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Row over rights: Mediapro vs the beautiful game

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Only days after France’s top football league closed the transfer window to acquire players for the upcoming season last month, its clubs were hit by a bombshell: their new broadcast partner Mediapro wanted to renegotiate its €780m TV rights deal due to the damage wreaked by the pandemic. 

“Covid-19 affects everyone and everything, and football is no exception,” Jaume Roures, co-founder of the Spanish group, told the Financial Times.

“It changes the equation for broadcasters, subscribers, teams and the players, and the product is not the same with no spectators. All these factors must be put on the table and discussed.”

Mediapro has done more than politely request such talks. It skipped a €172m payment to Ligue 1 on October 5 — only the second instalment due for its four-year contract. Mr Roures stunned the clubs when he revealed the move in newspaper L’Équipe, leaving them facing a massive budget shortfall.

Shortly before, heavily-indebted Mediapro had cannily put itself under court protection from its creditors by using a new legal process designed to help companies struggling to pay debts due to coronavirus. The gambit meant the French league was powerless to enforce its contract and instead had to agree to a court-supervised mediation that will run into December. 

“It is an economic catastrophe for the league,” said one club president. “If no solution is found, some clubs will go bust before the end of the season.”

The dispute is being keenly watched by the industry as the first indicator of a painful correction in the multibillion-euro market for European football’s media rights. 

For years, top clubs have grown richer as broadcasters paid ever-greater sums to screen their matches. Revenues in Europe’s top five leagues in England, Spain, Germany, Italy and France rocketed from €7.9bn in 2010 to €28.9bn last season, according to Deloitte.

The pandemic has ended the free-spending era. There have been a handful of cases where TV companies have skipped payments to leagues, resulting in legal battles. A more conciliatory approach was taken by England’s Premier League, Germany’s Bundesliga, Spain’s La Liga and Europe’s Champions League, which granted significant rebates to compensate for spring lockdowns.

French football hanging in the balance

But in France Mediapro has gone further, questioning the value of an existing contract to show matches that are still taking place this autumn, although with no fans present.

Yet Mediapro may be proven right on the lower value of sports rights. In June, the Bundesliga sold its domestic TV rights for €4.4bn over four years from 2021, 5 per cent less than its previous deal.

“We have reached the peak of sports rights,” said François Godard, a media analyst at Enders Analysis.

The battle could not come at a worse time for French clubs, with revenues from tickets, hospitality and merchandise having slumped. When Mediapro stopped paying, the league took out a €112m bank loan and parcelled it out to clubs.

Not long ago French football regarded Mediapro as a saviour, one that would help it achieve its ambition of taking its income closer to rival European leagues.

In 2018 the Barcelona-based group’s bidding in the auction for the 2020-2024 television rights pushed up the total price by nearly 60 per cent to €1.05bn. It beat Vivendi’s Canal Plus, the league’s pay-TV partner since 1984, to screen most of the best matches, leaving the rest to Qatar-backed beIN Sports. After losing, Canal Plus chief executive Maxime Saada called the price “totally unreasonable” and predicted Mediapro’s failure.

The choice of Mediapro was not without risk. Its parent company is majority owned by Orient Hontai Capital, a little-known Chinese private equity fund. Italy’s Serie A chose Mediapro’s blockbuster €1bn bid for the 2018-2021 rights, but then reversed this decision after a rival broadcaster filed a court challenge casting doubt on the group’s ability to pay.

The wage burden in France tops competitor leagues

Investors CVC Capital Partners and Advent International, who are part of a consortium that is hoping to buy a stake in a new company that will manage the broadcasting rights for that division, are now looking at ways to protect their investment if a rival European super league is launched.

Mediapro was most successful in Spain in the past decade where it beat incumbent pay-TV players in auctions and then cut deals to license them the rights in exchange for production contracts on sports channels. It used such arbitrage to strong-arm telecoms operator Telefónica and beIN to work with them. Outside sports, the group also produced movies and TV series.

The bare-knuckled approach left them with a certain reputation. “At best, he’s not orthodox,” another French club president said of Mr Roures. “At worse, he’s a pirate.” 

Mediapro is the latest newcomer to dream of conquering European sports. Over the past decade, groups such as the UK’s BT and rich outsiders like beIN have snapped up football rights and sought to rival pay-TV incumbents like Sky. But few were ever able to make profits because of the challenge of signing up enough subscribers to cover the astronomical cost of the rights. 

