Entertainment for the Privileged? - The Economic Avalanche of Televised Sports
20.06.1997By Boris Bergant
The XXVI. Olympic Games in Atlanta were not merely a celebration of the 100th anniversary of the Olympic movement in its modern version, they were definitely one of the major media events since man for the first time walked on the moon in 1969. All due to television.
Marketing experts estimate that at least 4 billion viewers were following the events in Atlanta (about 70% of the global population), who tuned in for more than 35 billion times during the Olympic days. The selling of the television rights representing a third of the total profit of 559,5 million US$ is the highest profit ever made by organisers (the Committee in Atlanta and the International Olympic Committee).
The American broadcasting corporation NBC paying for the main part of the television rights (the European Broadcasting Union contributed 240 million US$) was from the very beginning on convinced that in spite of the tremendous sum to be paid it was a good deal. Commercials was traded for 50.000 US$ per 30 seconds and brought huge profits.
Also the athletes made a fortune out of television rights: various associations were given about 100 million of TV dollars. But the relationship between sports and television is full of surprises. As if the Olympic slogan faster, higher, stronger applies only for money, costs and profit. The times of idealism and laity, if there had been any, have definitely passed.
Sports is being handled as a merchandise in the hands of more or less skilful merchants, who are quite effective in ripping off athletes as well as the audience. And it is quite common that the organisers and athletes pull the same business string on the account of the audience; the plague of profit-making has reached also mass sport events and nobody knows where and when it will stop.
It is indisputable that modern top sports more and more resemble ancient gladiatorship and the saying "panem et circenses" is for quite some time being the slogan of the moment.
Of course, it is only one of the possible viewpoints. Sport professionals do have their own right: for the made investments they demand a proper return and encouragement. It is up to them to decide how it should look like. Although some of them are multimillionaires, the slice of bread is still being cut by agents. Many regard them as penitence and salvation united.
The Olympic Games in Atlanta were for sure not the last free accessible to all viewers of public broadcasting services all over the world. The IOC initiating the commercialisation of sports, finally understood that money cannot be the sole criterion for its popularisation and to the great anger of numerous middlemen they have signed contracts on television rights til 2008, which ensured the universal access to television signals for some time.
But the signal Mr Samaranch tried to send out with this apparently unusual move (the television rights were sold when the locations weren't even defined in order to prevent exaggerated pricing and the organisers inclining on these revenues) gave no echo.
Price for television rights rose by 4275 percent
In summer 1996 the expert circles were stunned by the news that the International Football Association FIFA sold the television rights for the World Cups in 2002 and 2006 to private buyers (to the German Kirch corporation and the Swiss ISL marketing agency). The pattern is in a way very similar to Mr Samaranch's (while in 2002 the World Cup will be organised by South Korea and Japan the organiser for 2006 hasn't been determined yet), but the financial outcome has blown all boundaries.
The FIFA made 2.8 billion Swiss Francs (about 2.24 billion US$). 1.3 billion SFR for the 2002 World Cup means a raise of 500% compared to the 1998 World Cup in France!
But the problem is not solved at this point, it is rather just about to evolve.
Football is one of the most popular sports all over the world. More than 6 billion people all over the globe tuned in for last year's European Football Championship in the UK. The finals in Wembley itself attracted more than 550 million viewers (250 million just in Europe). This was made possible by the fact that the television rights were in the hands of the public broadcasting services.
The moment commercial bidders will lay their hands on such major events, free access for the wider audience will be endangered. Advertisement alone cannot cover the prices being pushed up to the sky by various competitors. It can be done only by coded transmission (specialised services, pay TV) and this is the most dangerous trap for the destiny of sports. It is obvious that even bigger money can be made out of it, but as paradox as it may sound, it can be made only on a limited number of viewers.
If I put it in another way: the gladiator games will be accessible only on extra payment, which will turn out to be a double-edged sword.
Some eloquent facts might bring some light into the matter: In 1980 the EBU (the European Broadcasting Union, an association of public broadcasting services with 67 active members from 49 countries) paid for the television rights of the European Football Championship (8 national teams) 3.2 million SFR, in 1984 4.1 million and in 1988 5.2 million SFR. So the price went up with 25%.
Meanwhile commercial competitors emerged, the public broadcasting services lost their monopoly and competition demanded a more market-oriented behaviour. The price for the television rights for the EC in Football went up to 25 million Swiss Francs (+ 400%), which at that time seemed to be unbelievable.
Just after that the business-makers in the UEFA came up with the idea that it would be interesting from the marketing point of view to enlarge the number of finalists to 16. This meant also more matches and so they were again asking for more money. The consequence is that for the EC 1996 in the UK the EBU had to pay 80 million (+ 220%) and in the year 2000 it will have to pay 140 million Swiss Francs, which means that it will pay 43 times more than in 1980 or precisely 4275% in 20 years!
