Throughout the world, live coverage of major football and sports games has become one of the most popular forms of television broadcast and has become a veritable source of revenue for the broadcast rights holders, the Sporting Federations and the individual teams.
Prior to the launch of major TV platforms, the rights to major national and international competitions belonged to the National free to air broadcasters individually or collectively. Unfortunately, the lack of proper regulation in this area in Nigeria ensured there was no definitive provisions on how these rights were distributed. For years the Nigerian football league was plagued by issues revolving around the broadcast of matches in the domestic football league. Not even the nation’s state-owned broadcast outfit, the Nigerian Television Authority could broadcast domestic football games.
In September 2017, however, the NTA signed a broadcast partnership deal with the LMC which required the engagement of a private owned company which would leverage on the broadcast equipment and capacity of the NTA to beam select matches of the NPFL live to the viewing audience. Why further details of this deal especially the identity of the private owned company was never made known is unclear. Even more disturbing is what eventually became of this deal. In any event, it was clear that whatever broadcast arrangement the LMC had was below the commercial target set for the league. However, subsequent developments showed that the private company referenced in the botched NTA deal may have been none other than the South Africa owned cable television providers, DSTV. Again, details of the deal were very sketchy as neither party divulged any further details. Interestingly, the cable television company unilaterally terminated the contract alleging breach of contract by the LMC. Feelers from both camps indicate that the arrangement may have collapsed due largely to the exchange rate which saw the naira falling. Besides, unconfirmed reports indicate that DSTV wanted an exclusive broadcast deal which the LMC failed to respect. At any rate, these reports were unconfirmed. The termination of the broadcast deal however, plunged the league into another period of uncertainty with dire commercial implications.
However, there appears to be some light at the end of the tunnel on this issue following the announcement on November 7, 2019 by the Nigerian Premier Football League regulatory body, the League Management Company (LMC) of the successful execution of a television broadcast rights deal with Chinese Broadcast giants, Next TV worth over $225,000,000.00 (Two Hundred and Twenty-Five Million Dollars) for a period of 5 years i.e. 2019 – 2024. This deal is coming on the heels of widespread criticism by avid followers of the league who have questioned the commercial intentions of the LMC. As expected, this development has received mixed reactions from fans, analysts and other stakeholders in the league.
The thrust of this article is to examine the commercial and legal implications of this deal. We shall also endeavor to engage in comparative analysis of this deal with some major broadcast deals in Spain, England and Germany and suggest ways through which the commercial value of the deal can be enhanced.
It is pertinent to start this discourse with a comparative analysis of the major broadcast deals in England and Spain. The value of the Premier League’s overseas broadcasting rights for the 2019-22 league season rose to 35 per cent; reaching an all-time record of £4.35 billion, ensuring that the League’s overall rights have gone up in spite of a fall in the value of the domestic market. These figures were by no means achieved overnight. The UK has through technological innovations and regulations maximized the revenue generated from awarding broadcast rights to the mainstream media.
In the Bundesliga, for instance, commitments were offered that divided rights into separate packages for internet, TV and Mobile broadcasting. This system has been replicated in Spain, England and Italy and even some South American countries. The rights were to be disposed of by a public tendering process and rights contracts were not to exceed three years. Similarly, the FA Premier League in England bifurcated broadcast rights into packages for mobile, internet and radio, in addition to a rule against exclusivity.
The increase in foreign rights, revealed in new figures from SportBusiness Media, is slightly more than Premier League insiders had envisaged, and shows that 46 per cent of all the League’s broadcasting revenue now comes from overseas. The deals cement the Premier League’s position as earning more money from overseas broadcasting than any other sports league in the world. However, this is just a part of the story. Earlier this year, just before the commencement of the 2019/2020 football season, Amazon acquired the internet broadcast rights of some Premier League matches which will be streamed on Amazon from the 2019/20 season after the US tech giant purchased one of the broadcasting rights packages in a landmark move for the game.
Under the English Premier League, Sky Sports and BT Sport will continue to broadcast games after purchasing rights to 160 matches for almost £4.5bn earlier this year, but they will do so alongside Amazon, who will show 20 matches per season for an initial three-year period. This arrangement has not only ensured the satisfaction of diverse customer needs of the viewing population but also ensured the revenue base of the league and the contracting clubs is fortified.
