La Liga’s media rights: the new law that prompted suspension of Spanish football
In the past month, the Spanish Government has approved a Royal Decree1 relating to the sale of the media rights of Spanish football clubs.
The new law will implement a system of collective commercialisation, and will channel fixed percentages of the revenue generated by the sale of media rights toward the secondary Spanish football league, and towards other specified purposes, with the aim of promoting the sport from grassroots up to professional level.
The practice of collective selling of media rights in football is well-established amongst La Liga’s European counterparts. Italy, France, and England have all adopted this approach and consistently generate significantly higher total media rights revenue than Spain. The English Premier League, for example, recently concluded a collective TV rights deal for 2016-2019 with Sky and BT Sport worth over £5.1 billion.2 Last season, Italy’s Serie A received a total of €846 million from the sale of media rights, compared to La Liga’s €800 million.3
Yet the proposal, and subsequent approval, of the Royal Decree prompted a dramatic “power struggle”4 amongst Spanish Football’s governing bodies and stakeholders, which culminated in the declaration of strike action by la Real Federación Española de Fútbol (the Spanish Football Federation (“RFEF”)) supported by the Asociación de Futbolistas Españoles (“AFE”) and a number of high profile Spanish players.
Spain’s National Football League, la Liga Nacional de Fútbol Profesional (“LFP”), which strongly supports the collective bargaining system introduced by the Royal Decree, brought proceedings before the Spanish courts challenging the legality of the strike. On 14 May, the Spanish high court ruled in favour of the LFP, ordering the RFEF and AFE to call off the strike.
This article examines the mechanics of the reform, the content of the new law (including the revenue split), and the timetable for change.
The status quo
The existing Spanish legislation governing the sale of media rights allows individual clubs to negotiate their own contracts with television broadcasters for the rights to show games. This system has repeatedly seen La Liga’s two top clubs, Real Madrid and Barcelona, together take almost half of media rights revenue relating to La Liga.
A move to collective bargaining had been in the pipeline for a number of years,5 with Barcelona and Real Madrid previously signing an agreement to redistribute a portion of the revenue by lowering their 42% stake to 34%.
Whilst many of the stakeholders in Spanish Football continue to recognise the benefits of a move to collective bargaining, a key source of contention was the ratio of revenue split. The AFE, for example, contended6 that a greater share should be reserved for distribution to the clubs playing in the second division.
Reform: introducing collective bargaining
The new law reforms two previous laws: the Law 10/1990, 15 October, of Sports, and the Law 7/2010, 31 March, for Audio Visual Communication.
Under the new system, ownership of the broadcast and image rights (the “Rights”) will remain the property of the clubs but the LFP (for the National Championship for First and Second Division) and RFEF (in relation to the Copa del Rey and Supercopa) will be responsible for selling the Rights (both domestically and internationally). The LFP and RFEF will also establish the conditions of sale, although the duration of contracts will be capped at a maximum of three years.
The new Law is designed to distribute more equally the benefits generated by the sale of the Rights. As noted above, a substantial proportion of these benefits are presently monopolised by Real Madrid and Barcelona, with the balance of the revenue shared between all other clubs in the Spanish leagues, including the rest of the teams in the first division, second division and women’s football.
Arguably, the existing system is failing to fulfil the league’s full revenue potential, and LFP forecasts predicting that the new centralised structure will increase the value of la Liga’s media rights7 to €2 billion per season (up from previous projections of €1 billion).
How will media rights revenue be allocated?
Revenue will be distributed as follows: 90% of the total revenue will be allocated to First Division clubs as a group (the “First Division Portion”), and the remaining 10% will be allocated to Second Division clubs as a group (the “Second Division Portion”). These portions are then sub-divided as follows:
- A substantial percentage of the revenue received by each Division (50% of the First Division Portion and 70% of the Second Division Portion) will be divided equally amongst the clubs in the relevant division; and
- The remaining amounts will be proportionately distributed amongst the clubs with reference to various factors (over the previous season in the Second Division, and over the previous five seasons in the First Division) such as (i) the clubs’ results (meaning the more successful the club, the more revenue received), and (ii) “La implantación social”, which essentially pertains to the value of the box office revenue achieved by each club and its contribution to the generation of television broadcasts. However, the ratio of the split is subject to a cap, with the effect that the highest amount of revenue received by any club may not be more than 4.5 times greater than the lowest amount of revenue received by any club (or 3.5 times where total revenues of €1,500 million or more are achieved).
