The way the deal was heralded by the British media one could have been forgiven for thinking that the BBC and ITV had paid £160m, not just to secure the UK broadcast rights for the next two football World Cup finals, but also to guarantee that England was going to win both tournaments.
Although most fans had remained blissfully unaware of any threat to terrestrial coverage of the finals, a dispute has been raging since February, and some doom-mongers had warned that the world’s greatest football competition could be kept off UK television screens.
As a result of such apocalyptic warnings the announcement last Thursday of a deal between the joint BBC/ITV team and the owner of the rights, German media group Kirch, was met with relief on a par with that expressed by the nation when David Beckham’s injury-time goal against Greece guaranteed England automatic qualification for next year’s finals.
As with so much in football, the dispute came down to a disagreement over money – in particular the value of the TV rights. Kirch initially demanded that BBC/ITV pay £170m to broadcast next year’s World Cup finals, to be held in South Korea and Japan. A separate deal would be struck at a later date for the 2006 finals in Germany.
We have become accustomed to football hyperinflation: the value of the domestic broadcast rights for live Premiership games has more than trebled, to £1.1bn, since 1992. But as recently as 1998 the BBC and ITV jointly paid an estimated £5.5m to screen the World Cup finals. The deals, covering the 1990, 1994 and 1998 finals, were struck in 1987 when pay-TV – which has fuelled the inflation – was in its infancy, and advertisers and sponsors shunned the sport.
In response to Kirch’s £170m demand BBC/ITV – which have co-operated to broadcast World Cup finals since 1966 – offered the German group £55m. Although it was ten times what they paid for the 1998 finals Kirch argued the figure was inadequate and talks were said to have broken down in the summer.
But last week’s compromise means that the broadcasters get two World Cup finals for £80m each – still a lot more than they paid in 1998, but less than the German company had originally demanded. So what is behind the compromise? How did the two sides resolve their disagreement after reaching what was described as an impasse? And why did Kirch, which at one stage had threatened to take the UK Government to court over its insistence that some sporting events should only be broadcast on free-to-air channels, finally decide that what had been unacceptable at one time was now acceptable?
Is it because Kirch had no choice? That a deal was always going to be done and that the bellicose words of the past eight months – including a complaint to the Office of Fair Trading that the joint BBC/ITV approach was an “unfair restriction of competition” – were theatrical rather than threatening because Kirch needed the deal? It could not ignore one of the biggest European TV markets, and FIFA’s commercial sponsors would not accept such a valuable territory being blacked out – and yet because of UK law they could only do a deal with the BBC and ITV.
Kirch bought the worldwide rights to both tournaments from the sport’s governing body FIFA, guaranteeing it a minimum income of SFr1.3bn – then worth $815m (£570m) – but with devaluation in the Swiss currency now worth closer to $550m (£390m) in 2002 and SFr1.5bn (now worth £630m) in 2006. The corresponding figure for the 1998 finals was SFr162m (£68m). So Kirch paid ten times what FIFA had previously received for broadcast rights and was determined to recoup its money with interest.
In the UK the only way to twist the arm of the broadcasters and squeeze more money out of them would be to drum up competition. Unfortunately for Kirch, UK broadcasting law dictates that the finals – all 64 games – are a “protected” event, and as such have to be shown on free-to-air TV.
Kirch had little room to manoeuvre. But what it did have was the knowledge that just days before striking the UK deal it had sold the Latin American rights to both tournaments for $860m (£605m). The deals in Argentina, Brazil and elsewhere in South and Central America were important parts of the wider Kirch World Cup jigsaw and made selling the UK rights to two World Cup finals, for £10m less than the price it had initially asked for just one tournament, more palatable.
In practical terms, the deal means that ITV will have to pass some of the extra cost on to a programme sponsor and/or advertisers in a market which by next spring may look even worse than now for TV advertising. But it will console itself with the fact that the deal for Germany 2006, when games will be played at prime time rather than breakfast, is more commercially valuable. The deal also maintains the BBC’s toehold in football.
Tom O’Sullivan is sports page editor of the Financial Times