Drew Barrand, full-time staff writer of Sport Business International magazine, debates on the comparative merits of two different types of selling structure.
The days of broadcasters throwing money at sport with no concern over return on investment are a thing of the past. Agencies can no longer provide up-front sums of money to sports properties outside of the major rights holders or indeed provide any guarantees as to the value of the rights on offer.
Thus, some properties are cutting out the agency middleman and moving the sale process of their rights in-house a move that gives them greater control over the sales of their assets without having to pay agency commission on the rights contracts.
One property to go down this path is the International Basketball Federation (FIBA) which recently announced that it will not be renewing its agency agreement with Sportfive when it ends in December 2004.
However, Paul Stimpson, FIBA’s head of television and the a man who will direct the new in-house team, told SportBusiness International that the decision had nothing to do with any dissatisfaction over Sportfive’s performance but was borne out of the governing body’s need to become more financially responsible for its rights.
“There was no issue with Sportfive at all. They did a very good job for us. We made the decision based purely with regard to the current market situation with agencies. The financial pressure of the market has determined that the guarantees and buy-outs that used to be prevalent in contracts between agencies and properties no longer exist.
“As a result of this situation, wearing our federation hat, we had to take the long-term view. It’s difficult for agencies to take reduced fees in rights contracts as they have a certain bottom line they have to hit, when sometimes the deal on the table might represent a decent long-term proposition for the property.
“At present, we need the freedom to look long-term and expand our exposure levels in certain markets without worrying about the immediate financial returns. We also have a big archive of programming at our disposal - an asset can be helpful in developing relationship both with existing broadcast partners and to attract new ones.
“We’re not pretending that it’s going to be easy of that we can immediately replace everything that an agency offers a rights holder in terms of global contacts because it’s not going to be that way. However, it is the right move for us at the time. At the moment neither Sportfive nor any other agency can deliver the long-term strategy that we require.”
The creation of an in-house selling team is not something that will be an immediate financial burden to FIBA in terms of staffing costs with the governing body set to build up personnel as and when the demands of the selling process require it.
Stimpson explains: “It’s a step-by-step development process. We have a mix of pay-TV and free-to-air broadcast partners in order to make our budgets work but, like many other federations and properties that are outside the major sports rights, we garner 90 percent of our television revenue from about ten percent of the countries that cover our
events so it is easier to manage. As and when this expands, we will hire more staff to cope with the increased demand”.
The switch of TV rights selling away from agencies to an in-house team has been mooted by a number of property rights holders, not least of which such big guns as soccer governing body of FIFA which has not ruled out such a move, albeit a few years down the line.
However, Stimpson believes that the direction FIBA has taken is not necessarily the right move for all rights holders.
“Every federation or rights holder has to look at their own situation and make a strategic decision based upon their worldwide development and existing rights sales. While it is a viable option for a body of our size and strength, I would be surprised if the likes of FIFA did away with their agency contracts.
“Agencies have a lot to offer rights holders in terms of their selling expertise in getting the best revenue available and contact network in terms of widening exposure levels - experience that cannot just be instantaneously replaced. We certainly have not ruled out a return to an agency contract. At the present time however, we believe that we can best move forward through a face-to-face relationship with out broadcasters.”
The article has been published in the November 2003 issue of “Sports Business International”and has been reprinted with the kind permission of the publisher. For subscription information on SportsBusiness International please go to www.sportbusiness.com.