gate receipts from live attendances,
television,
advertising,
sponsorship,
corporate hospitality,
merchandising and licensing,
retailing both on and off site,
catering,
venue licensing such as for live entertainment,
property investment, redevelopment and
construction, and online and interactive revenue
streams encompassing many of the above.
Sports television rights

Of major concern to the sports industry is the collapse of the sports rights market for high profile sports, although some analysts believe there are still opportunities to be found with smaller and niche sports. In 2001, the sports rights industry was thought to be worth in the region of £á16bn with North America accounting for just under half. In that year, News Corporation wrote off £á909m against rights to the NFL (£á387m), Nascar (£á297m) and MLB (£á225m).

News Corporation is not the only media company faced with weakening finances, huge fees and ever-growing debt after paying out large sums for sports rights in an attempt to attract new viewers and subscribers against a background of falling advertising revenues and a slow take-up of technology. Broadcasters are realising that they have to cut back on 'must have'content and this will lead to market consolidation.

A PricewaterhouseCoopers report on the media and entertainment industry published in 2002 predicts 6.6 per cent growth for the global sports sector (comprising gate revenues for live events and rights fees) from 2002 to 2006. It however forecasts that growth in the value of sports broadcast rights will be uneven, with major differences in growth rates between the US and Europe. PricewaterhouseCoopers predicts that rights fees will decline in Europe (excluding soccer World Cup years) but in the US rights fees will maintain their upward trend.

'The [US] broadcast networks will become less aggressive bidders for rights fees, but creative packaging and the licensing of additional games to more outlets will boost revenues,'the report states. The report claims that the creative packaging of sports programming will fuel growth in US rights fees despite declining ratings for sport.

Despite the report predicting a reluctance for networks to pay escalating rates, it believes that creative arrangements will characterise future rights fee deals. One example is the NBA's new agreements, which produced a 16 per cent increase on annual rights payments. 'The NBA will receive £á4.9bn over the next six years to have its games televised by ABC and cable networks ESPN, ESPN 2 and TNT, as well as a new digital channel called AOL Sports, in which the NBA will have 50 per cent.'

Growth however in the European market will be limited although the soccer World Cup will boost rights fees in 2002 and 2006, according to the report. Soccer dominates rights fees in Europe (along with the Middle East and Africa), accounting for half the region's £á4.7bn in rights fees in 2001. Formula One commands £á319.5bn. The report believes that the weak advertising market combined with the inability of pay-TV platforms to pay escalating rights fees will mean that even Europe's most popular sports will suffer. 'we expect rights fees to decline over the 2003-05 period, before bumping up in 2006 for the World Cup,'PricewaterhouseCoopers concludes.

Types of broadcast rights

Sports properties are increasingly presented with new opportunities to license their rights across a wide range of platforms. These include:

analogue television,
digital television,
analogue fixed media such as videotapes,
digital fixed media such as CD-ROM, DVD,
online digital media including the broadband and wireless internet.
Broadcasters compete for sports programming rights at national and regional levels. The owners of distribution outlets such as cable television systems may also contract directly with the sports teams in their service area for the right to distribute a number of such teams' games on their systems. The owners of teams may also launch their own regional sports network and contract with cable television systems for carriage.

In certain markets, the owners of distribution outlets, such as cable television systems, also own one or more of the professional teams in a region, increasing their ability to launch competing networks and thereby limiting the professional sports rights available for acquisition.

Spiralling rights

The cost of sports rights has spiralled over recent years. Rights for the Olympics have grown 400 per cent since 1884; the soccer World Cup 1,000 per cent from 1994-98 to the 2002-06 package; NFL 50 per cent from 1989-93 to 1993-97 and 100 per cent between 1998-2001 and the UK soccer Premier League saw 350 per cent growth from 1996-2001. The rising cost of these rights has contributed to the collapse of several high profile rights agencies such as ISL and KirchMedia, and has been indirectly blamed for the collapse of ITV Digital. The demise of the latter in turn has placed many UK soccer clubs on the brink of bankruptcy due to an over-reliance on the money they were expecting through ITV Digital's £á358m rights deal with them.

ISL went bust after admitting that the cost of its £á1.2bn contract to exploit a series of tennis events could not be recouped. Combined with the high prices it had paid for the soccer World Cup, CART and other properties, ISL was reported to be facing a shortfall of more than £á60m per year.

