Football falls foul of Spanish recession
By The Financial Times
For Spaniards living through a second recession in three years, reading about Real Madrid coach José Mourinho poking opponents in the eye can be far more appealing than the latest unemployment figures.
The melodramas of Spanish football have long served as a welcome distraction from daily life, with sales of Marca, the sports newspaper, outstripping any other daily, and 4.3m Spaniards watching the league on television each weekend.
Unlike England’s Premier League, Spain has one free-to-air domestic game on national television each week, meaning those unable to afford satellite and cable subscriptions can still watch the skills of Leo Messi or Cristiano Ronaldo.
But as collapsed advertising revenues weigh on the country’s commercial broadcasters, and with the publicly-owned regional stations that also show free matches facing extinction, this small pleasure may soon vanish.
Antena 3, which is in the process of buying rival La Sexta, which holds the rights to the free-to-air game, has said it may not bid for the matches for next year as their high price – and the depressed advertising market – make them uneconomic.
“If the price doesn’t go down I don’t think anyone is going to renew the match deal,” says Natalia Bobo, an analyst at Kepler Capital Markets.
La Sexta paid €60m for the rights to 38 La Liga games, a price Silvio González, Antena 3’s chief executive, has labelled a “financial disaster” due to the inability to make enough money in advertising revenues.
At the same time many of Spain’s regional television channels, which are controlled by autonomous communities, are battling for survival after the central government said they must be privatised or closed as regions struggle to reduce their budget deficits.
Spanish football as a global product has never been so popular, with the country’s national team simultaneously holding the World Cup and European Championship, and Real Madrid and Barcelona continuing to rank as the world’s top two revenue-generating clubs, according to Deloitte.
But this on-field and commercial success for Spain’s big clubs has come at a time of particular pain for its private sector broadcasters, which have been unable profit from the global focus on Spain’s football pitches.
Mediaset España, which with a 43 per cent market share is Spain’s largest network, saw its first-quarter net revenues fall 18 per cent to €218m, with the company, majority-controlled by Silvio Berlusconi’s Mediaset, expecting April advertising revenues to drop by up to 17 per cent compared with last year.
Its rival Antena 3, which is expected to close its deal with La Sexta by July, holds a 34 per cent market share and has said it expects the domestic television advertising market to shrink a further 7-10 per cent this year.
Both companies’ share prices are down by more than 40 per cent over the past 12 months, with analysts pessimistic at the chances of any recovery in advertising.
Natixis argues that television advertising revenue in Spain is closely linked to consumer spending, with an estimated 89 per cent so-called correlation ratio between the two, meaning a greater impact during times of recession.
Advertising revenues also reflect in part the health, or at least the priorities, of larger Spanish businesses. With Spain’s economic outlook, increasing domestic advertising spend is hard to justify.
In the first quarter Antena 3 saw a drop in spending from almost every commercial sector, with the largest declines seen in telecoms, which spent 35 per cent less compared with the quarter before, and beverages, which spent 31 per cent less.
The merger with La Sexta is expected to help Antena 3 improve its advertising margins, with Espirito Santo Investment Bank expecting the deal to raise the latter’s market share by at least 1 percentage point.
Another of the few remaining bright spots for the sector is the comparatively worse situation of its publicly owned rivals. Both Mediaset España and Antena 3 have taken market share from state and regional television, which have less to invest in programming after government budget cuts.
But it will make little real difference until advertisers begin to spend again.
“The market will continue to be weak for the foreseeable future in Spain,” says Jérôme Bodin, an analyst at Natixis. “In the end everything will be about a rebound of the TV advertising market for these companies.”