Agreements on the exploitation of broadcasting rights to sports events in Hungary
Published 20 September 2012 By: Péter Rippel-Szabó
This article will look into the legal background and practical structuring of agreements on the exploitation of broadcasting rights concluded by Hungarian sports rights holders. Special emphasis will be devoted to providing an overview (i) on the provisions of the Hungarian Sports Act ('Sports Act') on the exploitation of broadcasting rights and (ii) on the practical background of agreements on joint selling of broadcasting rights entered into by sports associations. In this article the term 'broadcasting rights' refers to the right to broadcast sports events through television, radio and platforms of new media (internet and mobile).1
Provisions of the Sports Act on the exploitation of broadcasting rights
Broadcasting rights and their owners under the Sports Act
Pursuant to the Sports Act recording and broadcasting of sports activity and sports events through television, radio and other electronic or digital platforms as well as their licensing are sports rights which have commercial value and can be exploited by their rights holders.
The owners of these broadcasting rights (and any other sports rights) are (i) either the athletes (ii) or, based on the athletes' membership in or contractual relationship with sports clubs. The original rights owner of broadcasting rights is the athlete unless he/she has membership status in or contractual relationship with a sports club where the athlete's broadcasting rights are automatically transferred to the sports club as secondary rights owner.
Joint selling of broadcasting rights by sports associations
Under the Sports Act, sports associations are entitled to jointly exploit the broadcasting rights to competitions organised by them for a definite period of time.2 Thus, the sports association concerned may preserve the right to exploit the broadcasting rights and as a result, will be entitled to enter into agreement(s) on their exploitation on behalf of the original rights owners. The Sports Act sets out the detailed provisions on joint selling that must be laid down in the internal regulations of sports associations. Sports associations can conclude the agreement either directly with broadcasting companies or assign marketing agencies for re-selling the broadcasting rights.
In return for authorising the sports associations to preserve the right to exploit the broadcasting rights, the Sports Act obliges the sports associations to pay the athletes and sports clubs (i.e. the rights owners) appropriate consideration. The amount of this consideration must be determined in advance and equal to the market value of broadcasting rights. Sports associations are also obliged to consult with the sports clubs prior to concluding any related agreements. Subsequent distribution of money generated through joint exploitation of broadcasting rights needs to be based on the following criteria:
- frequency and popularity of broadcastings;
- results achieved by sports clubs;
- principle of solidarity including the support of amateur sports and grassroots; and
- strategic development concept for the sport concerned.
These criteria must be laid down in detail in the regulations of sports associations.
The Sports Act also provides that, for managing the joint selling, sports associations may only deduct from the above consideration (i) either the sum covering their expenses incurred due to the joint selling of broadcasting rights, (ii) or maximum 5 % of the consideration paid in return for the exploitation of broadcasting rights.
According to the provisions of the Sports Act, joint selling of broadcasting rights by Hungarian sports associations is based on the following structure:
Specific provisions on the exploitation of broadcasting rights
In addition to the detailed rules on joint selling, the Sports Act sets forth two specific provisions on the exploitation of broadcasting rights that:
- rights owners of broadcasting rights to the matches of national teams are the respective sports associations; and
- organisers of competitions other than sports associations are entitled to exploit the broadcasting rights of the competitions organised be them.3
Agreements on the exploitation of broadcasting rights in practice
As Hungarian sports associations, making use of their authorisation given to them by the Sports Act, usually preserve the right to exploit the broadcasting rights to competitions organised by them, this section of the article will focus on the practice of joint selling of broadcasting rights.4
Conclusion of agreements
After preserving the right to the exploitation of broadcasting rights the sports association invites broadcasting companies and/or marketing agencies to submit tenders. The invitation for tender in most cases is publicly available, the tendering documentation however must usually be purchased by the bidders.
It follows from the provisions of the Sports Act that broadcasting rights may not be subject to sale and purchase agreements as these rights cannot be transferred to third persons. Thus, under Hungarian law, agreements on the exploitation of broadcasting rights can be categorised as special license agreements according to which the broadcasting company, based on the general principles of civil law, is entitled and obliged to exploit the licensed broadcasting rights.
Main elements of agreements
The core content of agreements on the exploitation of broadcasting rights are similar to those concluded in other jurisdictions. As a consequence, the agreements usually provide for the following clauses:
- Production and distribution of the basic feed and the related content (access to stadia and arenas / commentaries, programmes, reports, highlights and interviews etc.);
- Quality and methods of broadcasting (e. g. HD, 3D / satellite, terrestrial, cable, internet / live and deferred coverage, on demand contents etc.)
- Copyright of media and broadcasting contents;
- Marketing of sports venues (e.g. clean venue provisions, quality, quantity and placement of LED bands and 3D carpets etc.);
- Selection methods of the matches and sports events to be broadcasted;
- Exclusivity (period and territory / taking into consideration the list of events of major importance for society);
- Conditions of sublicensing; and
- Consideration (fixed fees and success fees, payment methods, guarantees, etc.).
