Market Insight

Zon Multimedia and Sportinveste bid to form sports rights conglomerate

December 21, 2012

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit
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Three Portuguese companies - pay TV platform Zon Multimedia, sports rights company Sportinveste and its subsidiary PPTV - have agreed to consolidate their shareholdings in the premium TV business Sport TV into a single entity. As part of the deal, Portugal Telecom will become a 25 per cent shareholder in Sport TV, paying Zon Multimedia €46m in cash. The deal is subject to approval by the Portguese Competition Authority.

In a statement, the companies said the new arrangement would create a single entity managing TV, internet and mobile rights for the Portuguese market, translating into efficiency gains in management and rights distribution. Effectively, the deal means that Zon Multimedia - Portugal's largest pay TV platform - will have a direct interest in the sale of sports rights owned by Sportinveste, including domestic league football, while the incumbent telecoms company gains a direct shareholding in the leading premium pay TV channels. At the same time, Zon said it had renewed its exclusive agreement for rights to the Portuguese league for three more seasons, through to 2015/2016. 

Football is the most popular sport in Portugal  and rights to matches involving the leading clubs are a key element of the deal. Although football clubs in Portugal negotiate their own rights agreements, Sportinveste has signed up rights to all the top clubs and exploits pay TV rights via Sport TV, which it currently co-owns with Zon Multimedia. The group sold off its newspaper publishing interests in October to concentrate fully on its rights business.  

The Portuguese league is the highlight of Sport TV's offer (Zon co-sponsors the first division of the league, currently dubbed the Liga Zon Sagres). Sport TV also broadcasts the Champions League and Europa League, the Spanish, English, German and French leagues, Formula 1 motor racing, ATP Tennis and golf) and operates a total of six premium channels available in both SD and HD.  

Despite the strength of the Sport TV offering, Zon's premium channel business faces challenges as Portugal, in the grip of financial crisis, struggles with austerity measures. In its latest results presentation, Zon reported a sharp decline in premium channel revenues in the first nine months of the year. Premium channel ARPU was down 14 per cent on the same period of 2011. While Sport TV is profitable, some level of additional financial muscle will be welcome. Zon Multimedia was a subsidiary of Portugal Telecom before being spun off in 2007.

Sport TV faces another challenge if Benfica, one of the two leading football clubs in Portugal, goes through with a threat to switch coverage of its home matches to its own channel Benfica TV from next year. The club's newly re-elected president pledged to make the move, as well as offering lower ticket prices. Benfica TV is not currently available on Zon's platform. Zon TV executives, speaking in a recent conference call, were not too concerned by the threat, as Sport TV would continue to show the club's away matches and would also be making lower rights payments. 

Leaving aside the uniquely concentrated structure of the Portguese sports rights market, the deal makes sense given the increasing convergence of rights marketing between linear TV, internet and mobile. Live rights are typically bundled together across media platforms and the rising availability of tablet computers and smartphones have made the separate sale of TV and telecoms rights increasingly unworkable. With Zon Multimedia having considerable success in offering triple play services (62 per cent of its cable customers were triple play at the end of Q3), more flexibilty in the way it exploits its key sports rights is crucial.

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