2016 in review: the sports business year in deals

From Liberty Media’s takeover of Formula One to FC Barcelona’s massive Rakuten agreement and everything in between, SportsPro looks back at some of the year’s deal-making highlights.

2016 in review: the sports business year in deals

High-profile acquisitions, mega-money broadcast rights contracts, record-breaking sponsorships, and China’s government-backed, billionaire-fuelled global advance - 2016 had it all. From Liberty Media’s takeover of Formula One to FC Barcelona’s massive Rakuten agreement and everything in between, SportsPro looks back at some of the year’s deal-making highlights.

Billion-dollar broadcast deals…

It was not quite a vintage year for mega-bucks broadcast rights deals, but 2016 did see a smattering of billion-dollar agreements to keep the money flowing into an industry that remains as reliant as ever on TV revenue.

In April, US college sport’s National Collegiate Athletics Association (NCAA) agreed an eight-year, US$8.8 billion extension with CBS and Turner, with both companies retaining exclusive broadcast rights for the Division 1 Men’s Basketball Championship, more commonly known as March Madness. The deal ensures that CBS and Turner will continue to broadcast every game of college basketball’s most popular tournament through 2032, and represents a 42 per cent increase on the previous cycle.

Following the huge deal struck by the NCAA, the Big Ten Conference - formerly known as the Western Conference - put pen to paper on a six-year, US$2.6 billion broadcast deal in June. ESPN agreed to pay US$190 million a year to retain half the conference’s media rights, while Fox Sports took the other half for US$240 million a year. CBS Sports also renewed its basketball-only package with a separate US$10 million a year, six-year agreement.

Across the Atlantic, with four of Europe’s ‘big five’ soccer leagues having already concluded their key domestic deals for this cycle, it was left to Germany’s Bundesliga to complete its home market rights sales in 2016. In June, the planet’s best-attended soccer league sold its domestic TV rights for four seasons from 2017/18, signing deals with several companies worth a combined total of US$5.27 billion, an increase of 85 per cent on the current cycle. Pay-TV service Sky took the lion’s share and will exclusively air 2. Bundesliga matches live, as well as most top-flight games played on Saturday and Sunday. Eurosport took a package of live Friday night games, while public-service broadcaster ARD retained a live free-to-air game each weekend.

In Spain, meanwhile, another significant soccer rights deal to saw Mediapro sub-license a package of premium content to Telefonica in January. The agreement, valued at US$2.6 billion, permits Telefonica to carry MediaPro’s new BeIN sports La Liga channel on its pay-TV unit, Movistar+, and includes coverage of other competitions such as the Copa del Rey, the Uefa Champions League and the Uefa Europa League.

…and billion-dollar takeovers

It was a tale of two high-profile, potentially game-changing takeovers in 2016. The first saw the ambitious, tough-talking bosses at WME | IMG, backed by private equity muscle in the form of MSD Capital, KKR and Silver Lake, lead a group of purchasers to acquire the Ultimate Fighting Championship (UFC) for US$4 billion in July. Believed to be one of the largest single financial transactions in the history of sport, the deal’s size not only confirmed MMA’s arrival to the ranks of mainstream sports, but underlined the rapid rise and burgeoning value of a promotion that was bought by Frank and Lorenzo Fertitta for as little as US$2 million just 15 years ago.

Following the takeover, the Fertitta brothers relinquished their stakes in the series but UFC president and public frontman Dana White (right) was retained by the new ownership. The long-rumoured deal also prompted a flurry of staff layoffs as WME | IMG, the series’ operating partner, set about restructuring, while a host of the agency’s best-known celebrity clients were sold ownership stakes to help finance the acquisition and infuse some mainstream media interest. 

The second big-money acquisition this year saw Liberty Media Corporation complete its long-awaited buyout of Formula One in September. Under the deal, the US media giant would initially acquire an 18.7 per cent stake in the series from a consortium of sellers led by CVC Capital Partners, before assuming all of the shares held by Delta Topco, the parent company and ultimate owner of Formula One.

