Why joint selling is crucial to La Liga's future

To many, 15 April 2015 marked the birth of a new era in Spanish domestic football.

On that date, the new Spanish Royal Decree¹ on football broadcasting and media rights was passed. It introduces the joint selling of the broadcasting rights for the Spanish national football league (La Liga divisions one and two).² It also creates a way to distribute the resulting revenue fairly between the clubs. The law took two tough years to negotiate and anecdotally has been compared to the challenges of drafting the Spanish Constitution of 1978. It is however noteworthy that the main players in the market (broadcasters, football clubs, government, league organisers) all showed a willingness to find a solution.

Many see the new law as a crucial and necessary measure in the development of the Spanish football industry. It resolved one of the main problems: the lack of effective broadcasting regulation and the uncertainty stemming from it. Neither the Spanish Professional Sports Act³ nor any other laws, regulations or administrative provisions directly approached the problematic area of broadcasting. And while general media and broadcasting regulations existed, they lacked the specificity required by the football industry⁴.

Much has been written about how the new regulations work and what it means for Spanish football in general (for example, see Lloyd Thomas’s article here⁵). This article therefore focuses on the and historical corporate and commercial issues that gave rise to the prior unacceptable situation, before explaining how the broadcasting funds are distributed under the new model and looking at the first results of the new regime.

Specifically we examine:

• Background and former problems: the way broadcasting rights were distributed previously and the problems this created for Spanish football
• The new regulations: a brief review of joint selling before a detailed break down of how the funds are distributed by La Liga
• Expected results of the new system
• First results of the new system

BACKGROUND AND FORMER PROBLEMS

During the 1990s, as a result of the development and increase in use of new digital platforms, the Spanish football clubs started to consider an efficient way to facilitate the acquisition and exploitation of the broadcasting and media rights for their competitions. In 1995, Spain’s National Football League, la Liga Nacional de Fútbol Profesiona (La Liga), called for an assembly of all its members, with the sole view of discussing a potential joint sale. However, against all predictions, the member clubs decided to negotiate their rights individually and independently, rejecting any collaboration with the football union.

As a consequence of that decision, many broadcasters fiercely sent offers to the clubs to try to acquire their rights and soon started to sign the first deals. Two different blocks of clubs emerged in the negotiation process: the dominant two, Real Madrid and FC Barcelona, and then the rest. A substantial gap developed as the more modest clubs requested more limelight whereas Real Madrid and FC Barcelona were closing important monetary deals for the following seasons.

Contrary to what it may seem at first sight, it is not entirely true that the Spanish broadcasting model was unique at that time. Despite the independent sale of the rights upstream, the clubs created Audiovisual Sport S.L in 1997, a company that was appointed to manage the exploitation of the broadcasting rights of matches in La Liga and Copa del Rey (Spanish FA Cup).⁶ Initially, the broadcasting rights were sold individually by the clubs (each club agreed with a particular broadcaster, its rights for a certain period of time), but afterwards, Audiovisual Sport collected them as an effective pool of broadcasters and commercialized them downstream.

Among others, Audiovisual Sport was one of the causes of the litigation between the broadcasters and clubs: problems arrived regarding the assignment contracts for the rights and antitrust issues took place given some alleged anticompetitive practices by the involved parties. Over time, more digital broadcasters came into the market and started to influence the selling model.

At that time, the clubs were generally in a poor financial position, so the Spanish broadcasters, under their legitimate business strategy, offered advanced payments in order to get their broadcasting rights at a low price. Each broadcaster was buying the rights of very different clubs, so therefore, given that those rights were not gathered together (regardless of the potential agreements between the broadcasters within the Audiovisual Sport structure), a downstream arrangement between the holders of the rights was mandatory in order to exploit the championship. Otherwise, all the players would have lost their money given the impossibility of broadcasting the matches. To a certain extent, this particular need forced hard-hitting negotiations between broadcasters that resulted in unclear agreements. 

Consequently, Spanish football has traditionally been in permanent conflict regarding the broadcasting of football matches. This situation, indeed, was known in Spain as an unstable balance because of the numerous disputes. Despite these contentious matters and the long negotiating processes, the TV market has always had access to football in Spain because parties have always found some agreement (often in "extra time”). Nonetheless it does not necessarily mean this system worked.

With the former model of individual selling, the first problem was the disaggregation of the offer, which considerably limited the profitability of incomes in the international markets. In addition to that, the way of sharing the incomes was anomalous. When compared to the European markets, the Spanish league has been, for many years, the only major European competition with a model that maintained the position of its two major clubs. As discussed before, the other problem of the individual model was that it gave a rise to aggressive litigation between the players in the market.

Taking into consideration all the above and speaking in economic terms, in general, the former self-management model was clearly inadequate for the stability and progress of Spanish football. The lack of clear regulation made it impossible to hold a balanced championship, and consequently, a fair competition between clubs. In this chaotic panorama, for many years, the differed players in the market demanded a new and detailed regulatory framework to consolidate such matters as how to collect the different packages of the broadcasting rights, and how to distribute the incomes fairly between clubs.

THE NEW REGULATIONS