Astronomical prices for televising Olympic Games
The Olympic Games in Rome were the first to be transmitted by television. According to IOC this was the second important milestone after the rebirth of the ancient tradition. It was television that opened the doors to the commercialisation of sports.
In 1980 the EBU paid the television rights for the Olympic Games with 5.95 million US$
In 1984 the price went up to 19.8
In 1988 the price was 26 million $.
In 1992 the price shot up to 90 million
In 1996 for the Games in Atlanta it amounted to 240 million US$
In the last two cases the price went up for 250% and 165% respectively.
The contracts for the next three Olympic Games are estimated thus:
Sydney 2000 will cost 363 million US$,
Athens 2004 will cost 408 million US$
Beijing 2008 will cost 459 million$
The television rights for Atlanta cost 40-times more than those for Moscow 1980, and in 2008 the price will be 77-times higher (7700%)! There are no goods or services in the world for which the prices shot up by so much in such a short time.
The value of tennis
In 1985 Eurovision paid for about two weeks of transmission from the Wimbledon tournament 375 000 Pounds Sterling.
In 1989, just before the EBU expansion to the former Intervision members and the NEC's, which enlarged the membership to 49, the organisers charged 3 400 000 Pounds.
For the five-year contract between 1989 and 1993 they were claiming 17 million Pounds Sterling, which seemed to be an unreasonable high price to Eurovision. But the indignation of the public broadcasters was used by their commercial competitors who bought the rights.
The five-year contract 1994 - 1998 cost 44 million Pounds (8 800 000 a year) and once again it went to private bidders (to the German agency UFA). The price and the market value of Wimbledon went up for more than 22-times just within the last nine years.
The greed of the Roland Garros organisers is even worse, although the total sums of the Paris tournament do not reach the same level.
In 1985 the television rights for the International Championship of France cost 600.000 French Francs, whereas in 1999 the price will amount to 70 million FFR 60 million had to be paid this year.
The EBU had to swallow at least this bitter pill, otherwise the public channels would have stayed without a first-class tennis event. A long-term contract including at least a more bearable yearly increase rate has been signed with the French organisers. Nevertheless the price for Roland Garros will go up a 116-times within just 14 years.
The organisers of the US Tennis Open are offering the European television rights for 2.2 million US$. Yet this sum doesn't include the rights for some of the biggest countries, for instance Germany and Italy, which they are trying to sell separately. Furthermore they are not prepared to negotiate on common rights for whole geographical areas, which is making it impossible to have an overview or comparison.
In spite of the fact that top tennis players are among the best-earning athletes (in some environments only the most outstanding athletes of "national" sports earn more), even the best earning tennis player does not make half as much as the most successful tennis agent. And they are the class steering the wheel.
Because of the interdependence of tennis and marketing, television rose to the most important factor of tennis promotion and it became the best milking cow for the organisers and agents. In many a country tennis is among the most popular sports, especially in countries which can pride themselves on excellent players or a long tradition of acknowledged tournaments, like Germany, the USA, Australia, the UK, the Czech Republic, etc.
It became one of the most powerful means in the battle between the public and the highly diversified commercial broadcasters for television markets. However, it very much depends on the latest trends. Boris Becker or Steffi Graf in the Wimbledon finals attracts up to 70% of the German audience, but in case they have a bad season (like in 1995/96) the interest of the audience and advertising agencies is going down rapidly, which may lead to considerable losses of investments.
In 1995 the German channel RTL offered 2000 hours of different tennis transmissions, which made almost a fifth of its programme offer. Not only was the interest swaying, this abundance caused also a decrease of the audience's interest, since it was too much of the good. They became more selective and the audience figures went down which caused a reduction of the offer.
Of course the television-makers haven't given up. What cannot be achieved at home, might be practised by so called "gaps" on foreign markets by specialised TV windows or through pay TV. This April a German commercial channel obtained the transmission rights for the Davis Cup meeting between Austria and Croatia in Graz. In order to vex the Austrian ORF still holding the monopoly, it offered such a high sum that the ORF simply wasn't able to compete.
Pay per view versus public broadcasting
All this is happening simultaneously with the new industrial revolution including the new multimedia offer as well. The sign of the moment is not only the dual broadcasting system (the public broadcasting system, which is in most cases obliged to play a certain role and which is ensuring a wide-ranged programme offer is struggling for survival against the more and more aggressive commercial and private sector being subject to no restrictions and thus having the possibility of making a more specialised offer).
