A winner’s curse in the bidding process for broadcasting rights in football? The cases of the French and UK markets

Abstract

The winner’s curse is a well-known phenomenon in the auction theory. The main aim of this article is to verify its existence in football broadcasting rights. The underlying objective is to assess whether some indices of this situation are verified and can cause a winner’s curse. The methodology is based on the application of Andreff (2014)’s six indices and a seventh index (disappointment) to the domestic markets for broadcasting rights of the French and English football leagues. These two markets have seen an increase in the number of packages offered to broadcasters, with the possibility of several ‘winners’. The article shows that the winner of the major packages in the auction is not cursed. The curse is more likely to happen for the second mover. As such, the article suggests a practical recommendation for broadcasters interested in football rights: win the best package or keep away.

Keywords:

• Bidding process
• broadcast packages
• football broadcasting rights
• first mover advantage
• second mover disadvantage
• winner’s curse

Notes

Acknowledgements

We are grateful to the participants of the 17th International EURAM Conference and the DESport seminar in 2017 where a first draft of the article was presented, two anonymous reviewers and the editor for their very helpful comments. Errors are our own. This article has not been published elsewhere.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Unesco. 2016. UIS Statistics, Total population, http://data.uis.unesco.org/Index.aspx

2 Baudelle Guy. 2002. “Deux Systèmes Urbains ? Une Comparaison Hierarchique De La Croissance Urbaine De Part Et D’autre De La Manche [Two Urban Systems? A Hierarchical Comparison of the Urban Growth on Both Sides of the Channel] (1960–1990).” In: L’information Géographique, volume 66, n°1, : pp. 70–80.

3 Unesco. 2015. UIS Statistics, GDP Current US$, $. http://data.uis.unesco.org/Index.aspx

4 Kirchmedia went bankrupt with 2, 1 billion euros of debt after acquiring rights for football World cup of 2002 in South Korea and of 2006 in Germany.

5 Kirchmedia went bankrupt with 2, 1 billion euros of debt after acquiring rights for football World cup of 2002 in South Korea & and of 2006 in Germany. L’Obs (. 2002) . Médias : la faillite pour le géant Kirch, Available at. http://tempsreel.nouvelobs.com/economie/20020408.OBS4648/medias-la-faillite-pour-le-geant-kirch.html

6 Born, Matt, . 2002., Sky throws £95m lifeline to football clubs, Telegraph. Available at http://www.telegraph.co.uk/news/uknews/1400516/Sky-throws-95m-lifeline-to-football-clubs.html

7 Gibson, Owen, . 2002., Germany to rescue clubs if Kirch folds, The Guardian, Available at. https://www.theguardian.com/media/2002/apr/04/broadcasting.citynews

8 DNCG report from 2003 to 2016, . http://www.lfp.fr/corporate/dncg

9 In France, Figure 3 shows annual increase rates equal to 0% from 1988–1989 to 1991–1992. Nevertheless, it must be noted that this is based on estimated rather than actual amounts.

10 Ozap. (2010). Officiel : Orange ne diffusera plus la Ligue 1 après 2012 [Official: Orange will not broadcast anymore the Ligue 1 after 2012]. Available at http://www.ozap.com/actu/orange-diffusera-ligue-2012-droits-canal/362544

11 La Tribune. (2012). CFoot victime collatérale d’Al Jazeera [CFoot Al Jazeera’s collateral victim] Available at. http://www.lexpress.fr/actualite/sport/football/cfoot-victime-collaterale-d-al-jazeera_1077829.html

12 Ecofoot. (2015). Beinsport condamné à être déficitaire ? [Beinsport condamné à être déficitaire ?] Available at. http://www.latribune.fr/actualites/economie/france/20150126trib7b3b3ae64/bein-sports-condamne-a-etre-deficitaire.html

13 Nokovitch, S. (2016, 14 December). Le milliard qui fait peur [Le milliard qui fait peur]. L’Equipe.

14 Ofcom. (2007). Summary of UK Sports rights.

15 Le Monde. (2008). Canal + et Orange se répartissent les droits télévisuels de la Ligue 1 de football. [Canal + and Orange divide up the television rights of the Ligue 1] Available at . http://www.lemonde.fr/sport/article/2008/02/07/canal-et-orange-se-partagent-les-droits-televisuels-du-football_1008332_3242.html

