Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Exploring the Validity of Unilateral Extension Options in Football – Part 2: The view of the DRC and the CAS. By Saverio Spera

Editor’s Note: Saverio Spera is an Italian lawyer and LL.M. graduate in International Business Law at King’s College London. He is currently an intern at the ASSER International Sports Law Centre. 

This blog is a follow up to my previous contribution on the validity of Unilateral Extension Options (hereafter UEOs) under national and European law. It focuses on the different approaches taken to UEOs by the FIFA Dispute Resolution Chamber (DRC) and the Court of arbitration for sport (CAS). While in general the DRC has adopted a strict approach towards their validity, the CAS has followed a more liberal trend. Nonetheless, the two judicial bodies share a common conclusion: UEOs are not necessarily invalid. In this second blog I will provide an overview of the similarities and differences of the two judicial bodies in tackling UEOs. More...

International and European Sports Law – Monthly Report – April 2017. By Tomáš Grell

 Editor's note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.More...

RFC Seraing at the Court of Arbitration for Sport: How FIFA’s TPO ban Survived (Again) EU Law Scrutiny

Doyen (aka Doyen Sports Investment Limited) is nothing short of heroic in its fight against FIFA’s TPO ban. It has (sometimes indirectly through RFC Seraing) attacked the ban in front of the French courts, the Belgium courts, the European Commission and the Court of Arbitration for Sport. This costly, and until now fruitless, legal battle has been chronicled in numerous of our blogs (here and here). It is coordinated by Jean-Louis Dupont, a lawyer who is, to say the least, not afraid of fighting the windmills of sport’s private regulators. Yet, this time around he might have hit the limits of his stubbornness and legal ‘maestria’. As illustrated by the most recent decision of the saga, rendered in March by the Court of Arbitration for Sport (CAS) in a case opposing the Belgium club RFC Seraing (or Seraing) to FIFA. The arguments in favour of the ban might override those against it. At least this is the view espoused by the CAS, and until tested in front of another court (preferably the CJEU) it will remain an influential one. The French text of the CAS award has just been published and I will take the opportunity of having for once an award in my native language to offer a first assessment of the CAS’s reasoning in the case, especially with regard to its application of EU law. More...

International and European Sports Law – Monthly Report – March 2017. By Tomáš Grell

 Editor's note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.

 More...

Kosovo at the Court of Arbitration for Sport – Constructing Statehood Through Sport? By Ryan Gauthier (Thompson Rivers University)

Editor's Note: Ryan is Assistant Professor at Thompson Rivers University, he defended his PhD at Erasmus University Rotterdam in December 2015. His dissertation examined human rights violations caused by international sporting events, and how international sporting organisations may be held accountable for these violations. 


“Serious sport…is war minus the shooting.” – George Orwell

 

In May 2016, the Union of European Football Associations (UEFA) admitted the Football Federation of Kosovo (Kosovo) as a member. The voting was close, with 28 member federations in favour, 24 opposed, and 2 whose votes were declared invalid. The practical outcome of this decision is that Kosovo would be able participate in the UEFA Euro championship, and that Kosovo teams could qualify for the UEFA Champions’ League or Europa League. More...


International and European Sports Law – Monthly Report – February 2017. By Tomáš Grell

 Editor's note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked. More...

Doyen vs. Sporting II: The Bitter End of Sporting’s Fight at the Swiss Federal Supreme Court. By Shervine Nafissi

Editor’s Note: Shervine Nafissi (@SNafissi) is a Phd Student in sports law and teaching assistant in corporate law at University of Lausanne (Switzerland), Faculty of Business and Economics (HEC).

 

Introduction

The factual background

The dispute concerns a TPO contract entitled “Economic Rights Participation Agreement” (hereinafter “ERPA”) concluded in 2012 between Sporting Lisbon and the investment fund Doyen Sports. The Argentine player was transferred in 2012 by Spartak Moscow to Sporting Lisbon for a transfer fee of €4 million. Actually, Sporting only paid €1 million of the fee while Doyen Sports financed the remaining €3 million. In return, the investment company became the owner of 75% of the economic rights of the player.[1] Thus, in this specific case, the Portuguese club was interested in recruiting Marcos Rojo but was unable to pay the transfer fee required by Spartak Moscow, so that they required the assistance of Doyen Sports. The latter provided them with the necessary funds to pay part of the transfer fee in exchange of an interest on the economic rights of the player.

Given that the facts and circumstances leading to the dispute, as well as the decision of the CAS, were fully described by Antoine Duval in last week’s blog of Doyen vs. Sporting, this blog will solely focus on the decision of the Swiss Federal Supreme Court (“FSC”) following Sporting’s appeal against the CAS award. As a preliminary point, the role of the FSC in the appeal against CAS awards should be clarified.More...

