AFC and FMA to renegotiate global rights contract

The Asian Football Confederation and the Football Marketing Asia agency are to renegotiate the terms of their landmark, $2.4bn (€2bn) global commercial rights contract covering 2021-28, SportBusiness understands.

The renegotiation has been prompted by the impact of the Covid-19 pandemic on the media and sponsorship rights sales process and on the AFC calendar, and is expected to involve a reduction in FMA’s financial commitments.

The AFC and FMA declined to comment directly on the matter when contacted by SportBusiness. The renegotiation was confirmed by other sources.

In a statement to SportBusiness, the AFC said, “Every world class organisation is in constant dialogue with its commercial agents at present to assess the impact of Covid-19 – the AFC is among those as we look to protect our position and that of our Member Associations.” It added, “any discussions with stakeholders are both commercially sensitive and confidential”.

FMA declined to comment.

FMA is selling the media and sponsorship rights for AFC club and national team competitions in all territories worldwide except for the Middle East and North Africa, where it is only selling sponsorships. The AFC is handling Mena media-rights sales in-house. FMA has been in the market since shortly after it acquired the rights in 2018, and was in the middle of negotiations with a host of potential partners when the pandemic took hold earlier this year. It is currently selling rights for the 2021-24 period, the first of two four-year cycles.

The first set of matches covered by the deal, the third round of the joint Asian qualification process for the 2023 AFC Asian Cup and 2020 Fifa World Cup, was originally to kick off in September this year but was postponed due to the pandemic. Earlier this month, the AFC postponed all qualifiers this year, and it is understood the third qualification round may not start until the second half of 2021.

Last week, FMA announced the departure from the business of co-founder David Tyler, who is moving back to Switzerland from Hong Kong, FMA’s base, “for personal reasons”. Tyler was one of its central figures at the agency, having founded the company along with chief executive Patrick Murphy and their Chinese partners, the Super Sports Media agency. Murphy and Tyler are former colleagues at the Team Marketing agency in Switzerland. Tyler will remain a shareholder in FMA and will work with the agency for a limited period as a “strategic consultant”.

Premium paid

Many in the industry will question whether the impact of Covid-19 is the only reason for the renegotiation. Well before Covid-19 struck, there was widespread belief that FMA had overpaid for the rights and was struggling to monetise them.

However, one industry insider this week argued that, with FMA’s guarantee in its pocket, the AFC would have little motivation to consider a renegotiation apart from the extraordinary circumstances of the pandemic.

FMA has remained bullish on its prospects with the rights – in June chief executive Patrick Murphy told SportBusiness he was satisfied with the progress of sales.

It is beyond doubt that the agency paid a huge premium to secure the rights in 2018. This was a time of sharp competition in the sports marketing agency business, which had consolidated into a small number of large players who were competing aggressively for market share. The AFC rights were considered a unique opportunity, having come on the market for the first time since the 1990s. The World Sport Group agency, which was acquired by Lagardère Sports in 2008, had managed the rights since 1993 in successive deals renewed without the rights going to market.

The sales process for the 2021-28 rights attracted strong bids from the biggest rights agencies, including IMG, MP & Silva, Infront, Mediapro, and a joint bid by incumbent Lagardère Sports along with Dentsu and Perform.

FMA blasted the other bids out of the water with an offer several hundred million dollars ahead of its nearest rival, the now-defunct MP & Silva.

In the current deal, from 2013 to 2020, the Sportfive agency – formerly called Lagardère Sports – guarantees the AFC $75m per year for its global media and sponsorship rights, including media rights in Mena. FMA has guaranteed the AFC an average of close to $300m per year, nearly four times more and without the Mena media rights. The latter are highly valuable, accounting for about a quarter of the total value of AFC media rights sales in the 2017-20 cycle.

Sportfive made a large profit on its sale of the AFC rights in the 2017-20 cycle, but its sales revenue – including Mena media rights – was far below the $300m per year FMA has committed to.

China key

FMA’s high valuation of the rights was largely predicated on the belief it could secure massive rights revenue increases from China. There were strong arguments to support this belief – the country’s economy was growing strongly, its sports media-rights market had been very competitive in recent years, and there was powerful government backing for the development of football. China has ambitions to be a football super-power and to host the Fifa World Cup in the next few decades.

The bigger-picture arguments about China’s economic trajectory and government-led ambitions in football largely still hold, although the former has been dented by Covid-19. The Chinese media-rights market, however, even prior to the pandemic was on course for correction after several years of overspending by leading players. The biggest rights buyer in recent years, streaming platform PPTV, is understood to be renegotiating several deals after Covid-19 applied a further squeeze to its already-stretched finances.

FMA’s Chinese ownership is considered critical in unlocking the value of a market that remains difficult for foreign-owned companies to penetrate. The agency is 70-per-cent owned by Super Sports Media, the Chinese sports marketing agency owned by Wuhan DDMC Culture & Sports. The latter is a sports and entertainment firm with several subsidiaries alongside Super Sports Media, including streaming platform iQiyi Sports and other companies involved in sports marketing.

FMA received a big boost last year when China was awarded the rights to host the 2023 Asian Cup, seen as a precursor to the country’s bid to host the World Cup. Corporate China will row behind the national football effort, and strong media rights and sponsorship revenues for the tournament are virtually guaranteed.

More than 80 per cent of the total value of the AFC’s media rights in the current cycle came from three markets – China, Japan, and the Middle East and North Africa. An uncompetitive Japanese market dominated by the Dentsu agency is not expected to deliver a significant, if any, increase in revenue this cycle.

Chinese media platforms are understood to be holding off on bidding for the next cycle until they see whether the Chinese national team qualifies for the third round of 2023 Asian Cup and 2020 Fifa World Cup qualifiers. China’s qualification for the AFC Cup is automatic as host, but its World Cup qualification is far from secure.

One industry insider said this week that any deals in China were likely to be done much closer to the start of the contract period, as was typical for Chinese broadcasters and sponsors.

Asian downturn

Elsewhere in Asia, FMA’s media-rights sales effort has been undermined by a downturn that predates Covid-19. Premium rights-holders including the English Premier League and Uefa have suffered sharply falling prices for their properties in a trend that’s expected to continue in upcoming sales cycles.

FMA is understood to be finalising media-rights deals in an array of territories for the 2021-24 cycle, although only five have been announced so far, in Central Asia, Korea, Indonesia, Taiwan and the DACH (Germany, Austria, and German-speaking Switzerland) region in Europe.

The agency has secured significant fee increases in some markets, including Indonesia and Vietnam – where a deal has not yet been announced – but these account for a tiny fraction of the overall value. In the biggest market announced so far, South Korea, the fee was close to flat on the current cycle. Talks in many markets are understood to be taking place at valuations far below initial asking prices.

FMA is understood to have a number of sponsorship deals in place for the 2021-24 cycle, although none have yet been announced. The agency is hopeful of generating a large increase in sponsorship values, primarily from Chinese companies but also from other markets. This is to be powered by a revamp of the AFC’s competitions and sponsorship rights packages. However, sponsorship interest, particularly outside China, is understood to have been hit hard by the pandemic. Sponsorship sales will ultimately account for a small proportion of overall revenues compared to media rights sales.