16 Mediasportif. (2015). Droits TV -5 diffuseurs se sont positionnés sur les droits de la ligue 1 et de ligue 2 [TV rights -5 diffusers positioned on the rights of the ligue 1 and the ligue 2]. Available at http://www.mediasportif.fr/2014/04/02/droits-tv-5-diffuseurs-se-sont-positionnes-sur-les-droits-la-ligue1-et-ligue2/

17 For example, Nasri from Marseille to Arsenal in 2008; Chamakh from Bordeaux and Koscielny from Lorient both to Arsenal in 2010; Gervinho and Cabaye from Lille to Arsenal and Newcastle, respectively, in 2011; Hazard from Lille to Chelsea, Giroud from Montpellier to Arsenal and Lloris from Lyon to Tottenham in 2012; André Ayew and Payet from Marseille to Swansea and West Ham, respectively, Martial from Monaco to Manchester United and Kanté from Caen to Leicester in 2015; and Ibrahimović and David Luiz from Paris to Manchester United and Chelsea, respectively, in 2016. Star moves from the EPL to L1 are much scarce and exclusively to Paris since the Qatari era (begun in 2011–2012), with David Luiz from Chelsea in 2014 (back there in 2016) and Di Maria from Manchester United in 2015.

18 See Appendix 1 for details about the players involved.

19 Moreover, we must be cautious about the timing of the amortisation of the TV rights: “The amortisation of an intangible asset begins when the asset is available for use, and is charged to the income statement through operating expense over the asset’s useful economic life in order to match the expected pattern of consumption of future economic benefits embodied in the asset” (Sky 2015, p.89). TV rights are amortised when they are made available to clubs (e.g. TV rights for 2016–2017 amortised in 2016–2017 and not before as they begin to be available in July and not before).

20 Douglas, T. 1999. Murdoch’s rise to the top. BBC. http://news.bbc.co.uk/1/hi/special_report/1999/03/99/murdochs_big_match/167937.stm

21 BBC. 2009. Setanta goes into administration. http://news.bbc.co.uk/1/hi/business/8115360.stm

22 BBC. 2009. Setanta loses Premier League TV rights. http://news.bbc.co.uk/1/hi/business/8109954.stm

23 ibid

24 The Guardian. 2009. Setanta thought it had a sporting chance. It lost. https://www.theguardian.com/business/2009/jun/28/sentant-bskyb-football

25 Ibid.

26 Challenges. 2010. INTERVIEW DE… - “France Télécom doit se remobiliser”. https://www.challenges.fr/entreprise/interview-de-france-telecom-doit-se-remobiliser_359170

27 Video on demand.

28 The Guardian. 2009. Setanta goes off air with loss of more than 200 jobs. https://www.theguardian.com/media/2009/jun/23/setanta-goes-into-administration

29 Lévêque, Francois. 2016. “Les surenchères des droits du foot, plus d’argent pour les joueurs, moins pour les téléspectateurs” [The higher bids of the football broadcasting rights more money for the players, less for the televiewers]. Les Echos. http://www.lesechos.fr/idees-debats/cercle/cercle-156798-les-surencheres-des-droits-du-foot-plus-dargent-pour-les-joueurs-moins-pour-les-telespectateurs-1220448.php, 05/09/16

30 BBC. 2009. Setanta goes into administration. http://news.bbc.co.uk/1/hi/business/8115360.stm

31 European Commission. 2006. Competition: Commission makes commitments from FA Premier League legally binding. http://europa.eu/rapid/press-release_IP-06-356_en.htm?locale=en

32 Chillingcompetition. 2016. Football, TV rights and the ‘single buyer rule’: In a world of commitment decisions, bad policy dies hard.

33 Spangler, Todd. 2017. Pay-TV Losses Could Accelerate to More Than 5 Million U.S. Households per Year, Survey Indicates, Variety. http://variety.com/2017/digital/news/pay-tv-losses-cord-cutting-rbc-survey-1202565269/