It is being even closer defined by the new digital technology, making a wider programme offer possible on the same frequencies, reducing the distribution costs and opening new marketing possibilities (pay TV, video-on-demand) as well as interactive services.
Now we have reached an important crossroad: Many are convinced that the new technologies will bring even higher profits through a limited, but carefully selected (wealthy) audience. What they require is first and foremost exclusivity.
An example: Kirch and ISL have for two world cups offered the FIFA 600 million more than all public broadcasters together. Some think of it as a game. Both commercial bidders fully aware of the inevitable loss went into this only to destroy the advantage of the public broadcasting. But is it so? Already the next comparison will leave no doubt:
The price for last year's EC in football was 80 million SFR. It included 31 matches and 2 drawings, so the price for a single match was 2.5 million SFR. If each match was tuned in by 150 million viewers (which is a more or less reliable fact), the outlay for each viewer figured as 0.016 SFR.
Let us suppose that this event would have been transmitted by pay TV channels exclusively, where each viewer would have to pay for each single match. Let's further suppose that only 10% of the 250 million viewers who were watching the finals would be prepared to pay 10 SFR for watching it. This would mean that already the finals would bring an income of 250 million SFR, which is three-times more than the EBU paid for the complete Championship.
Marketing experts claim that pay TV transmission of such events would bring more than 600 million SFR. We all know that sports has become an industry with its own internal dynamics attracting more and more participants and users, as in the case of winter sports, for instance downhill skiing.
Skiing as a major television product
The idea to organise a world cup in Alpine skiing is closely connected to the first World Championship which was organised in 1966 in Portillo, Chile. It was the first championship to be held in the southern hemisphere and it was announcing a global effort to make this discipline popular.
Of course, skiing had been even before been a popular pastime in Chile, Australia or New Zealand. But competition was limited to national contests. In case a skier from the southern hemisphere wanted to compete on international level, he had to go to Europe or North America, which was certainly a limiting factor. And the industry producing ski equipment could not count on anything but limited profits in this part of the world.
In 1967 the International Ski Association FIS and the EBU started negotiations on possible transmissions of international races. The idea was to organise an international competition of the world's best Alpine skiers taking place during the last three weekends in February. It should include 20 men's and women's races in downhill and slalom. The competitors would start in intervals of 3 minutes which would enable television to cover the complete track.
The main issue of transatlantic transmissions was the question of advertising and at that time transmissions free of commercials were favoured, so in exchange for the payment of TV licences the racing track and the outfits of the skiers would be free of advertisements.
But this kind of competition never came into being. Instead the World Cup in Alpine Skiing developed and during the years it was expanded also to other disciplines, which form the present form of this competition being highly influenced by commercial factors. The impact it has on television becomes obvious through the following data:
The first winter Olympic Games to be almost completely covered by television were the Games in Cortina d'Ampezzo in 1956 and the first summer Games those in Rome in 1960. The transmission for these two events was free of charge, the Italian organisers and the IOC were happy to be able to extend the contests over the limits of a local event.
The first skiing event rights had to be paid for was the Nordic World Championship in 1962 in Zakopani, Poland and it was being broadcast by ten countries, which had to pay 30 000 SFR. The same year a World Championship in Alpine Skiing was held in French Chamonix and the TV rights were given away for a mere 100 000 French Francs (or 7 200 Pounds Sterling).
The prices for the licenses were in the beginning increasing slowly: The World Championship in Nordic Disciplines 1966 in Oslo gained 40 000 SFR from the television rights, the pictures from the Alpine World Championship in Portillo, Chile cost all members of the EBU (at that time 25 members) 110 000 SFR, however this sum included the costs for the technical teams from Europe which transmitted the events by their own equipment.
In 1968 for the first time a transmission of a ski-jumping contest had to be paid, namely the 1st-of-January jumping from Garmisch-Partenkirchen which is one of the events of the New Year's Tour, for which the EBU members except Germany paid 5 000 DM. The German television was released from payment, since it covered the costs of technical realisation.
It was in the same year that television had to pay license fee for the first transmission of races, which are today a consisting part of the Alpine World Cup. Three races in Grindenwald were priced with 12 000 SFR and the three from Wengen with 15 000 SFR. The global rights for the downhill race and the slalom from Kitzbuehl cost then 20 000 DM.
In 1970 the prices for the World Championship already went up a bit - the television licence for the Alpine World Championship in Val Gardena cost 225 000 SFR and the Nordic in the High Tatra 126 000 SFR. Later a two year cycle of World Championships was introduced, which proved to be quite successful since it attracted a lot of interest.