​The transaction, which tagged Formula One with an enterprise value of US$8 billion and an equity value of US$4.4 billion, ended a years-long search by CVC Capital Partners for a buyer. With the takeover pending approval by the relevant authorities, Liberty has since entered into agreements with a group of third-party investors to sell US$1.55 billion in newly issued shares, and the takeover is expected to be finalised before the end of the first quarter in 2017.

Meanwhile a third takeover this year saw Shanghai Jin Xin - a joint venture investment fund formed by financial services company Everbright and technology firm Baofeng - acquire 65 per cent of MP & Silva in May. The deal valued the international media rights company, founded in 2004, at over US$1 billion, and saw another leading sports agency come under Chinese control after Dalian Wanda’s purchase of Infront Sports & Media in February 2015.

China to the fore

Given that China’s president, Xi Jinping, set out plans in April for his nation to become a soccer superpower by 2050, it was no coincidence that some of the country’s wealthiest businessmen rose to prominence in the sport this year. 

Having acquired a majority stake in Slavia Prague in 2015, investment company CEFC Energy spent a reported US$35.5 million in April to purchase 70 per cent of the club’s stadium. In May, two more major acquisitions occurred in the space of a week: businessman Tony Xia purchased the recently relegated Premier League club Aston Villa for a reported US$87.9 million, while sports marketing agency Desports acquired Granada CF from the Pozzo family for a reported US$41.34 million.

Apparently unfulfilled by his firm’s recent acquisition, Desports owner Lizhang Jiang then made further waves by taking a five per cent stake in the Minnesota Timberwolves the following month. In doing so, he became the first Chinese investor in a National Basketball Association (NBA) franchise. 

In October, meanwhile, Alisports - the sports arm of e-commerce giant Alibaba - agreed a joint US$100 million initiative with World Rugby with the aim of getting one million new Chinese players into the sport within the next five years.

After emerging as a global force in sport last year the Dalian Wanda Group, owned by China’s richest man Wang Jianlin (left), continued to make major inroads into the industry in 2016. In March, it signed a 14-year partnership with Fifa, becoming the global soccer authority’s first top-tier Chinese sponsor and a major backer of the next four World Cup tournaments, while in June it struck two more sizeable deals, including a tie-up with Adidas to promote sport throughout China and a sponsorship agreement with world basketball’s governing body, Fiba, which is set to run through to 2033.

Meanwhile, retail group Suning made headlines in June by paying a reported US$307 million for a 69 per cent stake in Italian soccer giants Internazionale, whose city rivals AC Milan have themselves been on the verge of a Chinese takeover throughout the course the year. Also in June, businessmen Alex Zheng and Chien Lee invested in OGC Nice and LED manufacturer Ledman paid US$3.67 million - and accepted substantial debts - to complete its takeover of Australian side Newcastle Jets.   

England’s West Midlands proved surprisingly popular among Chinese investors over the summer. Following Tony Xia’s purchase of Aston Villa, Fosun International agreed a US$59 million takeover of Wolverhampton Wanderers in July and Guochuan Lai led a consortium in acquiring 88 per cent of West Bromwich Albion a month later. In October, Trillion Trophy Asia, a group controlled by Hong Kong-based businessman Paul Suen, assumed control of Birmingham City to ensure the region’s four biggest clubs would all be under Asian ownership heading into 2017.

Beijing-based Dalian Wanda finished the year in typically aggressive fashion, striking two more eye-catching deals earlier this month. At the start of December, the group entered into an agreement with the International Cycling Union (UCI) to build a new cycling centre in China, and to develop the sport at both elite and grassroots level. And its year in sport concluded with the announcement that the new home of Atletico Madrid, the Spanish club in which Wanda purchased a 20 per cent stake in 2015, will now be named the Wanda Metropolitano.

European soccer giants cash in - again

2016 proved to be another lucrative year for European soccer’s status quo, with three of the continent’s most powerful clubs striking major sponsorship deals. 