The big winners were the leagues, who were happy to pit bidders against each other. Clubs used proceeds to build new stadiums and boost player wages.

Football revenues in France have lagged other European leagues

“All the leagues have been greedy,” said Mr Godard. “But the French league has been a bit more greedy, and a lot less lucky.”

The shortcomings of Mediapro’s strategy were exposed when it failed to reach a deal with Canal Plus to license its French rights last year. According to people familiar with the matter, the two sides negotiated for months over a deal in exchange for distributing Mediapro’s new Téléfoot channel to its subscribers. But they could not agree to terms.

Mediapro would have to sell Téléfoot, which is priced at €15 to €25 a month, without the help of France’s biggest pay-TV operator. Instead it signed distribution deals with telecoms groups Orange and Iliad, as well as Netflix and Apple. 

This was before the pandemic plunged football into crisis. France’s top tier was the only one of Europe’s big five leagues to cancel its season in April on government orders. It was forced to take out a €225m state-guaranteed loan to plug the budget hole.

Téléfoot faced a difficult backdrop for its launch. Mr Roures said he tried to negotiate with the league over the summer over changes to the schedule, but things deteriorated quickly. “We wanted a delay to the launch by some weeks . . . as well as discuss other matters,” he said. “We did not get anywhere.” 

Column chart of Ratio of gross debt to ebitda (x) showing Debt leverage increases at Joye Media

It remains to be seen if Mediapro will have more luck in the mediation process. Several outcomes are possible: the league could take the rights back for non-payment or agree to a price cut, according to people briefed on the talks.

Yet if the league were to resell the rights, it would almost certainly find itself in a weaker position. Canal Plus has little need to pay up since it had “barely lost” any subscribers since Téléfoot’s launch, Mr Saada recently told newspaper Les Echos, and it has “no interest” in overspending on football rights.

When asked if Mediapro would honour its next payment due on December 5, Mr Roures said only: “It will depend on the mediation process.”

It is unclear if Mediapro, which said it had €727m in debt at the end of 2019, has the money to pay the league or if its Chinese owner would contribute. Asked about its ability to pay, Mr Roures demurred but admitted that the business had taken a hit from Covid-19. Orient Hontai did not respond to a request for comment.

Vincent Labrune, head of France’s Ligue de Football Professionnel, said in a recent interview with the Journal du Dimanche: “I expect them to respect their engagements and act responsibly in ending the conflict between us.” The body declined an interview request for this article.

The second team owner predicted that the government would pressure the parties to make a deal to avoid plunging Ligue 1 into severe financial distress. 

“It’s a perfect storm,” said the owner. “You have no stadium revenue. You have sponsors who are unable to pay. Then you have no TV money, which is about 50 per cent of turnover of clubs . . . If you look down the light at the end of the tunnel, it’s actually a train coming towards you.”



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Analysis

Biden faces tough path to US economic recovery

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Joe Biden is grappling with a messy and unpredictable economic outlook as the twin threats of rising inflation and slow jobs growth shake confidence in the steadiness of the US recovery from the pandemic.

The US labour department this month reported that the pace of job creation slowed significantly in April, fuelling concerns of widespread discrepancies in the labour market.

It followed up that report with figures published last week showing an unexpectedly steep jump last month in its consumer price index, compounding fears of mounting inflationary pressures.

The data have exposed Biden to sharper criticism of his economic management from Republicans and rattled hopes of a smooth rebound from the coronavirus crisis on the back of hefty fiscal stimulus and quick vaccination rollouts.

The US has driven the global economic recovery, with the IMF predicting gross domestic product growth of 6.4 per cent in 2021.

“There are a lot of signs of a resurgence in aggregate demand — an economy that’s recovering, but that recovery is going to be chaotic,” said Wendy Edelberg, director of the Hamilton Project, an economic think-tank at the Brookings Institution. “And yes, really difficult to manage.”

Senior Biden administration officials have cautioned against drawing too many conclusions from one month’s data. They argued that average monthly job creation over the past three months has still been much stronger than in the previous quarter, that the inflation bounce is likely to be transitory and that the recovery remains firmly on track.

But they have also acknowledged high levels of economic uncertainty at a time of big shifts in spending patterns and employment trends, and as health-related restrictions are being lifted across the country more rapidly than predicted — partly because of the pace of the country’s vaccination campaign.

“There’s going to be a period, as supply starts to equal demand and sectors are healing and recovering, [during which] there’s going to be some choppiness,” Cecilia Rouse, chair of the White House Council of Economic Advisers, told reporters on Friday.