KirchMedia, which filed for bankruptcy in April 2002 with debts of over £á8bn, owns ProSiebenSat.1, Germany's largest free-to-air broadcaster, and one of the world's largest film libraries. The company's debts were the catalyst for the collapse of its Munich-based parent company Kirch Group, one of Germany's most venerable media organisations. The KirchMedia empire-which also extended to sizeable stakes in Formula One, Axel Springer and television channels DSF and Premiere-at the time of writing was being dismantled to pay off creditors, such as BSkyB, News Corporation and Mediaset.

The sale of KirchMedia's assets caught the attention of several major US companies including Viacom, AOL Time Warner and Walt Disney, alongside German groups like Burda, Holtzbrinck, WAZ Gruppe and Axel Springer. At the time of writing, the company looked likely to be bought by a consortium made up of Heinrich Bauer, the family-owned publisher, and HVB Group, Germany's second biggest bank in a deal worth £á2bn.

As a safeguard to protect its World Cup soccer rights, Kirch restructured its international sports marketing company KirchSport in April 2002 'to allow a continued and smooth operation throughout the 2002 World Cup and beyond,' according to a Kirch statement. Under the restructure, both KirchMedia rights-holding entities (Prisma Sports & Media and CWL) and the TV production outfit Host Broadcast Services, became fully controlled by KirchSport. In November 2002, former Adidas head Robert Louis-Dreyfus took control of KirchSport in a management buy-out and rebranded the company as Infront Sports & Media.

KirchSport controlled the broadcast rights to the FIFA World Cup in 2002 and owned the rights for the 2006 World Cup and FIFA Additional Events. KirchSport was also the exclusive marketing company for all German Bundesliga (DFB) live matches, including the DFB Cup Final, the German League Cup, as well as German national team games. In total it managed television, sponsorship and advertising rights for 11 national associations and more than 20 soccer clubs.

KirchSport also handled sponsorship and television rights to the IIHF Ice Hockey World Championship up until 2007 and the EHA European Handball Championships until the year 2006- a relationship that dates back to 1993. These rights are now managed by Infront. At the time of writing Infront was looking at the possible acquisition of ISPR, another Kirch Group sports outlet.

US broadcasters

The major US television networks will lose billions of dollars by 2006 due to the spiralling cost of sport rights according to Morgan Stanley Dean Witter. The investment bank states that, of the free-to-air networks, the Walt Disney-owned ABC, News Corporation's Fox and Viacom's CBS will lose a combined £á2.9bn on their current eight-year £á17.6bn NFL contract. ABC, together with its sister cable channel ESPN, will also lose a further £á2.2bn on the six-year, £á4.6bn NBA rights deal it signed in January 2002. The report also states that from 2000 to 2006, ABC stands to lose a total £á1.1bn on sport. Fox will lose £á1.3bn, CBS £á1.2bn and cabler ESPN £á856m. Fellow cable network Turner Sports, owned by AOL Time Warner, is projected to lose £á1.4bn on sports programming over the same period.

The network with the least losses will be free-to-air broadcaster NBC which, the report predicts, will face deficits of £á351m. NBC has reduced its investment in sports rights recently losing out on coverage of the NFL, NBA and MLB. The latter franchise is now broadcast on Fox which is predicted to lose at least £á875m on its six-year, £á2.5bn MLB contract alone. These financial arrears were attributed to a 'diminished interest' in baseball that had led to lower TV ratings.

The Olympics is reportedly one of the few properties to be profitable to televise. NBC has an £á3.5bn deal with the International Olympic Committee (IOC) (2000-08) of which £á545m was for the 2002 Winter Olympics in Salt Lake. The broadcaster claims to have made a profit of £á75m over and above the cost of producing the event and is set to make £á65m from the 2004 Games in Athens¡Xalthough the 2008 Games in Beijing is projected to set NBC back by £á72m.

NBC's rights contracts for forthcoming Olympic Games breakdown as follows:

Athens 2004 (£á793m),
Turin 2006 (£á613m) and
Beijing 2008 (£á894m).
Analysts believe that the next Olympics TV rights package will not run to five Olympic Games but will be shorter and NBC faces competition for the rights from the other US broadcasters.