Practical aspects of the exploitation of broadcasting rights
From a legal point of view there have been no such advanced developments in the exploitation of broadcasting rights in Hungary so far like in some other European countries. This can be ascribed to the low population of Hungary (ca. 10 million inhabitants), the resulting smaller size of the Hungarian economy and the rather insignificant international exposure of Hungarian competitions. Nonetheless athletes, sports clubs and sports associations generate significant part of their income through exploiting their broadcasting rights.
In practice, the duration of agreements usually varies between three and five seasons. E. g. broadcasting rights to the Hungarian football competitions were sold for three consecutive seasons in 2009 and four consecutive seasons in 2012, while the agreement on the exploitation of broadcasting rights to the man and woman handball competitions was concluded for five consecutive seasons in 2009. There may be very significant differences in the value of the rights depending on the sport concerned. What leads to constant concern among Hungarian sports stakeholders is the fact that only the broadcasting rights of football are marketable and even in football only the last two agreements reflects the real market value of the rights. The broadcasting rights of Hungarian football were awarded for HUF 3,54 billion (approx. EUR 12,4 million) per season for the mentioned four-season period commencing in 2012/13. This is a significant increase of income compared to 2009 when the same rights (excluding the rights to broadcast via new media) were sold for HUF 1,7 billion (approx. EUR 5,96 million) per season.
The recently published 'Advertising and Marketing Handbook'5 of the Hungarian Football Federation, which is a guideline for football clubs on how to comply with their obligations resulting from the joint selling of sports rights, gives also some indirect insights into the terms and conditions of the above mentioned broadcasting agreement on the joint selling of broadcasting rights to domestic football competitions. The two broadcasters who were awarded the broadcasting rights are obliged to broadcast 90 and 75 matches per season respectively (it means the broadcast of ca. 7 encounters per matchday) and produce match highlights on a matchday, monthly and yearly basis. The broadcasters, complying with some timing restrictions, can freely select the matches to be broadcasted. There are also detailed provisions on the visibility of logos and sponsors of the association on the TV screen and the accessibility and media equipment of club facilities. Sublicensing of broadcasting rights is strictly restricted as only deferred coverage of matches6 is possible by local broadcasters located in the registered seat of sports clubs.
In addition to the above, in the light of European developments, some conclusions can also be drawn relating to the Hungarian market:
(i) As to the exclusivity of agreements it must be noted that the Hungarian Competition Authority (Gazdasági Versenyhivatal) has initiated no infringement proceedings due to anti-competitive practices so far. This however might change in the future, as the broadcasting rights to football, which are by far the most valuable broadcasting rights in Hungary, were acquired by the same broadcasting company on successive occasions what might lead to market foreclosure and prevention of competition at the downstream acquisition market.
(ii) The Murphy ruling of CJEU should have no significant impacts on Hungarian rights holders as domestic competitions are rarely watched outside the territory of Hungary. With an eye on the findings of the CJEU in copyright issues of sports events it must be noted that under the Sports Act or other Hungarian laws there is no copyright protection for sports events. However the Sports Act protects the owners of broadcasting rights in a different way since it clearly sets out that, as already mentioned above in section 1.1, recording of sports activity and sports events through television, radio and other electronic or digital platforms is a sports right which is owned by the athletes and sports clubs, has commercial value and as such can be exploited by its rights owners. Thus, athletes and clubs can rely on this provision of the Sports Act upon any infringements against their broadcasting rights. Actually, this kind of rights protection, in line with the findings of the CJEU8, is comparable to the protection of works.
The Sports Act provides transparent legal framework for the exploitation of broadcasting rights what makes easier the practical implementations of the provisions. The core content of agreements on the exploitation of broadcasting rights should be similar to the content of agreements entered into in other jurisdictions. Unfortunately, marketability of broadcasting rights is hindered by the country's characters. However, mainly in the field of football, broadcasting deals have been concluded at arm's length in recent times.
1 This article can be a good follow on piece to the article ‘Exploitation of sports rights under the Hungarian Sports Act’ which gives a general and broader insight into the regulations of the Sports Act on the exploitation of sports rights in Hungary. The article can be accessed here: https://www.lawinsport.com/articles/editors-choice/item/exploitation-of-sports-rights-under-the-hungarian-sports-act.
2 It must be noted that sports associations are entitled to exploit both the broadcasting rights and any other sports rights related to the competitions organised by them. On the connected legal uncertainties see section 2.3 and 3 of the article referred to in footnote 1.
3 It must be noted that the scope of these specific provisions includes not only the exploitation of broadcasting rights but the exploitation of all sports rights related to these matches and competitions.
4 This part of the article is based exclusively on the author’s personal experience. Any data referred to herein are collected from publicly available sources.
5 The Hungarian version of the handbook can be accessed on the website of the Hungarian Football Federation: https://dokumentumtar.mlsz.hu/02_Szabalyzatok/02_Labdarugas_uzemeltetesi_szabalyzatok/01_Versenyeztetesi_szabalyzatok/RMK/RMK%20%28NBI%29%202012_%2820120703%29.pdf (last accessed: 18 September 2012).
6 There must be a 2 hour-gap between the end of a match and its screening by the local broadcaster concerned.
7 See section 100 of the judgement given in joined cases C403/08 and C429/08.
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