French Soccer Faces Monetary Disaster After MediaPro Pulls Plug

French Soccer Faces Financial Crisis After MediaPro Pulls Plug

In retrospect, the record-breaking television deal was far too good to be true.

The billions of euros the aspiring media company had promised to pay each year to watch French football matches television represented a 60 percent increase over the league’s previous television deal and much more than any other bidder had offered. It was such a large sum – roughly $ 1.2 billion a year – that league officials and the club chief on their board of directors ignored obvious warning signs. to put aside the fact that the company making the offer, MediaPro, had no history in French football; and making a deal without the kind of bank guarantees that could have ensured all that money arrived at some point.

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 return of the rights under its control for four years and less than a third of the more than 300 million euros it owes for games this season.

The resolution has meant that the leaders of the league have been desperately looking for a new television partner and the teams are facing a completely different financial future.

The effects can be immediate for the clubs. Instead of having enough money to create teams that can compete with those in Germany and Spain, most French teams are facing restructuring measures, starting with selling players when the European player trading window reopens in January.

One team leader described the situation as “a total disaster”. Another executive said the situation – along with the ongoing financial impact of the coronavirus pandemic – was “extremely damaging”. French champions Paris St-Germain’s president, Nasser al-Khelaifi, urged the league’s new front-runners to conduct a full investigation into the process that led to disaster for the French teams. Al-Khelaifi is also the chairman of beIN Media Group, a rights rival of MediaPro.

What can hurt the most, at least from the teams’ point of view, is that it is a crisis they caused themselves.

The trouble started in the spring. With all major European football leagues planned to restart, the French league announced that it would be the only one not to complete its suspended campaign.

A government decree ended the season prematurely, forcing Ligue 1 to draw on a national loan program to ensure their teams didn’t fall into financial ruin. Only the prospect of record-breaking broadcasting income, which should come into effect with the start of the MediaPro deal this season, softened the blow.

The agreement, signed in 2018, was considered groundbreaking at the time, a contract worth more than a billion euros per season (around 1.2 billion US dollars) for gaming rights in France’s two largest national divisions. This symbolic figure was one that the team leaders had long hoped for, and one so large that they parted ways with the league’s partner, Canal +.

However, the financial boom – MediaPro had agreed to pay nearly 60 percent more than the previous agreement – also resulted in teams spending more on recruiting in the last off-season, a decision many now regret.

“They were expecting higher TV rates and this is a shock to most people,” said the chief executive, who asked not to be identified as talks continue to stabilize the league’s finances. He predicted that some clubs would turn to overseas investors to bail them out in exchange for heavily discounted equity or direct sales.

Part of the comfort that led clubs to spend freely can be traced back to the lively comments from MediaPro boss Jaume Roures, at the height of the first wave of the spring pandemic, when global sport stopped and the most important French league broadcast partners At this point, Canal + and beIN Sports announced that they would suspend their rights payments.

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

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

For example, MediaPro would not have been allowed to take part in the French rights auction if the league had not changed the tendering process to allow agencies like MediaPro, which did not have a platform for broadcasting games in France, to participate.

After the agreement was made, it took several months for an official contract to be signed and, if it did, it did not contain the kind of bank guarantees that would have proven MediaPro would be able to meet the promised payments .

There were other warning signs too. Another major deal signed by MediaPro, the impressive takeover of the rights to Italy’s Serie A, collapsed around the same time that talks were being held to acquire France. Part of the reason for this was that the company couldn’t guarantee much of the amount it had promised the league.

Four years ago, the company’s business practices came under further scrutiny when a US subsidiary, Imagina Media Audiovisual, became embroiled 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 related to the case.

Roures had tried to blame the effects of the coronavirus when he urged the French league to renegotiate their MediaPro deal in October. With the stadiums largely closed to fans, football attendance figures have remained robust across Europe. In some cases, ratings have risen.

Didier Quillot, the LFP chief who led the bidding process, left his post in September with a payment of around $ 1.8 million, much of which was based on his negotiations with MediaPro. Quillot has stated in the past few days that it is ready to repay any bonus it has received in connection with the sale of the rights.

MediaPro’s problems began when they failed to secure 100 percent of the rights and lost an important package that included the top game of the week voting for beIN Sports, a Qatar-supported broadcaster. BeIN sold these rights to Canal +, reducing the need for the network, France’s largest pay-TV operator, to sign a contract with MediaPro for the other games.

This gave MediaPro expensive rights without the best point of sale being willing to buy them. In search of a way out, the company wanted to create its own channel, Téléfoot, which had little to offer subscribers beyond the games they bought. However, sales of subscriptions offered on other, smaller platforms didn’t reach meaningful numbers, allowing MediaPro to burn millions of dollars with little hope of breakeven.

Faced with this crisis, MediaPro was unable to make a payment of 172 million euros at the start of the French league’s new season in October. This month, another one was skipped for 152.5 million euros.

MediaPro tried to protect itself from legal disputes by taking advantage of new laws to protect businesses during the coronavirus crisis. The French league failed to insist on getting its debts back and was forced into a mediation process that ended last week. MediaPro agreed to return just 100 million euros ($ 121 million).

“Clubs desperately need cash. That’s why the league accepted this very bad offer from MediaPro, ”said Pierre Maes, advisor and author of“ Le Business des Droits TV du Foot ”, a book about the football rights market.

The league, which has so far kept its teams afloat with bank loans instead of the lack of broadcast payments, is now looking for a television partner, most likely Canal +, to come to the rescue. One thing is almost certain: the price that the league has to accept is not being celebrated like the MediaPro deal was.

“Whatever can be done to deliver cash to the clubs, they will,” Maes said. He predicted that any new agreement on the rights could now bring in about half of what MediaPro promised to pay.

“Canal + is now in a position to correct the market,” he said.