Serie A rights under the hammer
by Martin Ross
The sale of TV rights to Italy’s Serie A has often been beset by legal or regulatory complications, but the forthcoming auction is set against a backdrop of seemingly unprecedented circumstances. Author
24th March 2017, 13:28
Ask people in the industry about the invitations to tender for Serie A media rights down the years and you’ll often be met with a roll of the eyes that suggests “it’s complicated.”

This year’s process will be no different as Lega Serie A and Infront Italy, its appointed adviser, wrestle with a string of moving parts. Sky Italia and pay-TV rival Mediaset Premium presently shell out a combined €943 million ($992 million) per season for domestic live rights until 2018. Italy’s top flight used to occupy second spot among Europe’s ‘big five’ leagues in terms of media rights revenues (after the Premier League), but has been leapfrogged by new contracts signed by the Bundesliga and LaLiga. So it will be looking to win back what it sees as its rightful place.

But just how many viable bidders will challenge Sky Italia when the tender documents are finally dispatched, after a delay caused by the competition watchdog’s concerns? Can the oft-threatened proposition of a league channel do enough to drive up the value of the rights? And how much of broadcasters’ budgets will be gobbled up by the impending Champions League and Europa League rights sales?

An appeal to Italy’s highest court against the scrapping of fines dished out to the league, Infront, Sky and Mediaset for their conduct during the last tender process also lurks in the background, and there have been calls for sizeable change, including new kick-off-times, from member clubs. The league and Infront had initially targeted a launch of the sales process as early as March or April, but latest estimates suggest they won’t go to market until the summer.

A Sky monopoly? 

The health of Mediaset Premium has been a concern, especially given a bitter ownership dispute being waged with media giant Vivendi that threatens to have a major impact on the pay-TV broadcaster's spending power. Vivendi executives have been probed by prosecutors as Mediaset maintains that the French media giant never intended to honour the purchase of its pay-TV unit and tore it up with the aim of driving down Mediaset's share price to raid its stock. The uncertainty around the issue (coupled with a competition investigation) continues to muddy the waters as the league prepares to go to market.

The appetite of 21st Century Fox-owned Fox Sports to bid aggressively against sister broadcaster Sky is naturally questionable

Reports in Italy have surfaced about negotiations for Mediaset Premium to fall, instead, into Sky’s hands, but the prospect of a merger between the pay-TV rivals will be of concern to Italy’s competition and soccer authorities alike, given its knock-on effect on the Serie A rights. In the meantime, Mediaset has unveiled a revamp of its pay-TV offering, opening up its platform to other operators as it bids to establish  a “sustainable business” for Premium.

Outside of the duo, the appetite of 21st Century Fox-owned Fox Sports to bid aggressively against sister broadcaster Sky is naturally questionable, leaving Discovery, which has built up sports content for both DMAX, its free-to-air DTT channel, and Eurosport, which itself bid unsuccessfully for a package of Serie A rights during the controversial 2014 auction.

A sizeable dent into broadcasters’ budgets will be made soon when the Champions League and Europa League rights are sold in Italy for the next three-year cycle, particularly as changes to the access list look set to guarantee four Italian clubs in the group stages of Europe’s elite completion from 2018-19 onwards. Mediaset currently pays €700 million per season to show the Champions League across various platforms, while Sky holds the Europa League rights. The Team Marketing agency is keen to beat Lega Serie A and Infront to the punch and strike its new deals first.

Competition watchdog and legal legacy

The main delay to the launch of the tender has been the questions raised by AGCM, the Italian competition authority, over the definition of the packages and the assignment regulations.

The league has been awaiting the green light from the authority, which began studying the tender details at the start of December. There is thought to have been some resistance to providing full details on the packages, which, it is feared, could undermine the value of the rights.

AGCM and the league chiefs are familiar foes, with the former having ruled that the league, Infront, Mediaset and Sky clubbed together during the last rights auction to “preclude the entry of new operators.” The investigation resulted in fines of €51.4 million and €4 million for Mediaset and Sky, respectively, plus a €9-million fine for Infront and a €1.9-million fine for the league.

The fines were ultimately overturned by TAR, the regional administrative court of Lazio as appeals were upheld, but AGCM has appealed to the State Council and a verdict is expected later this year, adding a further twist to the bidding process. Regardless of that result, the mess left behind by the previous rights auction has clearly motivated the competition body to play hardball on the specifications of this process.

Call for change

Earlier this season, Claudio Fenucci, chief executive of Serie A club Bologna, added more fuel to the fire in the politically charged world of Italian soccer, calling for wholesale change in the way the rights are sold.

He called into question the practice of selling live rights to all matches and championed the Premier League example of restricting the number of matches broadcast domestically to protect match attendances and “give more quality to the product.”

It remains to be seen whether such a plea will fall on deaf ears, but kick-off times have been under review, particularly given the various slots introduced by the Premier League and then LaLiga over the years, in order to maximise their audiences and international revenues. Action is likely to be taken by the league and Infront to ‘improve the product’ as Serie A, once the trailblazer of Europe, continues to be plagued by swathes of empty seats in ageing stadia and restricted hospitality opportunities. The impressive Juventus Stadium (and its 97.5-per-cent occupancy rate) has bucked the trend and remains an example to follow.

Luigi De Siervo, Infront Italy’s chief executive, expects much of the uplift in rights value to stem from overseas, where MP & Silva, the league’s perennial international rights agency, markets the rights. Undeterred by the obstacles, De Siervo has been upbeat about the prospects of increased revenues, stating: “Despite the Vivendi case, the rights during the next auction will have a greater result than the previous one.”

Improved results are, of course, as much in the interest of Infront as they are for the league, given the agency’s €5.94-billion minimum guarantee agreement to operate as exclusive adviser on domestic and international rights sales until 2020-21.

Infront’s future role is a debate for another day, as is the effect of losing industry stalwart Marco Bogarelli and his political clout in the Italian game. Bogarelli has left Infront to form his own agency (and has been among those facing a probe over ‘alleged manipulation’ of the last Serie A rights auction), bringing an end to much of the industry talk about his close relationship with MP & Silva, which commits €184 million per season for the international rights. That fee was actually a 57-percent jump on the previous contract, but there remains a perception that MP & Silva is a ‘shoo-in’ for the job.

Serie A channel: the bluff tactic?

Going into the latest auction, stories have once again circulated that the league is ready to launch its own channel to showcase games, a ploy regularly used by leagues faced with the prospect of little competition for rights. It has been claimed that the league would create its own channel to be distributed across TV and online platforms and that talks with investors to fund the project have taken place.

There was a similar threat of such a ‘Plan B’ tactic ahead of the last tender, and the league did end up launching its own online channel that streams selected games to fans for as little as €1.99 per match, after the relevant package of rights went unsold. Infront’s De Siervo has insisted that the threat of launching a TV channel is real if a monopoly position is held by Sky.

Negotiating distribution, setting up advertising sales and putting production plans in place for a fully-fledged in-house league channel would be fraught with challenges. But the Italian game likes a complication or two.

Sportcal