the deal has thrown the entire French football in disarray. This deal was supposed to be the big break for all major French clubs, most of whom had adjusted their budget to account for the increased revenue guaranteed to them. After football stopped in March, French football was the only one to not resume in some capacity later in the summer, and this broadcast deal was a major factor in that decision. For the LFP, starting this season on its pre-COVID schedule was more important than playing out the previous one in its entirety.
In order to compensate for the missed payments, the LFP had to take a €112m government-backed loan in October to make ends meet. With coffers already running dry, there are no guarantees whether these loans would be repeated. The Mediapro broadcast deal has ended up in court, with the ultimate verdict yet to be determined, but by all accounts Téléfoot will be shut down, and Mediapro will be able to bail of this deal by just paying €100m of the outstanding €324.8m it owes to the LFP.
The LFP has already reached out to Canal+ to strike up some sort of a deal that would begin from the next half of this season, although Canal+ is reportedly offering even less than the €700m per year it previously was.
If a quick solution does not arrive, many French clubs might go bankrupt by the end of February. Many clubs are already alerting the rest of Europe to fire sale of their players, which could see France be a major land for plunder when next month’s transfer window rolls around. We can safely anticipate many Ligue 1 players leaving on the cheap.
The Mediapro debacle shows how the entertainment factor in football has started dictating how the sport itself is played. In the UK, we already have the likes of Sky and BT splitting the ‘mouth-watering’ fixtures between themselves. If anything, this shows us the volatility of the broadcast deals we often wouldn’t give much thought to and might teach the football clubs to manage their finances more pragmatically in the future. For now, we can only hope for a swift solution to be offered to the French clubs that would save them from insolvency.
Watch this space for updates on how the story unfolds.