There is a sense of positivity and satisfaction in the Ligue de Football Professionnel (LFP), the governing body of professional football leagues in France and Monaco, over its journey thus far on the newly launched direct-to-consumer (DTC) service responsible for the streaming of Ligue 1. Within one month of its launch, Ligue 1+, the brand name of the service platform surpassed 1 million subscribers mark which is very commendable considering DAZN struggled to get more than 600K subscribers it is 24/25 season. Even more commendable is the fact that 72% of users were committing to a full-season package. All this points to an estimated turnover of around €158m.
Only around April, the French National Directorate of Control and Management (DNCG) has issued a significant warning to football clubs in Ligue 1, advising them against factoring in television rights for the upcoming season.
While, this certainly does look good for Ligue 1 but there’s a long way to go. In this blog we look at the various aspects of the deal, its breakdown and the reliance on broadcast income for clubs and the most important question, what next?
Why Opt for DTC
The conditions under which LFP were forced to opt for DTC came after DAZN, the sports streaming service, who had agreed to show major part , i.e. eight of the nine Ligue 1 games held each matchday as part of a deal worth around €400mn, collapsed leaving no options for them. This was after LFP broke up with its long-time partner Canal+ following a disastrous partnership with Mediapro. It also could not retain Amazon as a broadcast partner. However, the agreement with other partner in whole media rights deal, Qatar-owned BeIN Sports remained intact (it still is, even after launching the DTC. Although, a legal dispute has arisen).
Adding the €40mn for the second-tier Ligue 2 media rights that BeIN Sports pays and further €140mn for international rights, it was supposed to be a total of €700mn for the next few years, at least 2 years till the exit clause lock-in period for DAZN. Well, the lock in period ended early!
The question then comes, why did DAZN pull out? Apparently because it has struggled to attract subscribers. With an estimated 500,000 signups, well short of the required 1.5 million subscribers to break even on its investment.
In this background, the DTC platform was launched. From scratch to amassing 1.026mn subscribers in just over a month of launch with 72% subscribers opting for full season package is definitely a satisfactory situation. According to L’Equipe, the streaming platform is projected to achieve a turnover of €158mn this season. Removing €16mn as commission for the distributors of the service, LFP is set to distribute €142mn to the clubs. This is way lesser than the previous season only increasing the gap with other leagues, but it definitely can be called as a journey well begun.
Broadcast Revenue Share
As the report from L’Equipe, given €142mn as distributed revenue, the league-winning club would stand to earn €30.1mn and the bottom-placed team is set to make €3.72mn. How does that stand for the clubs? At this stage, it’s important to understand the share of broadcast revenue stream in the club’s total revenue.
In 23/24, the aggregated revenue of Ligue 1 clubs was €2.55bn of which broadcast stream contributed €806.3mn or 32%. For PSG (who incidentally contributed €807.3mn or 32% of the total league revenue!) the share of broadcast income is 22% and for the rest of clubs, average share is 39% of the total revenue, a substantially high figure. This is after we consider the income from a separate revenue head called ‘others’ which is presumably about merchandising, licensing, community grants etc., which contributes a solid 26% or €655.6mn in the total revenue. Considering individual club accounts:
- Only three clubs have less than 25% dependence on broadcast income.
- Dependence of six clubs are between 30% – 40%.
- Nine clubs have more than 40% dependence on broadcast stream. Except for one club, all others in this segment shows positive net profit/loss in the 23/24 financial results. Thus, any decrease in broadcast income would lead to financial setback for the clubs.
Adding to the lower income from broadcasting, there is also the CVC loan to contend with. To those unaware, private equity fund CVC Capital had acquired a 13% stake worth €1.5bn in Ligue 1’s media rights business (in a separately created company).
Is DTC the Way Forward
One can understand the conditions under which French football is looking at adopting the direct-to-consumer route but why would any other league look at it? The answer, in a nutshell, could lie in three key things:
- Unlocking a larger potential revenue.
- Control of content and customized distribution.
- Stronger Fan Engagement: A huge benefit of native data and large scale insights could open up multiple revenue sources like merchandise, layered-pricing.
Examining a hypothetical situation where a PL DTC is announced. Premier League, broadcast reach is now more than 800mn homes in 188 countries by aligning with more than 90 broadcasters. A convincing argument on paper could be that with such a broad fanbase and existing reach, a slight push at an attractive price point would make the consumer switch over to a PL DTC willingly. Assuming 10% consumers switch over at say €9.99 pm price point, it would mean a whopping jump to a value of €9.6bn annually, roughly a 360% increase in value leading to a higher payout to each team.
Now that’s all good on paper but the challenges are manifold:
- The rights technology infrastructure: From live production to non-live content, this could require a significant investment to become like a global streaming service hosting over 100mn or even more concurrent viewers. For the context, it took Netflix experience of streaming at least 3 live sports events to get it right. However, with the fast-track development of AI, this might just be even possible but still would require tech-infrastructural set-up.
- Marketing: Coordinated campaign in multiple countries with the aim of sign-ups at a rapid scale. This is along with the multiple parallel campaigns to retain and boost delivered at regular intervals.
- Price point: One of the biggest challenges would be finding the right price point. A big reason for the early success of Ligue 1+ DTC is its attractive initial price point. Can every league follow this? In context, Premier League earns €1.97bn per season in domestic market. That would mean approximately 11.5mnn people in the UK paying €14.99 pm (the French Ligue 1+ rate) with 100% retention rate. And a slightly higher set of people in the international market. Combined, roughly 25mn people. Possible?
It still remains a wait and watch mode for a high revenue generating league like Premier League but for other leagues, this might be a possible solution.
In Conclusion
For LFP and Ligue 1, this is a crucial stage and at least two key actions will be required:
- A strong relationship building global exercise to ensure deals with multiple distribution carriers with the aim of crossing 2.5mn subscription at an acceptable price point to reach a critical revenue point
- Build value-added data-driven fan engagement building communities and ensuring highest retention.
This is a sort of litmus-test for Ligue 1 with the whole industry watching closely.
