Bidding battles TV Rights Rumors Worry Soccer Sponsors

The German Football League will shortly auction off its latest round of TV broadcasting rights. But for the first time, the DFL is likely to cut back on free-to-air packages to increase the value of paid-for content. That's bad news for club sponsors.
Sportschau, and the free advertising it brings, is very popular among club sponsors.

It will be an exciting year for German soccer, with the battle for the national soccer league (Bundesliga) title  heating up and German clubs faring well in European championships.

Meanwhile, at the Frankfurt headquarters of the DFL, a non-sporting but still much anticipated issue is being discussed: What mix of broadcasting rights packages will pull in the most TV revenue for soccer clubs for the 2017-18 season? And how should they be sold to avoid violating laws, annoying fans, irritating partners and alienating newly interested parties?

DFL Managing Director Christian Seifert is handling the delicate issue personally. Discretion is the watchword; pressure to achieve success is intense.

Karl-Heinz Rummenigge, the powerful chief executive of the Bundesliga’s biggest club, Bayern Munich, said he expects the DFL to earn at least €1 billion ($1.1 billion) in television revenues. Currently, the figure averages around €628 million per year.

And to further turn the screw, the country's anti-trust agency has been examining the submitted scenarios since last summer. The call for broadcasting rights bids, originally scheduled for this month, is being delayed because the competition watchdog needs longer than expected to look over the bids.

This would be a severe restriction of the commodity of the Bundesliga. Axel Balkausky, Sports coordinator, ARD channel

No information on the bids or decisions on them has been officially released. But a survey by a federal agency sent to sound out participants allows conclusions to be drawn about the DFL’s plans. One proposal involving Sportschau, a publicly broadcasted TV show that currently has the rights to show highlights of Bundesliga games on Saturday evenings, is causing particular concern.

The so-called Free Compact proposal would see Sportschau’s soccer highlights cut in half to just 45 minutes. In addition, the DFL is thought to also be accepting bids for a like-for-like replacement of Sportschau’s current deal.

The poker game has started. “Apparently DFL wants to have interested parties bid on both scenarios – and only decide at the end,” said Axel Balkausky, sports coordinator at state broadcaster ARD, which airs Sportschau.

Would half a Sportschau be acceptable to him? “That is not a conceivable model for us at ARD,” Mr. Balkausky said. “We believe that a certain reporting length is necessary in order to summarize a soccer game.”

A shortening of broadcast time on free-to-air TV would enhance the exclusivity in the pay sector. Mr. Balkausky suspects that a shortened show could get parties from the online sector interested: “This would be a severe restriction of the commodity of the Bundesliga, if what one is hearing is correct,” he said.

The shortened version of Sportschau would also have a negative impact on the current advertising partners of the Bundesliga’s 18 clubs. On-pitch advertising picked up by Sportschau’s cameras, for example on hoardings and on players’ shirts, is beamed to its 5 million viewers for free.

Jan Lehmann was involved in the DFL bidding process four years ago as director of the DFL. Today, he heads the German operations of the sponsoring consultant Repucom. The company has analyzed what effect a restriction of free-to-air soccer highlights would have on advertising partners.

“In the possible Free Compact scenario, according to the data from the 2014-15 season, sponsors would have to reckon with a reduction of gross advertising value amounting to €111 million,” he said.

That’s bad news for sponsors such as the retail bank Postbank. “In purely commercial terms, we want our brands to be as widely visible as possible in free TV,” said its head of communications Joachim Strunk, who is also the spokesman for a group of 16 large sports sponsors. “And Sportschau is a big tanker for us, the dominant format that fans watch week after week.”

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According to the Repucom analysis, Sportschau accounts for around 21 percent of the entire advertising value of all television deals for Bundesliga clubs. But there are differences: Sponsors of top clubs such as Bayern Munich, which are higher profile, derive only about 10 percent of their advertising value via Sportschau. But for less prominent clubs such as Hannover 96 and 1899 Hoffenheim, the share was more than 30 percent.

Repucom calculated these values through an evaluation of all broadcasts of games in the Bundesliga in the 2014-15 season. “We determined that the sponsors of the Bundesliga and the second league generated more than €220 million in advertising value through Sportschau and the Tageschau news program on Saturdays,” Mr. Lehmann said.

“Of course it is legitimate that the DFL wants to create competition for as many packages as possible,” Mr. Balkausky noted. “That was already the case four years ago.”

In the previous bidding round, the DFL simply accepted the highest bids for the available packages. According to unconfirmed information, ARD pays around €100 million per year for its package of rights, which also includes a few live games and highlights of the Sunday games.

Mr. Balkausky expects a tough fight among bidders in the coming round. “I am firmly convinced that all free-to-air broadcasters will take a close look," he said. "In any case, the DFL wants to take in more money overall than before.”

He adds that private broadcasters are also limited, because they are only allowed 12 minutes of advertising per hour. And ARD is no shoe-in: “There is no automatic mechanism that says we have to retain the rights," he said. "Everything is determined by cost effectiveness.”

ARD’s budget for sporting rights between 2017 and 2020 will only be confirmed this spring. At the moment, it is estimated that Mr. Balkausky has some €250 million per year for all sporting rights. “We will continue to operate in this framework," he said. "There won't be more money in the sports-rights budget.”

In the meantime, opponents are lining up. “Yes, we're definitely interested in rights to the Bundesliga," said Matthias Bolhöfer, spokesman for rival free-to-air broadcaster RTL. "But we will continue to be reserved regarding specific statements of intention even after the call for bids has been made.”

Constantin Medien, a sports marketing company, is also interested in the highlights package. This was confirmed by board member Olaf Schröder, programming director of Sport 1, a broadcaster that currently features highlights of German second division football.

“With a view to the next period of rights, our goal is to at least maintain the status quo," Mr. Schröder said. "If further possibilities arise and they are financially feasible, we would of course also be interested in them as well."

 

Thomas Mersch and Stefan Merx are freelance sports writers in Cologne. To contact the authors: [email protected]