WSC 182 Apr 02

It is rare that English football has to take notice of what is happening overseas. The Bosman case overhauled the way players were bought and sold in 1995, but there have been relatively few in­stances since which have threatened sim­ilar instability. Until now.

The German media company Kirch Group, one of Europe’s largest, is facing a grave crisis, the effects of which may be felt for many years to come. At first glance, there is little to connect Kirch with English football. The com­pany owns the pay-TV rights to the Bun­des­liga. It is selling the med­ia rights to the 2002 and 2006 World Cups on behalf of FIFA. It also owns a sizeable chunk of Formula One rights.

Kirch’s problems stem from bor­rowing too much and investing too heav­ily in sports rights, which have failed to generate the anticipated returns. In Eng­land, investments on a similar scale have been made by BSkyB and ITV. Both have paid con­siderable sums for (Sky paid £1.1 billion for the live rights to the Premier League over three years, ITV is paying £315 million for Nationwide League coverage) but are likely to bid less next time. ITV is in such a state that it is understood to be trying to renegotiate the Nationwide con­tract.

If Kirch goes under, it will become the most high pro­file casualty of the sports rights boom. Companies like BSkyB will be able to point to its collapse to justify not hiking their bids for sports rights. If that happens, clubs will re­ceieve less money and be unable to afford to keep players on lucrative contracts. The future of the Bundesliga itself, which is due to receive around £900 million from Kirch over the next three years, is unclear.

The Premier League is confident that it will be able to weather any storm. “BSkyB needs us,” says a spokesman. “We don’t anticipate re­ceiving less money for the next contract.” True, BSkyB has relied on Premiership foot­ball to build its business. But if no other com­panies are bidding – and in the current climate that is a distinct possibility – it is difficult to see the company offering as much as last time.

The last high profile casualty of inflation in the sports rights market was ISL, the Swiss company which was FIFA’s main commercial partner. ISL overpaid for tennis rights, but its proximity to FIFA threatened the finances of world football. ISL sold the World Cup rights on behalf of FIFA, which would then pay the money to its member associations. When ISL collapsed, FIFA had to borrow to meet its obligations. FIFA replaced ISL with Kirch, and now the spectre of a similar cash crisis looms again.

FIFA says it is confident that all the money it expected from the sale of the 2002 rights has been paid by Kirch. It is far less sure about 2006. And here lies the problem. National broadcasters may be less inclined to pay the money that Kirch demands for the rights if they know the media company is on its knees and likely to accept any offer.

The crisis at Kirch has signalled a major readjustment in the sports rights marketplace. And there is a real possibility it will be felt as keenly here as in continental Europe.

From WSC 182 April 2002. What was happening this month

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