“We know that the mismatch between different parts of the economy will show up in unexpected ways until the economy more fully recovers. As the president urged earlier this week, we must be patient,” she added.

Critics of the administration’s economic policies — ranging from former Democratic Treasury secretary Larry Summers to Republicans on Capitol Hill — have seized on the latest data to argue that the Biden administration has recklessly dismissed the risks of excessive fiscal stimulus, and played down the economic warning signs.

“I was on the worried side about inflation and it’s all moved much faster, much sooner than I had predicted. That has to make us nervous going forward,” Summers wrote on Twitter on Friday.

“I think there’s a decent chance that this works out fine. And that we just have a super rapid recovery and a great year,” said Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think-tank. “I think there’s also a chance that this could end really poorly.”

Other data releases last week failed to clarify the picture. The University of Michigan’s consumer sentiment index showed rising long-term inflation expectations, while retail sales were flat last month after a big jump in March. On the brighter side, weekly jobless claims out on Thursday dropped to a low point for the pandemic.

Cecilia Rouse
Cecilia Rouse said: ‘There’s going to be a period, as supply starts to equal demand and sectors are healing and recovering, [during which] there’s going to be some choppiness’ © Reuters

At this stage, there were no signs from the White House of any big changes to Biden’s policy agenda to address the emerging economic picture. On the labour market front, the president moved to enforce a requirement that citizens who were offered “suitable” jobs not be eligible for unemployment benefits, and Rouse said the White House was reminding businesses of a tax credit for employee retention set up as part of its stimulus programme.

The White House is sticking by the fiscal support it has enacted with the help of congressional Democrats not only to stoke the country’s recovery but also to help low-income families. It has also pointed to its confidence in the Federal Reserve to manage any rise in inflation.

But Republicans and conservative economists have called for more dramatic action to cool the economy, such as an early end to federal unemployment benefits, which Republican-led states across the country have refused to pay.

Meanwhile, economists whose forecasts were badly wrecked by the data released in recent days warned that any assumptions about the US recovery — let alone policy changes — may well have to be revisited.

“We’re in such an uncharted territory,” said the Hamilton Project’s Edelberg. “When you’re talking about the changes in aggregate demand that we’re experiencing, and changes in supply that we’re experiencing — whatever uncertainty you have about inflation in normal times, increase that by an order of magnitude.”





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Covid rules leave pubs and restaurants in England fearing the great indoor reopening

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Before the pandemic, the tiny Sicilian restaurant Franzina Trattoria was loved by south London locals for its long communal tables. Customers would squeeze in and share food with people they had never met. Two diners, who were complete strangers, ended up getting married.

But as owner Stefania Taormina and her husband Pietro Franz prepare to welcome the first diners since December back into their 4-metre-wide eatery in Brixton on Monday, Taormina fears they may not return.

“We don’t see many bookings inside [and] it’s a bit scary. We think people are thinking differently now and sharing tables is maybe a problem,” she said.

To comply with Covid-19 restrictions for hospitality businesses in England when the government allows them to open indoors from Monday, Taormina has cut the number of guests seated in the restaurant from 55 to 14 and spent £1,000 on plastic dividers to break up the tables.

The saving grace has been the six two-person tables on the restaurant’s outside terrace, which have been booked all hours of the day since restrictions on outdoor eating and drinking were lifted in late April. “We are breaking even just about with the terrace open,” she said. “I think people still prefer to go to places outside.”

The pandemic has left the hospitality industry facing a crisis of historic proportions. Since the pandemic struck, UKHospitality, the trade body, estimates the sector across Britain has lost £80.8bn in sales between April 2020 and this March, compared with the previous 12-month period, equivalent to £9m every hour.

Line chart of like-for-like hospitality sales compared with 2019 (% change) showing pub and restaurant sales have plummeted during the pandemic

More than 8,500 of the UK’s 115,100 licensed premises have gone out of business. And only a third of those operating have the outdoor space that has allowed them to reopen since the government allowed alfresco dining from April 12.

Even as the rest make ready to open inside in the biggest easing of restrictions in England since lockdown was imposed in January, many pub and restaurant owners fear the remaining Covid rules — waiter service only at tables that must be at least 1m apart, with a limit of six people from no more than two households — will make most establishments unprofitable.

“The vast majority of our pubs will be trading on May 17 [but] I expect us still to be trading at levels where we will be making a loss,” said Andy Spencer, managing director of Punch Pubs, which owns 1,100 premises. He said that pubs would run at half their usual capacity and that the restrictions were “challenging, time consuming and expensive”.

