Tuesday, July 22, 2008

Bundesbag: TV Drama

A scrap has been developing in Germany between the Government and the Bundesliga over a new TV deal which has led to a national institution coming under threat.

The start of the 2009/10 season could be an important time for the Bundesliga. The current TV deal finishes at the end of this season and the league's representatives, headed up by Leo Kirch of all people, are looking to line up a multi-billion euro deal with pay-TV giants Premiere for exclusive coverage of the league. With club ownership rules making it harder to attract investment than with other major European leagues, a lucrative TV deal is seen as imperative by the clubs if they want to compete at the top level of European competition.

Unfortunately for them, German anti-trust authorities stepped in and are threatening to scupper the arrangement, and why? Well, mainly because the exclusivity of the deal which is seen to be anti-competitive. It's a similar situation to what we had here in England when the EU basically instructed the Premier League not to sell all their rights to one provider (Sky). Consequently, Setanta have entered the fray as provider of live EPL matches, albeit low rent ones. In Germany, the authorities are unhappy at the prospect of all this football in the hands of one broadcaster who could hold football fans to ransom and charge, within reason, whatever they liked. If people didn't pay, they probably didn't watch, because the start of this new deal would also mean the end of Sportschau.

Sportschau is the German equivalent to Match Of The Day… sort of. Sportschau is on Saturday early evening time-slot as compare to the late night slot for MOTD. You may recall ITV's ill-fated attempt to introduce Premier League highlights to early evenings on a Saturday and it didn't last long, largely because it was crap. However, in Germany the time-slot has been associated with football for many years.

What also binds the two programmes is that they are institutions. Imagine, then, the outcry when the Bundesliga announced that, ahead of the new TV contract negotiations, Saturday early evening highlights were to be scrapped in favour of a later time-slot, similar to MOTD. The plan was that the later slot will persuade more people to sign up for football on a pay-TV deal. Sportschau's days were numbered. Except they weren't. The German Cartel Office stepped in and gave the Premiere deal the ok if and only if they committed to a weekly free-to air highlights programme on Saturday's prior to 20:00 CET. After all the wrangling and words of warning by the DFL that their business model was under threat and after warnings from the Man that the Bundesliga was getting too big for its boots, all the argument really boils down to is the German equivalent of MOTD.

This may, of course, reduce the overall value of the deal with Premiere, although you get the feeling the Bundesliga will cope. Also, it does not necessarily mean that Sportschau will return since the channel it broadcasts on, ARD, may not win the rights (although commercial rivals RTL have said they may not bid for them). However, Saturday evening Bundesliga free-to-air highlights appear to have been saved, for now at least.

I wonder what the German for 'Tactics Truck' is?


Jan said...

There are a couple more layers of complexity to the whole situation apparently, so to add further food for thought:

1. Sportschau pays €100m per year for their pre-20h Bundesliga highlight rights. That much money can't be recouped by advertising alone. Part of it is paid from the monthly fees people in Germany pay to the public broadcasters - similar to the TV license you acquire in England I think. Ergo: Sportschau has no competitors on the free TV market. They compete against Premiere. Once the cartel office rules that highlights have to be broadcast and finished prior to the 20h primetime timeslot, Sportschau has a monopoly. You can thus expect them to lower the price for the rights to a level where it's just about unattractive for other advertising paid channels to bid.

2. The new Bundesliga weekends have been spread out a bit more compared to the current deals, so Premiere actually get more value than before. But they still get less exclusivity than before. So you can't really expect them to pay significantly more either.

3. The Bundesliga and Premiere actually aren't BFF. The Bundesliga plans to produce their own Bundesliga channel and sell it to anyone who wants to show live Bundesliga. This could be Premiere, but with a completely pre-produced package, it could also be interesting for cable/sat operators to offer Bundesliga football to their customers, independent from Premiere. How that works out is a bit of a gamble.

4. The DFL had planned to present two scenarios for which anyone could bid actually. One keeps the Sportschau on its' early evening timeslot, but the Sunday matches wouldn't get aired earlier than 22h. The second scenario would put the Saturday highlights on the 22h timeslot, but the Sunday matches would be available early in the evening. On top of that there would be a live match on free TV every other week. (I.e. 17 live matches per season vs. 2 live matches in the current deal). The second scenario would be dead and it's not just Premiere and the Bundesliga who aren't happy about it. Other free TV channels are angry as well, because the live matches on free TV would have been very attractive.

So, I don't support the cartel office here to be honest. The scenario with more live matches is much more interesting to me actually. The Bundesliga can obviously cope. The strict licensing of the DFL alone will make the clubs cope. But it will be ever more difficult to close financial gaps to other top leagues.

Duffman said...

Thanks for that comprehensive, and superior, analysis Jan. If I understand you correctly, the Cartel Office have blocked the opportunity of more free-to-air live football for the sake of a highlights programme. Is that right? If so, that does seem a shame. On the other hand, what is to stop the DFB/Premiere from showing extra live matches irrespective of the scheduling of Sportschau? Is the time-slot so damaging financially at the 20h slot that they are not prepared to lay on extra free-to-air matches?
With regards to your point about Sportschau being able to acquire highlights at a low rate: I suspect that that will not be unique. Commercial TV is struggling as companies reduce their advertising budgets (credit crunch and all that). We may see a similar situation in a couple of years here in the UK. It’s hard to imagine ITV or Five putting up a strong bid for FTA highlights next time around as they may not get their investment back. This leaves the field open for the BBC and all that lovely licence fee money.

Good to know you;ve found the Bundesbag after it moved Jan.

Jan said...

The issue is central marketing of TV rights of course. So, for the cartel office to allow such a "cartel" they need to see a benefit for the customer. They think this benefit is the preservation of the early highlight programme on free-to-air TV on the main matchday (Saturday). But as I mentioned I can't follow their reasoning, as the DFL worked out two scenarios and is accepting bids for both and they tried to balance out the amount of free TV coverage in both (the live matches would actually add up to 30% more football on free TV).

In theory the DFL could offer it all of course: free TV live matches, early highlights etc. If they can make more money than with the pay-TV cheque by Premiere it would be possible. But I doubt it.

Anyway, the cartel office announced that they will publish their definitive judgement tomorrow and then we'll know whether the DFL has to quickly stitch together new TV scenarios or whether they can proceed as planned or just make small modifications. Due to the cartel office's complaints they are already behind schedule.


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