Collective sale of broadcast rights package and legal implications
Spanish football was for some years enmeshed in a broadcast controversy which allowed the individual clubs to sell their TV rights. This enthroned some sort of duopoly which ensured that the ‘big two’; Barcelona and Real Madrid amassed a large chunk of the TV money with the other 18 teams lagging far behind. Admittedly, the commercial brand of the two teams ensured this duopoly inured for a long time. This development ensured the rich clubs in the league became richer while the poor ones became poorer.
To further elaborate on this development, it is reported that Real Madrid and Barcelona between themselves, accumulated TV rights money totaling over 480, 000, 000 Euros for the 2014/2015 season which was shared between the two clubs with the other 18 teams forced to share whatever remained of the TV rights deal. Undoubtedly, this impacted on the purchasing power of the clubs. Protests by other clubs and a paradigm shift to collective sale of broadcast rights birthed the new dispensation which has seen all the teams collectively assign their commercial rights to broadcast deals to the Spanish Football Federation to negotiate on behalf of the teams and share the TV rights money to all participating clubs. This development puts an end, at long last, to a scandal that has besmirched Spanish football for years.
From 2016, individual clubs in the Spanish topflight were no longer permitted to negotiate their own television rights, as Barcelona and Real Madrid have done in the past. The practice meant that in 2017, the two clubs shared around €280 million between them, a figure that represented around a third of the money on offer from the broadcasters.
To put the matter into perspective, under the former system, Atletico Madrid — who finished champions of La Liga in the 2013/2014 season earned €42 million from TV rights. In contrast, Cardiff City, who were relegated after finishing bottom of the Premier League in England, received a whopping €74.5 million, according to Nick Bidwell of WorldSoccer.com. The above scenarios have diverse commercial implications for the participating clubs. Whilst the former model adopted by the Spanish Federation appears to encourage and reward brands, the English model is more egalitarian in outlook and seeks to reward on-field success. Which model has been adopted by the Nigerian league and why?
Nigeria has adopted a similar collective broadcast sale model that allows the regulators of the league to negotiate on behalf of the teams and sell to the highest bidder. But why does this deal elicit more questions than it has provided answers to the seemingly grey areas of the TV deal despite the promising commercial outlook? Why have the details of the deal been shrouded in secrecy? Apart from the TV money to be paid by the Chinese broadcast outfit, very little is known about this deal. Was there a public auction and if so, who were the competitors that lost out in that deal or did the LMC simply award the contract to the only available bidder for the TV rights? What should we expect from this deal in the next 5 years? These are posers raised by this deal whose answers will only become clearer when the deal takes full effect.
The role of non-exclusive broadcasting
In the race for contents, the concept of premium and its exclusive exploitation have been key. Combining premium and exclusive offers immediately results in a higher price and, given that it is produced from a dominant position, institutes barriers to competitors. This has undoubtedly led to the intervention of the competition bodies of many countries, which have conditioned the acquisition of rights, limiting their exclusivity and/or the periods of validity of contracts.
In Spain, exclusivity, both in the holding and the exploitation of La Liga matches in the national market, is limited by law (Royal Decree-Law 5/2015), which prevents the same person or entity from acquiring, directly or indirectly, exclusive rights to exploit contents corresponding to more than two lots in the auctions organized by the LNFP, both in the bidding process as at a later time, through acquisition or transfer, unless there were no bidders or equivalent offers. The first auction of the broadcasting rights of all La Liga matches for the national market, fully applying the new regulations, occurred in 2015 for the 2016-2019 period. Telefónica and Mediapro maintained the leading positions they had already enjoyed in the market and became the big winners. The exceptionality of this situation arose, subsequently, from the conditions imposed months before by the National Commission on Markets and Competition to Telefónica for the purchase of DTS (Canal+), which forced it to open all of its premium channels to their competitors so that they could buy up to half of them to their choice, which constitutes a brake on content exclusivity.