At that time the political and sport factors were still prevailing. It was important to introduce and establish skiing in countries where it wasn't so deep-rooted. This purpose should be served by the World Championships in Vail (Alpine) and Thunder Bay (Nordic) on the other shore of the Atlantic, where European television played a key role. Since the Americans at that time weren't trained to accomplish such demanding tasks in extreme conditions, both championships were covered by television staff from Europe, which also brought along the major part of the needed specialised equipment.
Things started to get complicated at a later point. The relations were becoming more and more market-oriented and many commercial agents trading television rights entered this field.
The Halva agency is definitely one of the most aggressive in this field and it caused a big stir within the past years. By very high bids made to the organisers and national skiing associations it managed to buy off almost all television rights for the transmissions of the World Cup in Alpine Skiing, for it has already in the first stage offered several times higher sums as the public broadcasters.
While some organisers in spite of the tempting offers remained loyal to their national institutions (mainly in Austria, Germany and Switzerland), because they also have the possibility to compensate the lower income from television rights with marketing revenues, the organisers in some other countries (also Slovenia) accepted the financial offers of this kind of agents. Up till now Halva offered about 200 000 SFR for two days of transmission from Maribor and Kranjska Gora, while for the next two seasons the offer amounts to 1 million DM.
Fact is that the costs for television transmission of sport events including ski races have risen essentially. We have shown the approximate price of TV rights for one race of the World Cup in Alpine Skiing on the case of the Slovene organisers (compared with 1968 the price for the transmission of these events went 19 to 22-times). The television rights for ski Nordic and Alpine World Championships have compared to 1966 risen for 27-times and 16-times respectively. Like in the case of the Olympic Games it also here came to an abnormal increase of the prices.
But fortunately many organisers are aware of the fact that their contest or the disciplines depend more on the free access to the global audience than the direct profit in cases where these profits are already huge. An event or a sport discipline is gaining popularity by a broad audience with free access to the pictures and this is facilitating sponsorship as well, which would definitely be banned by pay TV. But instead pay TV is offering much higher profits.
An uneven battle
The waves of this developments have already splashed over the football scene in some countries. Football associations and clubs are selling the rights only to those who are paying most. So in the UK, the Netherlands, in Italy and Germany direct transmissions of the national leagues can be viewed only by those, who are prepared to pay an extra charge. The prices have overnight risen by 400 to 600%.
The prices in some of the most attractive markets are being driven also by international media groups which are convinced that sports is one of the most promising components of the new technologies.
From a long-term perspective it is an uneven battle that will cause inequality of the users. The classic operators of radio and television programmes (public broad-casting services, as well as their commercial competitors) have to cover the acquisition of rights out of their basic income (subscription, commercials).
The operators of new technologies and channels are however convinced that their investments will pay off in only a few years by additional subscription fees and the sale of receiving equipment (satellite dishes and decoders).
The latest trend in the field of electronic media is the package offer of programmes and technical equipment. Equipment agents (manufacturers, national telecoms, cable operators and the computer industry) are closer and closer linked to the programme makers and vice versa. The world of electronic media faces vertical affiliation and globalization and thus a new dangerous concentration and information monopolies. Everybody is connected to everybody. A businessman said: I always know with whom I go to bed in the evening, but I never know with whom I will wake up in the morning.
Since the verdict of the European Court in the Bosman case stated that all obstacles for a free exchange of players within the European Association have to be abandoned (according to this verdict a team could consist exclusively of foreigners), even the media merchants do not stop at national borders.
The battle for the sports rights is not over yet, in fact it has just started. But in future it will at least be more transparent; there will be no possibility to hide behind coincidences and tricks. It is now a serious matter and the future of sports and television is on stake.
Some people believe that sport is a part of national originality and that it should not fall into the hands of profitmakers. In the UK regulations have been adopted, which state that matches of the national team at home and abroad have to be made accessible to the broadest possible audience through public broadcasting. To the incentive of Great Britain and some other members states the European Parliament passed a first draft of directives enforcing free access of the public to the major events.
A similar appendix to the Convention on Crossborder Broadcasting is being finalised in the Council of Europe. Only time will tell, whether it will be possible to pour some of the liquid back into the bottle, which has already been opened. Yet the development causes the same concern regarding the relationship between the wealthy and the less privileged within the national societies, as well as regarding the relation between the big and the small in the international community of the future.
Above all the ever increasing commercialisation of sports opens a fundamental dilemma. The prevailing opinion till now was that financial gains from sports go back to the benefit of sports and not into the pockets of agents and merchants using sports merely as a means of financial speculation. But as it seems, the pointer on the scale has now turned to the other end; sports is being handled as every other merchandise. And this to the loss of the athletes, the competitors and the audience.
From the book "Society's Watchdog - or Showbiz' Pet?" Inspiration to Better Sports Journalism, Danish Gymnastics and Sports Associations 1998.