French football faces financial crisis after MediaPro pulls the plug

The record-breaking TV deal was, in retrospect, way too good to be true.

The billion euros the fledgling media company had promised to pay to broadcast French football matches every year represented a 60 percent increase over the league’s previous television deal, and far more than any other bidder had offered. It was such a large amount – about $ 1.2 billion a year – that league officials and club executives ignored clear warning signs; to set aside the fact that the company making the offer, MediaPro, had no history in French football; and to make a deal without the kind of bank guarantees that could have gotten all that money in eventually.

And then the deal just disappeared.

Last week, arbitration talks between the Ligue de Football Professionnel (LFP), the governing body for professional football in France, and MediaPro, a Spanish broadcaster now controlled by Chinese interests, ended with the company having its four years of rights under its control. returned. and less than a third of the more than 300 million euros it owes in games this season.

Due to the resolution, league officials are frantically looking for a new television partner and teams face a very different financial future.

For the clubs, the consequences can be immediate. Rather than having enough money to build teams that rival those in Germany and Spain, most French teams are facing restructuring measures, starting with the sale of players when the European player trading window reopens in January.

A team director described the situation as “a total disaster”. Another’s director said the situation – coupled with the ongoing financial fallout from the coronavirus pandemic – was “hugely damaging”. French champions Paris St.-Germain’s president, Nasser al-Khelaifi, asked the new leaders of the league to conduct a full investigation into the process that ended in catastrophe for the French teams. Al-Khelaifi is also chairman of beIN Media Group, a MediaPro rival for rights.

What can hurt the most, at least from the teams’ perspective, is that it’s a crisis they’ve created themselves.

The problems started in the spring. As all of Europe’s major football leagues came up with ways to reboot, the French league announced that it would be the only one not to complete the suspended campaign.

A government decision brought an early end to the season, forcing Ligue 1 to tap into a national loan program to keep its teams from going into financial ruin. Only the prospect of record-breaking broadcast earnings, which would come into effect this season with the start of the MediaPro deal, softened the blow.

The deal, signed in 2018, was then heralded as groundbreaking, a contract worth more than one billion euros per season (about $ 1.2 billion) for rights to games in France’s two largest domestic divisions. That symbolic figure was one that team leaders had long hoped to realize, and one so large that it led them to part with the league’s partner, Canal +.

But the financial boost – MediaPro had agreed to pay nearly 60 percent more than the previous agreement – also led teams to spend more on recruiting in the last off-season, a decision many now regret.

“They expected the higher TV rates, and this comes as a shock to most people,” said the general manager, who asked not to be identified as talks to stabilize the league’s finances continue. He predicted that some clubs would look to foreign investors to save them in exchange for heavily discounted stock or outright sales.

Some of the comforts that led the clubs to spend freely can be traced back to lavish comments from MediaPro’s CEO, Jaume Roures, at the height of the first wave of the spring pandemic, when global sport had ceased and the main broadcasting partners of the French league. Canal + and beIN Sports announced at the time that they would suspend their fee payments.

In April, Roures promised in an interview with the sports daily L’Equipe to take over the broadcasting rights to the French games early if the season started again in the summer and the partners of the league, Canal + and beIN Sports, opt out. “To be a Good Samaritan is to pay what you owe,” Roures said at the time.

But a closer look at the deal French league officials signed with MediaPro, a company founded by Roures and two partners now largely controlled and funded by a little-known Chinese group, suggests several red flags were ignored in pursuit of the richest offer.

For example, MediaPro should not have entered the auction for the French rights if the competition had not changed the tender process to include agencies like MediaPro, which did not have a platform to broadcast games in France.

Then, after the deal was signed, it took several months for an official contract to be signed, and when it did, it didn’t include the kind of bank guarantees that would have proven that MediaPro would be able to fulfill the promised payments. .

There were other warning signs too. Another huge deal signed by MediaPro, the stunning capture of the rights to Serie A from Italy, collapsed around the same time it was in talks about the French takeover. Part of the reason was that the company couldn’t guarantee much of the amount it promised the competition.

And four years ago, the company’s business practices came under scrutiny when a US affiliate, Imagina Media Audiovisual, was involved in the FIFA bribery scandal. Earlier this year, Gerard Romy, one of the founders of MediaPro, was charged with wire fraud, money laundering and conspiracy of extortion in the case.

Roures had tried to blame the impact of the coronavirus on the call to the French league to renegotiate the MediaPro deal in October. But with stadiums largely off-limits to fans, football ratings across Europe have remained robust; in some cases viewing figures have skyrocketed.

Didier Quillot, LFP’s CEO who led the tendering process, left his post in September with a payment of approximately $ 1.8 million, much of which was based on his negotiation of the deal with MediaPro. Quillot has said in recent days that he is willing to repay any bonus he has received related to the sale of rights.

MediaPro’s troubles started when it failed to secure 100 percent of the rights and lost a crucial package that included the top pick of the week’s top game to beIN Sports, a Qatar-backed broadcaster. BeIN sold those rights to Canal +, reducing the need for the network, the largest pay-TV provider, to close a deal with MediaPro for the other games.

This ensured that MediaPro had expensive rights without the most feasible sales market being willing to buy them. In search of a way out, it tried to start its own channel, Téléfoot, which had little to offer subscribers except the matches it had bought. However, sales of subscriptions offered on other, smaller platforms failed to reach meaningful numbers, forcing MediaPro to burn millions of dollars with little hope of breaking even.

Faced with that crisis, MediaPro failed to pay 172 million euros ($ 208 million) when the French league kicked off the new season in October. He skipped another one this month for 152.5 million euros.

MediaPro defended itself against lawsuits by taking advantage of new laws passed to protect companies during the coronavirus crisis. Not being able to insist on reclaiming what it owed, the French league was forced into a mediation process that ended last week, with MediaPro agreeing to repay just 100 million euros ($ 121 million).

“Clubs desperately need money; that’s why the league has accepted this very poor offer from MediaPro, ”said Pierre Maes, a consultant and author of“ Le Business des Droits TV du Foot ”, a book about the football rights market.

The league – which so far has kept its teams afloat with bank loans instead of the missing broadcast payments – is now trying to find a television partner, likely Canal +, to come to the rescue. One thing is almost certain: the price that the competition will have to accept will not be celebrated like the MediaPro deal was.

“Whatever can be done to bring money to clubs, they will do it,” said Maes. He predicted that each new rights deal would now yield about half of what MediaPro had promised to pay.

“Canal + is able to correct the market today,” he said.