Doyen vs. Sporting I: Doyen’s Pyrrhic Victory at the CAS

At the end of December 2015, the CAS decided on a very public contractual dispute between Sporting Clube de Portugal Futebol SAD (Sporting) and Doyen Sports Investments Limited (Doyen). The club was claiming that Doyen’s Economic Rights Participation Agreement (ERPA) was invalid and refused to pay Doyen’s due share on the transfer of Marcos Rojo to Manchester United. The dispute made a lot of noise (see the excellent coverage by Tariq Panja from Bloomberg here, here and here) as it was the first TPO case heard by the CAS after FIFA’s ban. Yet, and it has to be clear from the outset, the case does not affect the legality of FIFA’s TPO ban; it concerned only the compatibility of Doyen’s ERPA with Swiss civil law. The hearing took place in June 2015, but the case was put under a new light by the football leaks revelations unveiled at the end of 2015 (see our blog from December 2015). Despite these revelations, the CAS award favoured Doyen, and was luckily for us quickly made available on the old football leaks website. This blog will provide a commentary of the CAS decision. It will be followed in the coming days by a commentary by Shervine Nafissi on the judgment, on appeal, by the Swiss Federal Tribunal. More...

International and European Sports Law – Monthly Report – January 2017. By Saverio Spera.

Editor’s note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked. 


The Headlines

The Diarra ruling of the Tribunal of Charleroi

On 19 January 2017, the Hainaut Commercial Tribunal – Charleroi rendered its decision on the lawsuit filed by the football player Lassana Diarra against FIFA and the Belgian FA (URBSFA) for damages caused by not being able to exercise the status of a professional football player during the entire 2014/2015 season. The lawsuit is linked to the decision, rendered by the FIFA Dispute Resolution Chamber (DRC) on April 2015, to support Lokomotiv’s decision to terminate the player’s contract and to order Diarra to pay Lokomotiv the amount of EUR 10,500,000 for having breached his contract. According to the plaintiff, Diarra’s opportunity to be recruited by Sporting Charleroi was denied due to the club being potentially considered jointly liable for Diarra’s compensation pursuant to Article 17 (2) RSTP. The Belgian court held strongly that “when the contract is terminated by the club, the player must have the possibility to sign a new contract with a new employer, without restrictions to his free movement”. This case highlighted, once again, the need to read the RSTP in the light of EU law. Moreover, the decision is laying further ground for broader challenges to the RSTP on the basis of EU law (for a deeper insight into the Diarra ruling, see the recent blog written by our senior researcher Antoine Duval) More...


Time for Transparency at the Court of Arbitration for Sport. By Saverio Spera

Editor’s Note: Saverio Spera is an Italian lawyer and LL.M. graduate in International Business Law from King’s College London. He is currently an intern at the ASSER International Sports Law Centre.


The time is ripe to take a closer look at the CAS and its transparency, as this is one of the ways to ensure its public accountability and its legitimacy. From 1986 to 2013, the number of arbitrations submitted to the CAS has grown from 2 to more than 400 a year. More specifically, the number of appeals submitted almost doubled in less than ten years (from 175 in 2006, to 349 in 2013[1]). Therefore, the Court can be considered the judicial apex of an emerging transnational sports law (or lex sportiva).[2] In turn, the increased authority and power of this institution calls for increased transparency, in order to ensure its legitimacy.[3]

More...


Asser International Sports Law Blog | Introducing the new legal challenges of E-Sports. By N. Emre Bilginoglu

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Introducing the new legal challenges of E-Sports. By N. Emre Bilginoglu

Editor’s Note: Emre Bilginoglu[1] is an attorney in Istanbul and the co-founder of the Turkish E-Sports Players Association, a non-profit based in Istanbul that aims to provide assistance to professional gamers and to work on the relevant laws affecting them. 


The world is witnessing the rise of a new sport that is growing at an incredible speed: E-Sports. We are only starting to understand its legal implications and challenges.

In recent years, E-Sports has managed to attract thousands of fans to arenas to see a group of people play a video game. These people are literally professional gamers (cyber athletes)[2] who make money by competing in tournaments. Not all video games have tournaments in which professional players compete against each other.

The most played games in E-Sports competitions are League of Legends (LoL), Defense of the Ancients 2 (DotA 2) and Counter-Strike: Global Offensive (CS:GO). LoL and DotA are both Multiplayer online battle arena (MOBA) games, a genre of strategy video games in which the player controls a single character in one of two teams. The goal of the game is to destroy the opponent’s main structure. CS:GO is a first-person shooter (FPS) game, a genre of video games where the player engages combat through a first-person perspective. The main objective in CS:GO is to eliminate the opposing team or to terrorize or counter-terrorize, planting bombs or rescuing hostages. Other games that have (popular) E-Sports competitions include Starcraft II (real time strategy), Hearthstone (collectible card video game), Call of Duty (FPS) and FIFA (football).

