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:
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.
1% of the broadcasting revenues will go to the LFP
for the purpose of promoting the League on the domestic and international
market.
1% of the broadcasting revenues will go to the RFEF
as a solidarity contribution to develop amateur football[5].
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).
A further 0,5% of the broadcasting revenues will go to
the CSD, and shall be distributed in the following way:
Aid to female
football clubs participating in the Women’s First Division, covering social
security contributions.
Aid to football
clubs participating in the Second Division “B”, in order to pay social security
contributions.
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):
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.
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