Key to profitability for most pubs and restaurants is the removal of all social-distancing rules, and many owners were buoyed by recent comments from Boris Johnson. At the start of this week, the UK prime minister raised the possibility that all restrictions could be lifted over the summer.

But by Friday, Johnson warned that the next state of England’s lockdown easing plans due on June 21 — when all existing rules are set to fall away — may have to be delayed because of a surge in infections caused by the emergence a Covid-19 variant first detected in India.

Opening with extensive restrictions in place has presented other challenges, not least the need to train staff who have been furloughed for months.

Pedestrians walk past a PizzaExpress restaurant in central London
PizzaExpress’s 6,000 staff have had a week of ‘full immersion’ training in both hygiene measures and service © Tolga Akmen/AFP/Getty Images

Zoe Bowley, managing director of PizzaExpress, said the chain’s 6,000 employees had undergone a week of “full immersion” training, both in hygiene measures and service. “Some of our team members, apart from a small gap in November, haven’t worked for a year,” she said.

The sector also faces a labour shortage with a loss of experienced and qualified staff, partly due to the pandemic and partly due to Brexit, with EU workers returning to their home countries.

This will add to the pressure on employees facing customers for the first time in months. “They are rusty after furlough for a year and are heading back to jobs where they will have to cover other roles because there aren’t enough staff to cope,” warned Mark Lewis, chief executive of the charity Hospitality Action.

Another common fear is antagonising guests by insisting they comply with the Covid regulations, such as checking in with the test-and-trace app and wearing a mask when moving around.

Even if reopening goes as planned, the absence of foreign tourists and commuters for at least part of the summer — with international travel still heavily restricted and office staff encouraged to continue to work from home until at least late June — is expected to leave many city-centre establishments short of customers.

Anna Sebastian, manager of the Artesian bar at London’s Langham hotel
Anna Sebastian, bar manager of the Artesian at London’s Langham hotel, said ‘normality won’t be restored’ until tourists return in large numbers © Charlie Bibby/FT

“We’re very dependent on footfall from tourists shopping on Oxford Street and hotel guests, so until they return in large numbers, normality won’t be restored,” said Anna Sebastian, bar manager of the Artesian at The Langham hotel in London.

If there is a positive to have come out of the crisis, the pandemic has forced the industry to accelerate the adoption of technology that has improved productivity: payment and ordering apps allow operators to turn tables faster and employ fewer staff.

Customers using apps also tend to spend more per head having had more time to peruse the menu and the ability to order as and when they want, according to several pub and restaurant owners.

But Bowley warned there was a “fine balance” to strike to make sure that an industry built on personal service did not become “faceless” just as it needed customers to return.

Technology aside, Spencer said he feared that until sports and live music could restart and customers could stand up in crowded bars, the pub experience would be a “sanitised” one. “We have taken out a lot of the soul . . . and a lot of the things that make the pub really special,” he said.

It is the same pre-Covid conviviality that Taormina fears will be lost at Franzina Trattoria. “It was a joy for me because you would see people who you had never seen in your life start to drink together and talk about food together and then sometimes they would go out together afterwards . . . I am scared that it will not happen again.”

Additional reporting by Oliver Barnes



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Death of the call centre? Workers ring in the changes during WFH era

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A new message frequently punctuates the muzak as customers wait to speak to a call centre worker nowadays: a recording warning them to expect “home life noises in the background” once someone answers.

“A friend of mine heard splashing water when she called her bank,” said consultant Ursula Huws, a long-term advocate for staff to be allowed to do their jobs from home and who coined the term teleworking in the early 1980s.

“The agent revealed she was in the bath. For an industry historically so resistant to remote working, that speaks volumes about how far things have come in the past 12 months.”

Before coronavirus arrived in the UK, only 3.8 per cent of the country’s 812,000 call centre workers were based at home, according to research group ContactBabel — below the 5.1 per cent average for the working population.

But as the government introduced sweeping restrictions in March last year, the pendulum swung. By November homeworking was almost twice as common among call centre staff as the general workforce with about three quarters of 139,000 agents surveyed saying they were home-based.

This looks set to remain. A recent poll of 107 call centre managers and directors conducted by industry bodies found just four who anticipate a full return to the office.