The gaming requires cooperation between team players, a high level of concentration, rapid reactions and some seriously fast clicking. E-Sports is a groovy term to describe organized competitive computer gaming. The E-Sports industry is exponentially growing, amounting to values expressed in billions of dollars. According to Newzoo, a website dedicated to the collection of E-Sports data, there are some 250 million occasional viewers of E-Sports with Asia-Pacific accounting for half of the total amount. The growth of the industry is indubitably supported by online streaming media platforms. This article aims to explain what E-Sports is and to give the readers an insight on the key legal questions raised by it. 


Is E-Sports a Sport?

The introductory legal question regarding E-Sports is whether it is a sport. There are different definitions of “sport”. According to the Council of Europe, “sport” means all forms of physical activity which, through casual or organised participation, aim at expressing or improving physical fitness and mental well-being, forming social relationships or obtaining results in competition at all levels.

SportAccord a non-profit association which is composed of autonomous and independent international sports federations and other international organisations contributing to sport in various fields, also offers a definition of sport. According to this definition, sport:

1) includes an element of competition;

2) does not rely on any element of “luck” specifically integrated into the sport;

3) does not pose an undue risk to the health and safety of its athletes or participants;

4) is in no way harmful to any living creature;

5) and does not rely on equipment that is provided by a single supplier.


Sport categories designated by SportAccord are primarily: physical sports (e.g. basketball); mind sports (e.g. chess); motorized sports (e.g. motorcycle racing); coordination sports (e.g. snooker); and animal-supported sports (e.g. equestrianism).

SportAccord also states that activities with limited physical or athletic activity would be carefully considered. E-Sports indeed involves a limited physical activity. The professional gamer generally sits in front of a designated computer. However, at this point it is important to highlight the existence of multiplayer video games that involve a considerable amount of physical activity. Home video game consoles that detect movement were released in early 2000s, paving the way for true E-Sports cyber athletes in the near future. Until now however, games that require physical activity have not been played at a professional level.

Having said this, E-Sports does involve a clear element of competition, does not rely only on luck, does not pose an undue risk to the health and safety of its competitors and is not harmful to any living creature. At some point, it does rely on equipment that is provided by a single supplier, as the subject game that is played is in general produced by a single supplier. In other words, E-Sports clearly complies with the remaining criteria (2 to 5) suggested to be defined as a “sport”.

Even though there are a myriad of multiplayer games, one mostly categorizes E-Sports as a primarily mind and coordinated sport. It does not require lots of physical activities except for very fast finger movement. A similar sport is chess. It is challenging to oppose the argument of David Papineau, professor of philosophy of science at King’s College London, who, as regards chess, said that “(t)he activity is playing a game, therefore it is not a sport but a game”. However, chess is a strategy board game and at the same time it is an organized sport with an international governing body, namely FIDE.


Can E-Sports Be an Olympic Sport?
The International Olympic Committee (IOC) is the supreme authority of the Olympic movement. The IOC decides which sports are included in the Olympic Games. Choices of the IOC always bring forth discussions and debates in the sports community. Some sports are discontinued and some are re-introduced. Wrestling was announced to be dropped from the 2020 Olympic Games in 2020, but was reinstated seven months after losing its place. Even though wrestling is one of the founding sports of the Olympics, the IOC could have removed it from the Olympic Games. The IOC recently reinstated baseball and softball, and added skateboarding -, karate, climbing and surfing- to the sports programme for the Olympic Games in Tokyo 2020. Therefore, it is possible to say that popularity is one of the crucial elements for a sport to be included to the Olympic Games. Chess, led by FIDE, is attempting to be an Olympic Sport. Although the attempt for Tokyo 2020 was not successful, things may change in the future.

In my opinion, E-Sports can very well be regarded as an Olympic sport in the near future. Whatever game that is played on a professional level, may be regarded as its discipline. The crucial setback is the perishability of games. Video games become “obsolete” with time. This is especially the case with sports games. Squads and the game play changes every season. That is one of the reasons why FIFA releases a new video game every single year. Therefore, video games such as FIFA are unlikely to make it to the top E-Sports games awarding prize money.


What type of Governance for E-Sports ?

The formation of a single internationally recognized E-Sports federation would be a first step in a long journey to reach the Olympics. Currently however, several international E-Sports organizations exist.

In South Korea, where E-Sports is what football is to Brazil, the South Korean E-Sports Association was founded in 2000. The Association regulates the working conditions of cyber athletes. The highest earnings in E-Sports by countries are listed as: China, the United States, South Korea, Sweden and Canada. As for international associations, three of them need to be mentioned.

