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EBU versus the EBU.

The European Broadcasting Union (EBU) appears to have reacted effectively to the new competition in Europe for sporting events. But in this process, as a collective organization, they have made one strategic mistake--their efforts have been reactionary to private bids--they have not been able. to value individual sports from a ratings/income point of view. Many EBU members don't sell advertising and a great many have TV sponsorship restrictions. Because of the dramatic (nearly 300 per cent) increases in rights fees paid for some events (i.e. the 1996 Summer Olympics), their budgets will decrease for other viable but less high profile events. Sports organizers will expect more money from the EBU for their respective events, and if these rights are not judged on theft potential revenue from audience ratings, the EBU will lose more ground to the private networks in the sports arena. Buying television sports rights is a business of profit and loss and not one where an individual member's desire drives the EBU to acquire the TV rights to the event at any cost.

The most significant difference between entertainment and sports is sports' common interest factor among Europe's 140 million TV households. All of them love soccer, and fans across Europe watch sports like formula one motor racing, track and field and tennis in high numbers. Because of this common thread, public broadcasters across Europe have been able to maintain their alliance--EBU, which is one of the biggest and most powerful buyers of sports programming in the world.

Until recently, a sports event organizer had no terrestrial TV network to go to in his country except the EBU member--this is still the case in Switzerland, Austria and, even though TV networks are competitive, all terrestrial networks in the U.K. and France are EBU members. The EBU member in most cases cannot

sell advertising; therefore on the basis of perceived audience interest they offer the organizer "free" television coverage of the event.

The only source of revenue for the organizer is to sell signage.

The events' TV ratings success does not affect the price of TV rights, but the prices charged to signage sponsors increase. It took a visionary like Horst Dassler, founder of Adidas, to see this opportunity many years ago and his company, ISL, which sells signage sponsors, is now a multimillion dollar enterprise.

Nearly every international sports federation is based in Switzerland. The federations have deals with signage sellers like ISL and CWL, which is also headquartered in Switzerland. ISL, CW L, etc. sell signage for a commission fee to advertisers in Europe and the rest of the world, and the federations receive this signage money. With the advent of private television, the EBU forged firm alliances with the various federations, signing multi-year agreements for no rights fees and when impossible they kept prices down to a minimum through leverage of the TV audience coverage provided. The federations went along because of signage revenue and signage sellers like ISL's very existence depended on selling audience coverage provided by the EBU. There are no private TV stations in Switzerland and cable penetration is at 76 per cent. The federation bosses who don't deal with the EBU risk not seeing their events in their own homes. Individual federation chiefs are in some way connected to the EBU. As a result, the EBU uses this very judiciously.

Only one European marketer has been successful in breaking the EBU stranglehold. Bernie Ecclestone did this with Formula One--a TV rating winner; he was able to keep signage sponsors on board while he found the highest television bid, on a country by country basis. In most countries he ended up selling Formula One to an EBU member, but he was successful in avoiding the EBU as a collective organization. Since then, companies like UFA, which owns the European TV rights to Wimbledon and the U.S. Open, have entered the picture but they are primary market buyers--they bought these tennis tournaments because their TV station (RTL Plus in Germany) had much to gain in the ratings with Becker and Graf in the games. What appeared to be an astronomical sum for Wimbledons European TV rights in 1988 was covered in great part by RTL Plus

The EBU has several problems with respect to monopolistic trade practices, i.e. the Eurosport/TESN issue where through terrestrial leverage it keeps cable/satellite rights for its subsidiary, Eurosport. This case is currently being fought in the EC courts in Brussels.

This cartel strategy of the EBU to keep all for nothing is their biggest enemy. This approach overpays some event organizers like the 1996 Olympic games because of pressure not to lose to a competitive bid and penalizes other worthy event organizers who are deprived of their share of the rights fee pie because of such action. The future of the EBU approach is even more bleak when new technologies take over. In nearly all cases EBU members are public trusts and, unlike their private competitors, are not profit driven operations. Pay TV is now flourishing in France, England and Scandinavia. Germany, Italy and Spain are on the way. These pay TV broadcasters have already established winners in sports like boxing. Pay-per-view is on the horizon. Watch EBU signage allies like ISL and the rest jump ship as soon as private broadcasters are on an even footing covering the European audience.
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Title Annotation:European Broadcasting Union
Author:Mascarenhas, Mark
Publication:Video Age International
Date:Oct 1, 1992
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