Having secured a marquee agreement with Manchester United in 2014, Adidas made headlines again in January when it signed a record-breaking extension with European champions Real Madrid. The German sportswear giant, which has sponsored Real since 1998, will continue to provide match and training kits for the La Liga side in a ten-year-extension worth some US$152 million a year. 

Unwilling to be outdone by their bitter league rivals, FC Barcelona announced a landmark kit deal of their own in May, expanding terms with Nike in a ten-year agreement understood to be worth a massive US$170million per year. And if that wasn’t enough to line their already bulging pockets, the Catalan club would later go on to secure a four-year shirt sponsorship deal worth US$235 million with Rakuten in November. The Japanese e-commerce company’s annual investment almost doubles what Qatar Airways, the club’s current sponsor, is paying, and is eclipsed in world soccer only by Chevrolet’s outlay on Manchester United.

Elsewhere, just four years into a ten-year-agreement with Adidas, Premier League club Chelsea bought themselves out of their partnership with the brand in May, reportedly aggrieved by the disparity between their deal worth US$433 million and United’s new US$1 billion tie-up. After agreeing to pay Adidas significant compensation for exiting the partnership early, the west London club signed a new deal with Nike in October, securing a hugely increased agreement worth a reported US$870 million over the coming decade.

Yet another bumper year in the business of elite European soccer was rounded out by a pair of major broadcast deals in November. First, the Premier League signed the biggest overseas broadcast agreement in its history with Chinese over-the-top streaming service PPTV, agreeing a three-year, US$700 million deal starting in the 2019/20 season. And just days later, Digiturk struck an extension for the rights to broadcast domestic soccer in Turkey. The TV platform will pay US$600 million per year to show the SuperLig on TV, radio and online, through to the completion of the 2022/23 season. The deal makes the SuperLig the world’s sixth highest-earning soccer league in terms of broadcast rights.

Stateside movers and shakers

Over in the US, the year began with the news that Los Angeles’ 21-year wait for a pro football franchise was over. The National Football League’s (NFL) owners voted 30-2 in favour of the St Louis Rams relocating to LA, and in doing so they left the door open for the San Diego Chargers and Oakland Raiders to follow suit. The future of both franchises remains in doubt, however, and won’t be known at least until after the current season comes to an end in the new year.

As the Rams prepared for their first season back in California, the National Hockey League (NHL) became the first North American major league to land in Las Vegas, confirming the long-rumoured news that the desert city would be home to its 31st franchise in June. The new team, which has since been dubbed the Golden Knights, will begin play in 2017 and compete in the Pacific Division of the NHL’s Western Conference.

In college sport, meanwhile, apparel licensing contracts between major university athletics departments and the big beasts of the sportswear industry continued to escalate this year. In January, Nike and Ohio State set a new record when they signed a US$252 million, 15-year extension to their agreement, but that deal was eclipsed just weeks later by Under Armour’s US$280 million tie-up with the University of California, Los Angeles (UCLA).

In April, the NBA approved long-mooted plans to introduce jersey sponsorship, paving the way for teams to generate millions of extra dollars. The league’s board of governors gave the green light to a three-year pilot scheme that will begin with the 2017/18 NBA season, marking the first time a major league had permitted corporate branding on playing jerseys. Soon after the announcement, the Philadelphia 76ers sold their advertising space to ticketing firm StubHub in a deal valued at around US$5 million a year, and the Sixers were followed in October by the Sacramento Kings, who struck an agreement with Blue Diamond Growers.

Elsewhere, Major League Baseball (MLB) ended its year with two important announcements of its own. Amid record revenues for the league and on the back of impressive TV ratings for last season’s World Series, the league and its players union, the MLBPA, thrashed out a new collective bargaining agreement (CBA) just hours before a 1st December deadline. Days later, the league then confirmed a landmark on-field uniform and apparel licensing deal with Fanatics Inc and Under Armour. In what is Under Armour’s first league-wide apparel contract, the brand from Baltimore will design and manufacture all on-field gear while Fanatics, the world’s largest retailer of sporting goods that also penned a major new deal with the NHL in October, will make and sell jerseys and licensed products in return for the lion’s share of the revenues.