First, there is the World E-Sports Association (WESA), founded in 2016 by a group of E-Sports teams and ESL (i.e. largest video game event company in the world). WESA aims to professionalize the industry, regulating matters regarding revenues and schedules. WESA even has an internal arbitration court, namely WESA Arbitration Court. It operates independently from WESA and is open to everyone involved in E-Sports, such as players, teams, organizers and publishers.

The second is the International e-Sports Federation (IeSF), an international organization based in Seoul, South Korea. A total of 46 nations are member of the IeSF. It has listed seven objectives in its Statute, the first one being as follows: to “constantly improve e-Sports and promote it in the light of its values - humanitarian, educational, cultural, unity of purpose and ability to promote peace”. IeSF is a signatory of the World Anti-Doping Code (WADC). ESL also endorsed the WADC and conducts doping tests on cyber athletes. Stimulants- drugs that improve reaction time and concentration are prohibited.

The third association worth mentioning is the International eGames Committee (IEGC), a non-profit E-Sports organization, supported by the government of the United Kingdom. It aims to positively shape the future of competitive gaming.

In my view, countries that seek to be a part of the E-Sports world should establish their own national federations and apply to IeSF. IeSF should collaborate with WESA, which is founded by the most significant organizations in the industry. IeSF is capable of growing into an internationally recognized authority that is in charge of international competitions between national teams, whereas WESA would be in charge of all competitions between clubs.


E-Sports and Free Speech
Since there is a certain amount of (virtual) killing and planting bombs involved, some games are not suitable for children. Deciding who can play which game is up to certain institutions around the world. One of them is Pan European Game Information (PEGI). PEGI is the age rating system for video games in Europe, Israel and Quebec. The Entertainment Software Rating Board (ESRB) is another institution providing an age rating system for video games, this time for North America. PEGI and ESRB standards are generally not legally binding. PEGI standards are legally enforced in few jurisdictions, one being the United Kingdom. Another example is Austria. In Austria, protection of minors are implemented by states. Two of the nine states, Vienna and Carinthia, legally adopted PEGI standards.

California passed a law that prohibited the sale of certain video games to minors. It was struck down by the U.S. Supreme Court. The Supreme Court ruled that video games were protected speech under the First Amendment.[3] The Supreme Court had its own reasons, such as “Psychological studies purporting to show a connection between exposure to violent video games and harmful effects on children do not prove that such exposure causes minors to act aggressively.or “This country has no tradition of specially restricting children’s access to depictions of violence.”


E-Sports and IP Law
Apart from constitutional law, video games can be subject to other fields of the law. Intellectual property law is one of such fields. For example, DotA is a fan-made custom map originated with Warcraft III, a strategy video game created by Blizzard Entertainment. It was not a separate game until published by Valve Corporation as Dota 2. Blizzard sought to prevent registration by its competitor Valve of the trademark Dota by resorting to the United States Patent and Trademark Office. Subsequently, Blizzard and Valve reached a settlement agreement and Valve went on to publish Dota 2.

Playing Dota 2 is free of charge and Valve speedily hosted its first competition in 2011, with a prize pool of 1.6 million dollars. The International became an annual Dota 2 E-Sports tournament. The prize pool for the tournament in 2016 was approximately 20 million dollars. The team Wings Gaming of China completed the tournament in first place and was awarded 9.1 million dollars. The final was viewed by almost 6 million spectators. Dota 2 tournaments have awarded a total prize money of approximately 90 million dollars so far. League of Legends took the second place with 36 million dollars, followed by Counter Strike: GO (nearly 27 million dollars) and Starcraft II (nearly 22 million dollars). 


E-Sports Clubs, Athletes and the Law
The E-Sports teams that participate in these kind of high level competitions have different rosters for different games. They are starting to become more and more important business entities with their superstar players. The teams are mainly sponsored by tech firms, consumer electronics companies, gaming equipment producers, web hosting companies, automobile manufacturers, energy drinks manufacturers and business people who dream of owning a sports team but who cannot afford to acquire a professional football club. Football clubs themselves are also keen on forming their own E-Sports club, not only limited to football games. PSG (FIFA, LoL, Starcraft, CS, Call of Duty and Hearthstone) Schalke 04 (LoL) and Manchester City (FIFA) have already signed their own E-Sports players. Besiktas was the first football club in the world to form an E-Sports team in 2015. Fenerbahce has also entered the arena in 2016 and will be competing in the upcoming Turkish League of Legends season with a roster of accomplished players. As for football, FIFA and EA Sports organise the FIFA Interactive World Cup 2017. FIFA announced that the winning prize would be 200 thousand dollars.

