Opinion: Rethinking Media Deals and Capturing Value

Ingrid Silver, partner in the global entertainment and media industry group of international legal firm Reed Smith, predicts the sports that could command a commercial premium following the COVID-19 pandemic.

There is no question that traditional sports-related revenue streams have been significantly disrupted by the pandemic, since sport as we know it has been transformed – at least for the foreseeable future. It can no longer be a given that live sports events can take place at the time they were originally scheduled, while international events of course face the added, and often unpredictable, challenge of travel restrictions and divergent local COVID-related regulations.

Even if live sports events can take place, they can no longer do so with spectators in attendance. The Premier League’s decision to screen closed-door matches on pay-per-view TV has caused outrage among sports-starved fans, showing there is still plenty of progress to be made in achieving sustainable solutions.

But despite all the disruption and uncertainty around what the future holds, it is not necessarily all doom and gloom for the world of sport or, indeed, the economic value of sports rights.

For starters, demand for sport remains as strong as ever – if anything, the pandemic has spurred a greater appetite for entertainment, as well as a willingness on the part of viewers to watch and engage with content they wouldn’t have previously contemplated. Consider the new-found British passion for the Bundesliga back in May and a tolerance for a diminished overall viewing experience because of the impact of empty venues on the atmosphere of an event.

Likewise, sporting organisations and everyone in the value chain have had to be more innovative and creative in how they offer content. We’re seeing new packages, methods of distribution and patterns of consumption – all of which brings new monetisation opportunities. This has included accelerating the significance of esports for mainstream consumers. For example, the recent announcement by the Union Cycliste Internationale, the world governing body for cycling (a sport not typically associated with tech-orientated demographics), that the first ever Cycling Esports World Championships will take place in December – I’m willing to bet this will become an important fixture in the international cycling calendar, long after the pandemic has subsided.

As the pandemic unfolds, some sports, by their nature, will lend themselves more easily to social distancing (think tennis, golf, motorsport) and as a result, will potentially find themselves facing less competition from sports that do not. Predictability – that is the confidence that an event is likely to take place at the expected time and in the expected way – will start to command a financial premium, both for rights deals and sponsors. Even so, sports that are less reliant on social distancing, because they are based on individual performance, will be exposed to the risk of those same individuals contracting COVID and prevented from participating, as happened in June with tennis World No. 1 Novak Djokovic. This again brings with it economic and contractual consequences, such as the fact individuals and their entourage may be subject to harsher contractual requirements related to isolation.

While hardship has been inevitable, there are some properties and companies – both existing and new – which have undoubtedly seen their prospects enhanced as a result of the pandemic and will now be looking for advertising and sponsorship opportunities that reflect this elevated status. These same organisations, which have flourished under pandemic conditions, are also likely to be more open to less conventional, but nonetheless lucrative, deals.

Even though the value of TV sports rights will continue to be affected – for instance, Bundesliga international rights were recently down by 20% – that does not necessarily mean that the overall value of sports rights is set to suffer.

For lawyers at least, the biggest lesson from the fallout from the collapse of the Premier League’s PPTV agreement in China, and others in recent times, is that contracts structured around traditional, binary contractual outcomes – i.e. payment/non-payment, non-breach/breach, continuing a contractual relationship/terminating – are not necessarily the best way to deliver optimal outcomes for parties to those contracts, let alone the stakeholders in the sport in which they operate which, in the case of the Premier League, means the clubs.

If sports rights are to continue to command their economic value, then dealmakers and lawyers will need to be a lot more creative in structuring contracts that allow for a range of contingencies and scenarios and reflect a world and an economy defined by uncertainty. Despite the challenges that COVID-19 presents, there are great opportunities for those willing to be creative and adapt.

Dylan Rogers
Dylan Rogers

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