The direct exploitation of broadcasts of premium, non-exclusive, audiovisual content by the leagues themselves is a system that has been operating for years in other sports. It is worth noting the case of the NBA and its NBA League Pass. The NBA games can be viewed through cable and satellite television on the ESPN and ABC channels, as well as on TNT, who share more than 160 games per season, completing the broadcasting offer and the set of games through the NBA TV, a 24-hour television channel, launched in 1999 and produced by the NBA itself. However, the NBA League Pass streaming service, which was launched in the 2006-2007 season, as the NBA League Pass Broadband, was an extension to the Internet webcast, of the NBA League Pass TV channel launched in 1994. However, after years of producing its audiovisual contents (through NBA Entertainment) and selling through satellite and cable television, the NBA launched its own streaming platform, with access to live games and multiple commentary services. The foregoing represents the diverse ways through which the commercial potentials of the NEXT Tv deal can be maximized.
As already demonstrated in the Spanish model, such transactions are usually conducted by public auctions. Public auctions in this sphere are usually advertised to invite bidders for the broadcast rights. We are not sure this was the case with this deal. One can excuse the commercial challenges faced by the LMC which just landed its first major broadcast deal in years. It is therefore understandable if Next TV was the only bidder for this right. It is however suggested that this deal should go beyond the TV rights. Apart from avoiding an exclusivity clause in the contract which vests absolute power on the sponsors, the LMC should find ingenious ways of broadening the market by perhaps launching a streaming platform which would allow a buyer, possibly a Telco to live-stream a percentage of the games; similar to the arrangement between the English Premier League and Amazon. This ensures that a percentage of the population who cannot afford cable subscription can conveniently live-stream a number of the games on their mobile devices. Next TV on its own part, needs to unbundle some of the plenitude of the broadcast rights it has acquired in the deal. This not only enables it meet its financial obligations to the LMC, it ensures the commercial target of the deal is maximized as much as possible.
Both MediaPro and Telefonica in Spain and BT Sports and Sky Sports are big entities that can afford solo sponsorship deal but have been able to coexist in multi billion Euros deals. The LMC can replicate such sponsorship masterstroke by exploiting the Arab and Middle East Market which has a large pool of Nigerian players plying their trade in the continent by interfacing with a cable or satellite television provider. It is inconceivable that NEXT Tv would televise all 380 NPFL games each season. Accordingly, the goldmine in commercial TV broadcast rights in the league may never be unlocked until the LMC explores its options on this issue.
Having analyzed the commercial implications of this deal, it is pertinent to take a cursory look at the legal implications of the broadcast deal. As noted earlier, the sale of TV rights in sports entails a joint selling model which allows the football association or relevant league regulatory body to negotiate the sale of these rights to a rights buyer. This model has been criticized for restricting competition. This concern has been ameliorated in large part by the unbundling of broadcast rights that can be sold to an individual bidder. Thankfully, technological intervention has ensured that the fears of restriction of competition and exclusivity do not jeopardize the commercial prospects of the deal.
The legal implications of this deal are very straight forward. Nigeria earlier this year, passed the Federal Competition and Consumer Protection Act. The Act aims at promoting a competitive market and protecting consumer rights in Nigeria. Prior to the enactment of the Act, there was no single piece of legislation regulating competition in Nigeria. Thus, provisions of laws regulating competition were found in various legislation such as the ISA; the Nigerian Communications Act 2003; the Electric Power Sector Reform Act 2005 amongst other laws. However, the new Act applies to all businesses in Nigeria and supersedes all laws on competition and consumer protection.
The Act prohibits unfair business practices or abuse of dominant market position by any company, as well as any agreement to restrain competition such as agreements for price fixing, price rigging, collusive tendering etc. To regulate and facilitate competition, the President may from time to time, by order published in the Federal Gazette, declare that prices for goods and services specified in the order shall be controlled in accordance with the provisions of the Act.
This legislation has far-reaching implications for this deal. For one, it ensures that this deal is subject to some regulatory mechanism which would keep the sponsors in check. It also gives aggrieved consumers the rights to challenge any arbitrary increase in subscriptions. Above all, the law would facilitate competition and put both the LMC and Next TV on their toes to ensure the end users of this deal get the most out of it. At any rate, time will tell whether the LMC has made judicious use of the commercial potentials of this deal.
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Steve Austin Nwabueze is a lawyer, Senior Associate and Team lead of the Dispute Resolution and Sports group of Perchstone and Graeys LP, Lagos.
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