High level cyber athletes are mostly men. However, the industry is trying to tackle gender discrimination and promote women cyber athletes. Cyber athletes sign contracts with their teams and sometimes receive salaries from video game developers. The developer of League of Legends, Riot Games chooses to pay salaries to competitors. Cyber athletes may want to make some extra money by streaming on online platforms, an important issue while drafting a contract. Therefore, E-Sports concerns both labor law and contract law. It also concerns criminal law, as there have been several incidents of betting-related match-fixing in E-Sports. In one such case, the manager of a LoL club was inciting his players to lose against big teams, claiming that the organizers would kick them out of the league should they win. The players allegedly did so, believing their manager. In the end, the manager was found to be betting against his own team, which finished the season with no wins. A player of the team attempted suicide, leaping off a building. Fortunately, he survived. In another case, a Dota 2 player placed a bet against his own team in a major event and won $322. “322” is now a nickname for players who deliberately fail in a game.

In Turkey, where I practice law, E-Sports players became athletes licensed by the “Federation of Developing Sports”, established by the Sports Ministry. There are about three thousand licensed players. The level of professionalism in elite clubs is surprising, and they are actually pretty successful in international tournaments. Space Soldiers (CS:GO), SuperMassive (LoL) are followed by tens of thousands of fans, even though they were founded only a few years ago.

The primary concern of the athletes and their families in general is the lack of opportunities after their brief but intense careers. Successful cyber athletes require a superordinate level of reactions and excellent reflexes. These attributes become slower with time. Consequently, cyber athletes are usually active between the ages 18-23. It is arduous for them to find time to study, as they need at least eight hours of training per day. National legislators around the world should also focus on devising E-Sports regulations, as more and more professional contracts are being signed. Cyber athletes are transferred from clubs to other clubs as in any other sport and foreign cyber athletes may encounter problems regarding their visas. France recently tackled the legal vacuum and granted a specific legal status for cyber athletes.


Conclusion
Call it a sport or not, E-Sports is growing exponentially. It is an industry worth billions and watched by millions. Although the industry is a commercial success, there are still lots of legal issues to tackle. These legal issues fall within the scope of various fields of law causing lawyers to work on improving their respective national laws.

Transfers of cyber athletes, drafting contracts for cyber athletes and the resolution of contractual disputes are some of the key issues, as well as tackling doping and match-fixing, intellectual property rights, broadcasting rights in particular, and the exploitation of minors or professional gamers. WESA and IeSF are significant international organizations that can endeavor on unifying E-Sports regulations and tackling legal problems faced by the players and the clubs.

The 21st century will offer more new games to play. Considering the current growth in the industry, I would dare predict that the industry will be worth hundreds of billions in the near future. I would recommend the countries and E-Sports governing bodies leading the industry to work together and bring forth certain essential regulations. This would also benefit game developers, as their games and gamers would find a place in the industry on a legal basis. I would also suggest the industry to incite women cyber athletes and facilitate their involvement in professional competitions, so that possible instances of discrimination are proactively precluded.




[1] Nurettin Emre Bilginoglu, LLM, Attorney-at-law - Istanbul, Turkey.  E-mail: emre@caglayanyalcin.com.

[2] Although there is no precise definition of a “professional E-Sports player”, the approach of FIFA could be deemed applicable by analogy. According to Article 2 of FIFA Regulations on the Status and Transfer of Players, a professional is a player who has a written contract with a club and is paid more for his footballing activity than the expenses he effectively incurs. In E-Sports, certain players are paid more for their gaming activities than the expenses they incur.

[3] Brown v. Entertainment Merchants Association, 564 U.S. 786 (2011).

Comments (1) -

  • Adem Yaşar

    2/6/2017 4:55:32 PM |

    A new milestone has been recorded in the history of eSports. So, that is very good to deal with this matter in terms of legal implications.
    Good luck from Heidelberg University

Comments are closed
Asser International Sports Law Blog | The Spanish TV Rights Distribution System after the Royal Decree: An Introduction. By Luis Torres

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

The Spanish TV Rights Distribution System after the Royal Decree: An Introduction. By Luis Torres

On the first of May 2015, the Spanish Government finally signed the Royal Decree allowing the joint selling of the media rights of the Spanish top two football leagues. The Minister for Sport stated that the Decree will allow clubs to “pay their debts with the social security and the tax authorities and will enable the Spanish teams to compete with the biggest European Leagues in terms of revenues from the sale of media rights”.[1]Although the signing of the Royal Decree was supposed to close a very long debate and discussion between the relevant stakeholders, its aftermath shows that the Telenovela is not entirely over. 

This blog post will first provide the background story to the selling of media rights in Spain. It will, thereafter, analyse the main points of the Royal Decree and outline how the system will work in practice. Finally, the blog will shortly address the current frictions between the Spanish League (LFP) and the Spanish football federation (RFEF). 


