30 November 2010- Soccer Investor

News and Analysis on the

International business of football

By FIFA Confederation

Soccerbusinessworld.com

Soccer Business World

The implications of a new report by television consulting group Madigan-Cluff suggests that there could be a significant reduction in FIFA broadcast rights income the further east from Europe is the choice of candidate for the 2022 World Cup. For 2022 the best result for overall tournament revenue would be Qatar.

Michael Cluff one of the authors of the report published this week said: “Moving further East creates an increasing problem the further you go. The bidding processes for rights make the exact difference very different to quantify, as losing one bidder can equate to losing substantial revenue. Yet weakness in the bidding process can lead to more rights disappearing behind pay TV walls reducing the impact for brand partners.” This week FIFA’s executive committee will make the controversial decision as the allocation of the 2018 and 2022 FIFA World Cup Championships. Madigan Cluff has undertaken a major analysis of the impact of the 2010 World Cup in South Africa in terms of advertising impact. The report demonstrates that the real interest and consumer focus is around the live action with previews and catch ups playing a secondary role. The consultants estimate that the decision about 2018 is relatively neutral for the rights negotiators since some canny scheduling of matches can meet the scheduling needs for most broadcasters.

Apart from the question of developing the game, the most interesting question for FIFA’s executive committee has to be how the broadcast rights will be impacted by the choice of venue. The desire of any broadcaster is to buy rights which will result in live matches which appear in prime time. Live matches attract the big audiences and prime time drives advertising money. For advertising supported stations the logic is clear – a primetime live match is likely to be worth three times the advertising value of non prime match. For non advertising public service broadcasters and for the increasing interest from subscription based pay TV operators the link is not quite as transparent. For public service broadcasters the objective remains to drive audiences and share while subscription uptake will be much greater if the programme dominates the viewing time of economically active adults. Madigan Cluff show that some of the impact of moving the World Cup around the world can be mitigated by moving when matches are played in the local time of the host country. Of countries competing for FIFA votes at present there are effectively two groups. For 2018 the matches will take place broadly within a European time zone with only Russia 2 hours forward of Central European Time likely to cause any issue. Even here a match kicking off at 5pm will be a 7pm match in most of Europe, and an 8pm match for the countries on the Western fringe. Only across the Atlantic does the time of day become difficult with Sao Paulo seeing the match at midnight, New York at 1am and the West Coast at 5am. For most of Asia Pacific the match will appear in daytime. From a European viewing perspective the 2022 decision can create winners and losers. If Qatar wins the scheduling can be similar to Russia and therefore not much of a challenge. However the risk is much greater if the tournament moves further East. Korea or Japan is 7 hours out of alignment with Central European time so a match starting at 1pm, runs at 8pm in most of Europe and 9pm on the Western fringe of Europe. Australia is a real challenge 8 hours out of alignment with Europe and 11 hours out of alignment with Brazil. Whatever time you set the matches someone loses. In terms of the importance of a move to FIFAs income the consultants estimate that this year’s World Cup broadcasting rights income split 45% to Europe, 35% to the Americas and 20% to Asia Pacific. This split will inevitably change going forwards in favour of Asia and away from Europe, but Madigan Cluff see several challenges. First, for 2010 the European figure is substantially reliant on public service broadcasters who are currently under severe budget pressures. Most European markets have a limited set of competing buying points for the rights in each market and there is risk of reduced biding and downward pressure on rights payments. Certainly FIFA may not want to give some of these broadcasters reasons to request a step change in their contribution. Second, moving from public services broadcasters to pay TV carries the risk that a smaller The Independent Guide to the International Business of Football www.soccerbusinessworld.com © No reproduction in whole or part without the prior approval of the copyright holder.

audience reduces the value to commercial brand partners who are believed to have contributed 40% of 2010 income. Third, the Americas figure is partly driven from a valuable deal with ESPN which needs football interest within the US market to thrive and the key moments of the World Cup to occur when America is awake. On the positive side, however, the consultants recognise that the Asia Pacific vales are likely to grow sharply – and some opportunities exist in bidding competition where subscription TV operators see this as an opportunity to drive subscribers. Furthermore, new rights for transmission on mobile and across the internet will come substantially into play. Although this is still a rapidly evolving market the current evidence suggests that the real value will be where consumers can enhance their involvement in live action. As demonstrated in Madigan Cluff’s report on the 2010 tournament finals – highlights and previews only make up a small fraction of the transmission value to TV stations.

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