Mediapro's bankruptcy prospect spreads panic in French football
The fact that the influential and very demanding French newspaper Le Monde devotes a page and even an editorial to the business of French football illustrates well the extent of the wave of panic caused by Mediapro's financial fragility. In addition to the 3,129 million euro contract that Jaume Roures' Catalan group signed in May 2028 with the LFP (French professional football league), in exchange for broadcasting rights to 80% of French league matches between 2000 and 2024, many of the sector's 34,000 jobs are at risk.
It was by mail, through a simple letter, that Jaume Roures demanded the LFP to open negotiations, with a view to lowering the price of television rights for the 2020/2021 season. What he also did, without notice, was to postpone "sine die" the second annual payment of 172 million, which was due on October 6. The COVID-19 pandemic is the pretext after which the Catalan expert journalist tries to camouflage the failure recorded with the resale of the football rights and even more with the creation of the gala Telefoot channel.
In any case, there is no doubt that the situation now created by Mediapro has nothing to do with the euphoria unleashed on August 6th, when he made the first annual payment agreed with the LFP, for some 172 million euros, of which 27 million are tax rates payable by the clubs. Until then, only praise had been heard, contrary to what had happened in 2018, when some club presidents questioned Jaume Roures' project and, above all, the absence of the usual bank guarantees.
It should be remembered, that if Mediapro failed to obtain the rights to Serie A (Italian league), which it had practically acquired, it was because it refused to present - maybe because it was unable to obtain them - the financial guarantees required by the Italian leaders. Mediapro's explanation for not presenting guarantees is that it had guaranteed a deserved credit of reliability and solvency in all the countries where it operates, that is, the same argument it used in France to convince the unwary heads of the LFP.
By not having made the second payment of the second tranche of 780 million relating to the 2020/2021 season, Jaume Roures makes a very risky bet: he attributes to COVID-19 the sole responsibility for the loss of income recorded by Mediapro, he tries to force the hand of the LFP, to negotiate a reduction of the financial conditions for the current season, but he is not unaware that he has only an extra period of 30 days to make the payment, after which the French football bosses will be able to recover the rights and auction them again.
Mediapro's financial weakness also drew the attention of UK media The Economist. At the end of March, it put Jaume Roures on the spot, between politics and sport and as a Catalan separatist, and, beyond the group's economic woes, warned that football rights are no longer a gold mine. Even in the United Kingdom, the home of football and multi-million-dollar contracts, Sky and BT Sport will only pay the equivalent of some EUR 7.3 billion for the rights to three Premier League seasons.
In any case, the experts consulted by The Economist, Le Monde, Le Point, etc. do not believe that Mediapro has strong arguments to force the LFP to accept a downward renegotiation of the rights for 2000/2001. The pandemic and the closure of stadiums would be unwelcome, and it might even be thought that, in the face of fear of the coronavirus and with millions of football fans locked up in their homes, Jaume Roures, as mediator, would have more scope to redistribute the rights acquired and make juicy capital gains.
In fact, Mediapro did not find any of the planned facilities, starting with Canal+, which refused to negotiate the repurchase of rights that had been its property for more than three consecutive decades. In addition to the resale of the television rights, Jaume Roures also bet on the creation of a new channel, Telefoot, with clearly unrealistic objectives: the channel would only have about 350,000 subscribers, far from the 1.5 million expected by the end of the year, and up to a total of 3.5 million in the medium term.
The next few days will be crucial for Mediapro's French adventure, and most of the bets sound terrible: they take it for granted that LFP will not extend the Spanish group's legal 30-day deadline for late payment. The solution to the problem would therefore be to recover the television rights and organise a new auction. In this case, the great favourite would be Canal+, which in a position of strength could take over the rights in question, at a price lower than that paid by Mediapro: some 800 million a year.
Time is on the side of Vivendi's channel: after losing the battle with Mediapro, what Canal+ did was to make peace with BeIN Sports of Qatar, which, against payment of only about 380 million euros, granted the former rival the broadcasting of 76 matches acquired from the LFP between 2000 and 2004. That is, 20 per cent of the matches auctioned, including 28 of the 38 with the highest audience ratings, but none of the so-called star matches-those played by Paris Saint Germain de Neymar and Mbappé against Marseille and Lyon, which were broadcast by Mediapro.
It is therefore an almost surreal situation in which Jaume Roures' group, which had set itself the ultimate goal of broadcasting the matches of the five major European leagues (English, Italian, French, German and Spanish), will not be spared. Some even consider the 2018 operation between Mediapro and the LFP to be a "fraud", and predict that if the French football rights are lost, the Telefoot channel, which bills its subscribers 25.90 euros per month, will no longer live long.
However, it should be remembered this is not the first time that Mediapro finds itself on the brink. As it was the case in the late first decade of 2000, after the war with Prisa/Canal Plus, when it was a small step away from bankruptcy, with a bill of EUR 3.1 billion in unpaid rights. The equivalent, then, to almost 80 times the operating result, 25 times the equity and 7 times the turnover, so hardly anyone believed anymore that Jaume Roures could turn the situation around.
The problem now is whether Mediapro still has room for manoeuvre to pursue its plans in France, and if so, then to move towards the IPO promised to the two major shareholders, Chinese private equity firm Orient Hontai Capital and the advertising multinational WPP, both seeking to reduce their respective holdings of 53.5% and 22.5%. The Chinese position was acquired in 2018 for 900 million euros, without affecting the holdings of the group's founders, Jaume Roures and Tatxo Benet, who control 24% in equal shares.
It was not the problem in France, but the arrival in Spain of the coronavirus pandemic, which put the brakes on the stock market flotation, which Mediapro had been preparing for months, specifically since the publication of the good results in 2018. The preparatory task entrusted to Goldman Sachs, Deutsche Bank, City and Rothschild was left halfway through, and it is most likely that it will never again have legs to walk on, at least in the short term, now both because of the pandemic and because of the probable failed bet in France.