I. The road to the royal decree 

The old individual selling system 

The individual selling model of media rights in Spain was adopted in the 1997/1998 season. The Spanish individualized marketing system required that the TV operators and the clubs sign individual agreements over the media rights for La Liga games. Obviously, not all the agreements were born equals. The two biggest clubs in Spain, Real Madrid and FC Barcelona, were soon deriving much more revenue from TV rights as the other clubs. Hence, it is not surprising that latter have been asking for a bigger share of the TV rights revenues since then. For the 2014/15 season, for example, Barcelona and Madrid earned 140 million € each, whereas Córdoba, Eibar and Deportivo la Coruña have only earned 17.5 million €. Even the last winner of La Liga (Atlético de Madrid) has received only 45 million € (3.1 times less than Barcelona and Madrid). Meanwhile, the overall sum paid by the operators to all the teams (MEDIAPRO Agency and PRISA Media Group) reached 742.5 million €/year for a three-year deal (2012/13 to 2014/15).[2] 

Due to the delay in approving the Royal Decree, some clubs (such as Barcelona) decided to sign an individual contract with a TV operator for the 2015/16 season. Consequently, it is unlikely that La Liga will be able to collectively sell its media rights for the next season. However, the new system should be in place for the 2016/17 season.  

Disagreements prior to the Royal Decree 

The negotiating process prior to signing the Royal Decree involved three main stakeholders: the Spanish Government (CSD –High Sports Council- and the Minister for Sport), the RFEF and, obviously, the LFP. The most difficult hurdle to overcome was the RFEF’s demand of a non-negotiable 2% share of the broadcasting revenues. Both the CSD and the LFP refused to budge and considered that the RFEF should not get more than 1%. The negotiations were especially tense as a consequence of a personal feud between the presidents of the main bodies involved.  

Why a Royal Decree? 

Notwithstanding the RFEF’s outspoken disapproval, the Royal Decree 5/2015 was adopted by the Council of Ministers on 30 April 2015 and was published in the Official Journal on the following day. In principle, a Royal Decree is only used for extraordinary and urgent matters and the Spanish Parliament must consolidate it in a law 30 days after its approval, which was done, last week. Nevertheless, one may question whether this was truly a matter of urgency requiring the introduction of a Royal decree. According to the explanatory memorandum of the Royal Decree it is justified on the basis of the public interest in securing a new system to commercialize the media rights. The justifications included in the Decree read as follows: 

“Concerning the media rights of professional football competitions, three reasons justify the need for an urgent response by the Government: first, the undisputed social relevance of professional sport, second, the repeated and unanimous demands to intervene from all parties involved and, finally, the need to promote competition in the market for the ‘pay-per-view’ television.”[3]

 

II. The new LFP’s media rights collective selling system 

The LFP’s media rights remain owned by the clubs. However, the football clubs are obliged to assign the right to commercialize them to the organizing bodies of the competition, i.e. the LFP (first and second division) and the RFEF (the cups).[4] 

The conditions for the joint selling of the media rights

In accordance with article 4 of the Royal Decree, the organising bodies will commercialize the media rights on an exclusive or non-exclusive basis.  Moreover, the procedure must be fair and equitable. The LFP and the RFEF will define the different packages commercialized in line with Article 4(4) of the Royal Decree.  These conditions will be attached by the organizing body into categories (‘packages’), depending whether it is on an exclusive basis or not, the time of the game and the duration (maximum 3 years), in accordance with the Article 4(4). The structure of the packages will be set out when the collective selling takes place.  

The specific distribution key of the revenues derived from the collective selling is enshrined in Article 5: 90% of the revenues will go to the first division clubs, and 10% to the second division clubs.   

Graph: Distribution of the money regarding the media rights of the first and second division:


 


Payments by the clubs after the distribution of revenue: The overdue debts to the Public Revenue and the indirect solidarity contributions.  

After receiving their share of revenue from the media rights, the clubs must first cover their overdue debts with the Spanish tax authorities. Indeed, Article 6(2) holds that “(t)he payment of overdue and payable debts owed to the ‘State Agency Tax Administration’ and the ‘General Treasury of the Social Security’ shall be considered on a preferential basis”. No club will be able to carry out the indirect solidarity payments foreseen by Article 6(1), if they do not reimburse their outstanding liabilities with the public authorities.

It is a well-known fact that Spanish football clubs have accumulated large amounts of debts over recent years. Indeed, at the end of the year 2013, the debt of the Spanish football amounted to 3.600 million € in total, with “around 700 million” to the public authorities. The Royal Decree is also aimed at tackling this longstanding debt “addiction” of many Spanish football clubs.                                             

Furthermore, in accordance with article 6(1) of the Decree, the clubs will have to make solidarity contributions to specific funds and Institutions promoting football and sport. These contributions will only be made after the obligatory contributions to the tax authorities have been paid. The five contributions include:

  1. 3.5% of the broadcasting revenues will be used to create a ‘Compensation Fund’ in order to assist relegated clubs from the first Division to the second and from the second division to the third division (in Spain known as the second division “B”). Out of the Compensation Fund, 90% will flow to the relegated clubs from the first Division and 10% to the relegated clubs from the second Division.