Clubs will also be required to allocate a part of the revenue received for several specified purposes, with the aim of promoting the sport. These include:
- 3.5% toward a compensation fund to assist relegated clubs;1% to the LFP, to be used for the promotion of competition in international markets;
- 1% to the RFEF for the promotion of the sport at grassroots level;
- 1% to the Consejo Superior de Deportes (Higher Sports Council (“CSD”)) for the costs of welfare for athletes; and
- 0.5 to the CSD to be used for the purposes (in order of preference) of women's soccer, Second- B Division and the established unions for players, referees, coaches, and trainers.
By way of comparison, this revenue split differs from the position in the Premier League. Under the Premier League Rules, the Premier League pays out of money received in respect of UK broadcasting rights such sums as are agreed from time to the Professional Footballers’ Association for players’ educational, insurance and benevolent purposes and any other sums approved by resolution. The balance of UK broadcasting money is then divided so that one half comprises the “Basic Award Fund”, one quarter comprises the “Merit Payments Fund” and one quarter comprises the “Facility Fees Fund”. Each of the Basic Award Fund and the Merit Payments Fund shall be divided into a number of shares and distributed to the clubs. The Merit Payments are shared amongst the clubs by virtue of their finishing position so that the top club receives twenty shares and the bottom club receives one. Separately, any sums received in respect of overseas broadcasting are shared between the clubs equally, while relegated clubs receive a steadily declining percentage of a share for the four years following relegation.8
The implementation of this new collective system is entrusted to a newly-created body within the LFP. This supervisory body will consist of six members (whose identity shall change every year), including the two clubs which have generated most revenue from media rights over the last five seasons, and the President of the LFP.
While this represents a step towards a more equitable distribution of the television rights, it seems likely that the implementation of rights sales will remain a difficult process. It is conceivable that there may be difficulties in the six nominated clubs reaching agreement and there will need to be serious debate about how disputes will be dealt with, who has the final say (i.e. will the decision be made by majority or unanimous decision) and the impact of the members changing on an annual basis.
The reform is expected to come into force for the 2016/2017 season, but there is scope for the Spanish Government to take measures for earlier implementation.
La Liga has traditionally been dominated by two clubs: Barcelona and Real Madrid. The income of these clubs has dwarfed those of their smaller competitors and, as a result, the smaller clubs have found it difficult to break the duopoly. In this respect, it has been reported that, under the previous regime, Barcelona and Real Madrid both earned €150 million per season, some three times as much as Atlético Madrid, the team that has proved their nearest rival in recent seasons.9
That competitive imbalance was arguably levelled out by the use by a number of Spanish football clubs of third party ownership. In circumstances where those clubs did not have the financial might to compete with Barcelona and Real Madrid in the transfer market, many acquired the registration of talented players (often from South America) with the assistance of third party investors. This reduced the initial outlay for the club but still gave the opportunity of acquiring the kind of talent required to challenge Barcelona and Real Madrid. By way of an example, Atlético Madrid won La Liga in the 2013/2014 season and, according to a 2013 investigation, reportedly fully owned the rights of only six of its squad players.10
However, since FIFA’s introduction of Article 18ter of its Regulations on the Status and Transfer of Players from 1 January 2015, clubs and players are now prohibited from entering into agreements with third parties whereby third parties are entitled to participate in compensation payable in relation to the future transfer of a player.11 The benefits for clubs provided by third party ownership will no longer be available and the smaller clubs may again find themselves at a competitive disadvantage when faced with the larger, more wealthy clubs.
Against this background, it is likely that the introduction of the new law will be welcomed by a number of the smaller clubs in particular. The more equitable distribution of funds provided to those clubs will allow them greater ability to compete with Barcelona and Real Madrid.
Moreover, if the LFP’s forecasts prove accurate, the value of La Liga’s media rights will increase to €2 billion per season. Such a result would undoubtedly prove popular for all Spanish clubs.
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- Tags: Asociación de Futbolistas Españoles (AFE) | Commercial Law | England | FIFA | FIFA Regulations on the Status and Transfer of Players | Football | Governance | La Liga Nacional de Fútbol Profesional (LFP) | Premier League | Regulation | Spain
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Lloyd Thomas is an associate in Squire Patton Boggs’ Litigation department and is part of the Sports Law team based in its London office.
Fernando González leads the dispute resolution and intellectual property team in Squire Patton Boggs’ office in Madrid. Fernando has more than 25 years of litigation experience in commercial and IP law. He represents clients around the world in international arbitration proceedings.