Uproar between DFL and DAZN
What does the TV rights crash mean for the Bundesliga?
April 18, 2024, 7:41 p.m
Firstly, secondly – don’t sell to anyone for the time being: the auction has its hammer. For the first time in the history of professional football, the auction of media rights had to be suspended. The billion-dollar poker game is on hold because bidder DAZN is accusing the German Football League (DFL) of discrimination. What will happen next after the scandal remains completely open. A legal dispute does not seem to be ruled out.
What even happened?
There was already a clash between the DFL and DAZN in the first round of the auction that started on Monday. According to its own information, the streaming service made the highest offer in the bidding for the largest rights package B, but should provide a bank guarantee in the short term. DAZN explained why in a letter to the DFL management and all 36 clubs. Accordingly, the company has, as with the last tender, “submitted a tough letter of comfort”.
There is a difference: a letter of comfort is a promise from a third party to cover the liabilities of a person or organization. A bank guarantee is issued by a bank to cover a customer’s debts. The company further stated: “Despite this previously accepted position, you requested (the DFL, editor’s note) On Monday, April 15, 2024, in the middle of the tender process, a very specific bank guarantee from DAZN within 24 hours – an impossible task.”
First things first: Package B? What is that actually about?
The Friday evening game was removed from package D, as shown by the red arrow.
(Photo: DFL)
The DFL is currently auctioning off the TV rights for the two federal leagues from the 2025/26 season. For this the rights were given split into several packages. Some will run on pay TV, others on free TV. There are a total of seven for the first and second Bundesliga. B is the largest package, with 196 live games. It not only includes the relegation and the Friday evening games at 8.30 p.m., but also all individual games on Saturday at 3.30 p.m.
However, there are other packages: The classic conference on Saturday afternoon is in package A. Package C includes the top games on Saturday evening, which start at 6:30 p.m., and also the Supercup, i.e. the meeting between the champions and the cup winners. Package D is the Sunday games; the Friday evening game used to be included. It was the package that DAZN has shown so far and will continue to show next season. The game summaries are also available for auction on the Internet and on TV.
Why did the scandal arise?
DAZN was not awarded the large rights package in the bidding on Monday, despite what the company considered to be a “financially superior offer”. Instead, Sky reportedly won the contract, but declined to comment.
As the “Bild” newspaper reports, DAZN offered more than Sky in the first round, but not enough to automatically win the contract. It was only in the second round that the streaming service “drastically increased the amount and even significantly exceeded the league’s expectations.” Apparently it’s worth a little more than 300 million euros.
What happens next between the conflicting parties?
In its letter, DAZN stated that the award of package B violated German and European antitrust law. The streaming company therefore contacted the Federal Cartel Office, which approved and monitored the tender. But: The authority does not have the authority or status of a court to release the process again after a decision. The cartel office can at most take on the role of a mediator.
In any case, it is difficult to imagine at the moment that the two parties to the dispute will find each other again. The relationship of trust is shaken. The rejection of the DFL management, which informed the clubs in relation to the DAZN letter, was also too clear: “The insinuations and allegations made herein are incorrect, baseless and we reject them very clearly.” The letter from DAZN Group Limited also contains “a large number of incorrect representations and shortenings of facts,” wrote the DFL managing directors.
As the “Bild” newspaper reports, there is also great dissatisfaction in the DAZN environment. Accordingly, the streaming service speculates that the DFL had planned to award the large rights package B to Sky anyway. DAZN was supposedly only intended to drive up the price. The bank guarantee, the paper writes, was an excuse not to award the rights to DAZN – even though the offer was much higher.
Why did the DFL actually want a bank guarantee?
Basically, it doesn’t seem far-fetched that the DFL wants to play it safe as a “burnt child”. In the past, the league association has been unable to rely on a buyer several times (church bankruptcy, arena exit, Eurosport exit). It is therefore understandable that the DFL does not want to tolerate the slightest doubt about a financial guarantee. The “Bild” newspaper also quoted a DAZN spokesman as saying that the streaming service “always paid within the agreed payment deadlines”. However, according to the DFL, late payments have become “a massive problem”. The paper speculates that deadline extensions may have occurred again and again.
But what does that mean for the clubs?
Even before the scandal, the clubs were even more worried than usual because the turbulent market is causing concern. The 36 professional clubs currently receive around 1.1 billion euros per season – which already corresponds to an annual decrease of 100 million compared to the previous cycle. Due to the rumored economic problems of potential interested parties, there was speculation that revenue would fall further below the billion mark.
The slices of the pie for all clubs could be even smaller. The reason is an investor’s failed entry. In order to meet the investment costs estimated at 600 to 700 million euros over the next five to six years, “domestic financing” is favored. In plain language, this would mean that the DFL would withhold the necessary sums and not distribute them to the clubs.
The Bundesliga is now under enormous time pressure because the contracts that are still valid expire at the end of the coming season. More than a quarter of current TV revenue comes from DAZN. For their planning and, above all, for the long-term commitment of new players, the clubs need to know as soon as possible how much money there is for the 2025/26 to 2028/29 seasons. It seems unlikely at the moment that the auction will continue in the next few days.
There is even a risk of a major disaster: If DAZN completely withdraws from bidding after the trouble, the DFL will even be faced with the dilemma of lacking a solvent competitor for the other pay-TV packages. It would be just as problematic for the league if the company took the dispute to court and a long-term legal battle followed. The league association and clubs need planning security.