  2. 1% of the broadcasting revenues will go to the LFP for the purpose of promoting the League on the domestic and international market.

  3. 1% of the broadcasting revenues will go to the RFEF as a solidarity contribution to develop amateur football[5].

  4. Up to 1% of the broadcasting revenues will go to the Consejo Superior de Deportes (CSD), a Spanish Governmental body encouraging the development of sport in Spain. The goal of this contribution is to finance the social protection of high-level athletes (not just football players).

  5. A further 0,5% of the broadcasting revenues will go to the CSD, and shall be distributed in the following way:

    1. Aid to female football clubs participating in the Women’s First Division, covering social security contributions.

    2. Aid to football clubs participating in the Second Division “B”, in order to pay social security contributions.

    3. Aid to associations or unions of players (‘AFE’), referees, coaches and trainers. 


The Spanish cup and Supercup revenue-sharing criteria

The packages will be made according to the criteria similar to those applicable to the LFP’s media rights. The revenue generated by the RFEF’s competitions will be shared as follows (Article 8):

  1. 90% will be directly allocated to the LFP teams (first and second division). This money will be distributed to these clubs using similar criteria as for LFP Competitions. The revenue share depends on the results obtained by the teams in the cup. The distribution envisaged foresees 22%, for the winner; 16%, for the runner-up; 9%, for the semi-finalists; 6%, for the quarter-finalists; and 2,5%, for the clubs who got knocked-out the round of the last 16.

  2. 10% will be used for the promotion of lower (semi) professional football and amateur football, that is to say, for clubs who play in the cup but are not in first or second division.


III. The Problem with the Decree: RFEF and AFE’s Opposition 


The main beneficiaries, i.e. the clubs, are quite exultant after the publication of the Royal Decree. Nonetheless, two bodies believe that they are the principal losers of the distribution model adopted, namely the RFEF and AFE (Spanish Professional Footballer's Association). In fact, the RFEF and AFE’s discontent is such that they have threatened to organize a strike paralysing the last few games of the current season, should the Decree not be renegotiated.

RFEF

The RFEF wanted 2% of the total revenue for itself, but the Decree allocated to the RFEF only 1% of the total. , As discussed above, this share will be paid indirectly by the club as outlined in Article 6(1). This implies that the federation will get paid only once, and if, the clubs have serviced their overdue debts with the public authorities.

In addition to this, the Federation did not obtain any compensation for women’s football or (semi) professional football in lower divisions. The competence for supporting women’s football and lower professional football rests with the CSD even though it is the RFEF that is in charge of the organisation of the competitions. In other words the RFEF has no control over the money flowing into the competitions it is responsible for. 

AFE

The frustration expressed by AFE (Professional Footballer's Association) is also understandable. The players have not obtained a fixed share of the broadcasting revenues, as is the case in England (1.5%) or France (1.09%). Nevertheless, according to the Royal Decree, AFE will receive from the CSD a contribution of “up to 0.5%” (Article 6(1)(e), par. 3). Moreover, the players’ representatives claim they were unjustifiably excluded from the negotiations. Without the ability of partaking to the negotiations, they were unable to secure higher guarantees for the players regarding the payment of the salaries in the lower divisions of Spanish football. Given that many players do not receive their salaries on time in the lower Spanish divisions, this money would have been a potential solution to a chronicle problem.

The strike

In return, AFE (supported by elite players like Casillas, Xavi, Piqué or Ramos) threatened with a strike. For its part, RFEF suspended all the Spanish football competitions. In response to these moves, the LFP lodged a case against AFE in the Spanish Courts, requesting the suspension of the strike and the recognition of its illegality as it would lack a legitimate ground and would violate the existing collective bargaining agreement. 

The Audiencia Nacional (the National High Court in Spain) decided on 14 May in a preliminary decision to suspend the strike. This decision ensured that the last two games of the season and the final of the Copa del Rey will be played. The case is still pending and awaits a decision on the merits. The hearing will be held on 17 June. The parties have already commenced negotiations in order to reach an agreement before the hearing. But, given that the Royal Decree has been ratified by the Parliament, very few substantial changes to the system put in place by the Decree can be made. Thus, only minor peripheral adjustments are to be expected.  

