Spaniards hit by the debt crisis can sideline their sorrows and watch the likes of Lionel Messi and Xavi Hernandez in their local soccer league. Broadcasters say they can’t finance that sort of therapy anymore.
Antena 3 de Television SA and Mediaset Espana Comunicacion SA (TL5), Spain’s biggest commercial TV stations, say when the rights to broadcast next season’s top weekly games come up for sale in June, they plan to bid only if prices fall by half. Rival La Sexta, which is merging with Antena 3, paid about 60 million euros ($79 million) for the last season, or 1.6 million euros for each of the 38 matches, according to Antena 3.
Even as Spain dominates in the world’s favorite sport after winning the European Championship in 2008 and the World Cup in 2010, its broadcasters are struggling to turn that success into a profitable business. A 15-year Spanish law requiring one game a week to be shown on free-to-air TV not only pushes the prices for those matches to unacceptable levels, but also dilutes the value of pay-TV offerings, the Spanish Soccer League said.
“The problem with sports events is that it’s good for ratings but it’s a financial disaster,” said Antena 3 Chief Executive Officer Silvio Gonzalez.
The standoff threatens the finances of clubs, potentially triggering the departure of more players, especially to the English Premier League, where clubs are bankrolled by Russian oligarchs, Middle East oil sheiks and Indian food companies. Players are concerned whether Spanish teams can honor contracts, said Rodrigo Garcia, a lawyer at Laffer Abogados in Madrid, who handles negotiations for several players in La Liga.
“You aren’t 100 percent certain of getting paid,” he said. A collapse in the value of television rights would make the situation “very worrying.”
Mediaset Espana rose 0.7 percent to 4.08 euros in Madrid trading today while Antena 3 gained 1.7 percent to 4.11 euros.
As the Spanish league reaches this season’s climax with Real Madrid one point ahead of Barcelona, the last winner of the pan-European Champions League competition, and the final matchday set on May 13, newspapers are carrying reports about potential player transfers.
Manchester City, owned by Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan, may make a 42 million-pound ($67 million) offer for Colombian striker Radamel Falcao, who scored more than 25 goals for Spain’s Atletico Madrid this season, The Sun reported March 29. Chelsea, controlled by billionaire Roman Abramovich, may pay 80 million pounds to get Portugal’s Cristiano Ronaldo and Argentina’s Gonzalo Higuain, two key players of Real Madrid’s squad, the Daily Telegraph said on March 26. Representatives for the clubs declined to comment.
Spain’s clubs are suffering as revenue of TV stations and newspapers decline. The number of people registering for jobless benefits rose for an eighth month in March as the economy tipped into its second recession since 2009. At 23.6 percent, Spain’s jobless rate is the highest in the European Union.
Antena 3’s net income fell 14 percent last year to 93.4 million euros. Mediaset SpA (MS), the parent company of Mediaset Espana, cut its dividend in March after profit dropped more than estimated on lower ad sales.
In the English Premier League, La Liga’s biggest rival, no games are shown live on free TV. British Sky Broadcasting Group Plc (BSY), the pay-TV company which has held exclusive rights to England’s top soccer games since 1992, has more than 10 million subscribers and is one the most profitable businesses of Rupert Murdoch’s News Corp. (NWSA)
In Spain, while most soccer games are offered through pay- TV broadcasters such as Prisa TV, a unit of Promotora de Informaciones SA, the free-to-air rule means commercial broadcasters including La Sexta and regional stations such as Catalunya TV3 and Telemadrid are also showing these matches.
“It’s not compulsory to put movies or theater on free television in Spain,” said La Liga spokesman Juan Carlos Santamaria. “So why should it be for soccer?”
In Germany, Europe’s biggest television market, local law states that events of “significant societal importance” such as the Olympics and the Soccer World Cup can’t be broadcast on pay-TV channels alone and need to be shown on a free-TV station as well. That rule doesn’t apply to live broadcasts of the country’s Bundesliga top soccer league.
Garcia, the lawyer at Laffer Abogados, said there are also concerns about whether Spanish pay-TV revenues are sustainable and secure. Mediaproduccion SL, a unit of rights owner Mediapro, sought protection from creditors in 2010. The company, which says it met all commitments to Real Madrid and Barcelona among other teams, agreed last year to pay back creditors through 2014.
While the Spanish League, which generates about 600 million euros in annual TV revenue, trails the English league in overall income, its superstars are the world’s best paid players. France Football magazine this year estimated that Messi is soccer’s No. 1 earner with an annual income of 33 million euros, including base salary, bonuses and endorsement deals. Ronaldo is No. 3 with 29 million euros, the publication said. Representatives for the players declined to comment.
The departure of more La Liga superstars would also make it more difficult to increase revenue from selling the rights abroad. Joan Bonareu, head of international TV rights at Mediapro, which also sells the broadcasting rights to foreign stations, says the league needs these superstars to close the gap to the Premier League.
“The value for international TV rights to the Spanish league has grown significantly,” he said in an interview. “For example, France now prefers to pay more for the Spanish league than for the Italian league.”
The price for free-TV matches is “unsustainable” as only games involving either Real Madrid and Barcelona, which have won the last seven league titles between them, draw enough viewers to make the broadcasts profitable, said Mediaset Espana Chief Financial Officer Javier Uria. Whether Mediaset will bid will be a “matter of price,” he said.
Sandalio Gomez, the chairman of the Center for Sport Business Management at IESE business school in Madrid, said moving all games to pay-TV will be difficult as debt-stricken Spaniards will resist paying more for their national pastime. Still, it’s the only solution, he says.
“The current model poses a risk for media companies and the league itself,” Gomez said. “If media companies stop paying for the rights, the league will collapse.”