Those deals concluded a year that also saw an MLB franchise change hands for the first time in nearly four years. In April Nintendo of America sold its controlling stake in the Seattle Mariners to First Avenue Entertainment (FAE), a 17-member ownership group led by Mariners minority owner John Stanton (left in picture). The transaction was valued at US$1.4 billion and ended MLB’s longest sale-free period for almost four decades.

And as the year drew to a close, there was just enough time for Nascar to get its new title sponsorship deal over the line. Earlier this month, almost two years after Sprint revealed it would be ending its backing of stock-car racing’s premier championship, Monster Energy was confirmed as the company’s replacement in a deal estimated to be worth markedly less than Nascar’s reputed US$1 billion asking price. From next year, Nascar’s rebranded top-tier circuit will be formally known as the Monster Energy Nascar Cup Series. 

Into digital and over the top they go

If changing viewing habits and new means of distribution have served to further fissure the sports media landscape in recent times, 2016 will go down as the year in which the industry’s response began to take shape.

After years of speculation surrounding when - and it was always deemed a matter of when, not if - a Silicon Valley tech giant would seek to acquire live sports rights, Twitter finally showed its hand this year. In a bid to stem its flagging share price and stagnating daily active user numbers - and with rival Internet giants like Amazon, Yahoo, Google and Facebook lurking - the company made a splash when it struck a deal with the NFL for the global streaming rights to a ten-game, Thursday Night Football package in April. That agreement, reportedly worth less than US$10 million, was then followed up by a slew of new content partnerships with the likes of the NBA, Major League Baseball Advanced Media (MLBAM), the Pac-12 Conference, Sky Sports and Wimbledon, as the social network set about redefining itself through the medium of live video. 

In August ESPN parent The Walt Disney Company splashed US$1 billion on a 33 per cent stake in BAMTech, the live streaming specialist spun off from MLBAM, as it stepped up plans to develop an over-the-top (OTT) offering under the banner of ESPN, which spent much of 2016 working out how to deal with subscriber ‘cord-cutting’ and dwindling advertising dollars. BAMTech then launched a joint venture across the Atlantic with Eurosport, which is seeking to establish its own Eurosport Player digital subscription service.

Elsewhere Eleven Sports Network, which has put OTT and localised content at the heart of its business model, signed several deals this year, notably picking up NBA action in Taiwan and Singapore, while the Perform Group launched DAZN - perhaps the closest anyone has come to creating a true ‘Netflix of sport’ - in a number of markets and quickly forked out some ¥210 billion (US$2 billion) on Japanese soccer’s J League.

The International Olympic Committee (IOC), meanwhile, launched its Olympic Channel as the Rio 2016 Games drew to a close in August, making good on its Agenda 2020 promise after reaching content collaboration agreements a host of international federations. Fifa, world soccer’s governing body, signed up this month, announcing its deal just hours before Comcast’s NBCUniversal unveiled plans to launch a new Olympic Channel content and distribution service of its own in the US next year.

Also in the US, there was a marked shift in the regional sports rights marketplace as teams set about reimagining their broadcast models and, specifically, exploring the possibilities offered by OTT. On the west coast, the LA Clippers, owned by former Microsoft chief Steve Ballmer (right), agreed terms on a new local rights deal with Fox Sports Prime Ticket that would see the NBA team conduct ‘in-market tests for new, innovative digital offerings on a trial basis to a targeted number of fans’ this season. And in the east, Washington DC-based venue and franchise operator Monumental Sports & Entertainment (MSE) struck what it described as ‘an advanced media partnership’ with CSN Mid-Atlantic. As part of that deal, MSE acquired a stake in the network, whose owners NBC Sports Group snapped up shares in MSE’s Monumental Sports Network, a new OTT subscription service that launched in October and now carries exclusive content from MSE’s many assets, in return.

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