Conclusion

In my opinion, there are two key aspects that must be kept in mind. First, the duty to pay overdue debts to the public Authorities. This mandatory requirement cannot be found in any other countries and is clearly linked with the specific problems that exist in Spanish football with regard to the clubs’ indebtedness and the enmeshment of local politicians in their management. On the other hand, the other key change introduced by the Royal Decree will be that La Liga will be in a position to negotiate a much hoped for gigantic TV deal with the broadcasters. A deal, which will not exclusively benefit Real Madrid and FC Barcelona. The economic gap between these two teams and the rest of the pack was growing bigger and bigger over the last years. With the new system in place, this gap is poised to be reduced. Nevertheless, the distribution method still heavily favours the status-quo. The traditionally large clubs are rewarded for having a large number of supporters, and for their past performances. Hence, it is still virtually impossible for a smaller Spanish clubs to become, over a short time span, one of the top-earning clubs in La Liga.



[1] IUSPORT: “Aprobado el Real Decreto-Ley de los derechos audiovisuales del fútbol”

http://iusport.com/not/6713/aprobado-el-real-decreto-ley-de-los-derechos-audiovisuales-del-futbol/

[2] MARCA, “Así será el reparto del dinero televisivo”, available at http://www.marca.com/2015/05/01/futbol/1430467483.html

[3] RD 5/2015, Explanatory Memorandum.

[4] Article 2 RD 5/2015.

[5] This percentage may be expanded by agreement

Comments (3) -

  • Marca Espana

    6/23/2015 1:20:22 PM |

    Interesting that the article fails to even mention that the new and "fairer" revenue sharing system will not be applicable until at least 2022 since the royal decree's transitional disposition provides that Barca and Real will continue to earn as much as they have been earning for at least six seasons. Smoke and mirrors but not a lot of change for the next six years. Our Spanish friends may have hoped that nobody would read the small print...

    For a more complete take on the new decree, I suggest reading the following article published by The Independent.

    www.independent.co.uk/.../...tv-deal-10243057.html

  • Luis Torres

    6/23/2015 3:56:16 PM |

    Thanks for the comment. You are right to point out that Real Madrid and FC Barcelona will continue to earn as much as they earned this season (2014/15) for the next six years. However, it is important to take into account that the revenue sharing favours the status quo. This is a formal way to state that RM and FCB are not going to suffer a disadvantage when the time to share the money comes.
    The second transitional provision (pages 15-16 of the Decree) will only jeopardise the applicability of new collective selling system if LaLiga sells the TV rights for a total amount which is less than the amount for which they are sold now individually by the clubs themselves. However, provided that the amount of money paid for the collective rights is bound to increase, the scenario that you sketch is, in my opinion, hypothetical.
    This provision, and specifically its point b), assures that if any club receives an amount lower than the amount received this season (2014/15) with the individual selling system, the other clubs will have to “compensate” this club. In other words, the clubs that are receiving a higher amount through the new collective selling system, will have to give this positive income to clubs which receive a lower amount.
    To conclude, and taking into account the amount that La Liga is expected to receive for the collective selling (at least €1,000M per season for the upcoming years), the situation you are exposing is merely hypothetical.
    Nonetheless, you are right, both RM and FCB will receive at least the same amount as this season, in a way similar as all the other clubs, who will also receive at least the same amount as this season.

    • Marca Espana

      6/24/2015 12:19:15 PM |

      Apologies but the numbers just do not add up. If La Liga were to sell its TV rights for the €1,000M that you mention (i.e. €900M for the first division and €100M for the second division), Real's and Barca's calculation would be as follows:

      - €22.5M which is 1/20 of the common pool
      - €37M of the merit pool for Barca. Real a bit less, about €34M since it has had worse results during the last few seasons
      - €45M of the support pool (which is capped at 20% for each club and it is likely that, since they are fully in control of the committee that decides how this is calculated, Real and Barca will pay themselves the maximum)

      This means that if the new "fairer" system would be applicable (i.e. in the absence of the transitional disposition) Barca would be entitled to €104M and Real to €101M instead of the €140M that they earned during the 2014/5 season.

      Just by way of comparison Rayo Vallecano's earnings would increase from €18M during the 2014/5 season to approx €34M
      (€22,5M common pool + €6M + €5,5M support) if they were calculated under the new "fairer" system.

      Unfortunately and by virtue of the feudal privilege provided to Real and Barca by the transitional disposition, "mighty" Rayo will be obliged by law to give up part of this increase to "compensate" poor Real and Barca for their loss to ensure that they keep on earning at least €140M until at least 2022.

      This means that the rest of the vassal clubs will have to pay their El Clasico lords as much as €75M annually to fund their European expansion.

      Crony capitalism at its absolute best. Fortunately we are fully aware by now that the juicy bits of any law related to Real & Barca are always to be found in the additional/transitional dispositions. The preamble and the first part of the laws ("PLCs are a great form of incorporation", "We have created a fair system to distribute the TV rights", etc.) shall be ignored.

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