HSBC has confirmed its 1,200 call centre staff will remain at home permanently. Outsourcer Capita has said many of its 16,000-strong call centre workforce in the UK can do the same, while rival Teleperformance has indicated many of its 10,000 employees will be allowed to continue working remotely once the pandemic subsides.

First Direct customer service representative at a call centre in Leeds, England
Working from home has allowed call centres to shed costly office space © Chris Ratcliffe/Bloomberg

The shift will have far-reaching consequences: for the working lives of hundreds of thousands of people employed in the sector, for commercial landlords and for customers relying on their services.

Working the phones

The earliest known example of a call centre in the UK was in the Birmingham Post and Mail building in 1965, but it was not until the establishment of Direct Line in 1985 that they became more widespread. From 63 staff at the insurer’s call centre in Croydon, the industry has since mushroomed into one of the UK’s largest.

For a sector weighed down by a reputation for frenzied offices, distrustful management and high attrition rates, the post-pandemic world in theory offers a chance for a reset.

“Call centres are . . . a fun punching bag for a lot of people,” admitted Gary Slade, Teleperformance’s UK chief executive. But he insisted that a hybrid working model will offer his employees “more choice” rather than simply being an opportunity “to squeeze the staff by cutting costs and removing benefits”.

Yet half a dozen staff who spoke to the Financial Times on condition of anonymity, two of whom are Teleperformance employees, said remote working had made their jobs more difficult — or alleged they were being denied the right to do so.

One 26-year-old, who works for an online travel platform, described the stress from solving more complex customer queries from home as “all-encompassing”, while a 21-year-old Teleperformance agent said virtual training was “difficult to absorb”, adding that he often “had to wing it”.

Two are office-based, one of whom is working for an outsourcer in Liverpool having had repeated requests to do so remotely rejected for “no apparent reason”.

Chart showing that WFH improves staff morale but raises performance concerns

Privacy is another concern. Teleperformance has already butted heads with Unite, Britain’s biggest trade union, and the Communication Workers Union over concerns about a plan to issue remote workers with webcams.

Slade said reports they will be used to monitor staff at will are “absolutely not true”. He said webcams will be used to replicate “the checks and balances” that are normal in the office.

The FT has seen an internal memo sent to Teleperformance staff suggesting video calls could be mandated to “conduct clean desk audits” and “[detect] unauthorised objects in [an] employee’s workspace . . . such as a mobile phone”. Slade said “occasional checks” are essential to “avoid data breaches”, adding that the webcams are “not designed to be remotely activated”.

But Jamie Woodcock, who went undercover in a call centre for his book Working the Phones, fears what he describes as “callous management practices” mean the chance to improve the workplace culture with the adoption of remote working will be “squandered”.

“Managers in call centres rarely ask workers what will improve their work, instead they simply rely on ever stricter targets and monitoring to get results,” said Woodcock.

Aimie Chapple, Capita’s executive officer for customer management, insisted she was “always checking in” with staff such as during virtual coffee mornings but that a balance has to be struck between “what employees want [and] what clients want”.

Others are more optimistic. The migration of consumers online during the pandemic has prompted a hiring spree to meet demand for helplines. “Thanks to the work from home model, they’ve been able to tap into wider talent pools,” said Leigh Hopwood, chief executive of Call Centre Management Association. “A call centre in Bradford can now easily hire an agent in London.”

Landlords put on hold

The prize for call centres allowing staff to work from home is the freedom to shed costly office space.

Capita saved £10m from office closures during the first UK lockdown and has now permanently closed 49 sites worldwide, nearly a fifth of their commercial real estate holdings, with plans to offload more.

In the UK, Santander has scrapped plans for a £75m call centre in Merseyside that would have housed 2,500 workers, while travel group Saga has put a 600-capacity call centre in Kent up for sale.

The call centre industry is important to the north of the UK

That could pose a problem for landlords in regions where call centres are a major employer. “Are they lettable? It hangs on the location. Some of these [operators] went to locations which had high unemployment and not a lot of other industry,” said Mat Oakley, head of UK and European commercial property research at Savills.

In the north of England and Scotland more than 6 per cent of the local population are employed in call centres, according to ContactBabel.

They are often thought to be unappealing workplaces. “Secondary office buildings in Dundee, Prestwick, East Anglia . . . on business parks like the one where [TV show] The Office was filmed,” said one analyst.

Many suffered during a wave of offshoring in the early 2000s but customer preferences led to a return, said Oakley, who also argued that concerns about high staff turnover led to improvements in office quality.

That will increase their chances of being re-let to other businesses or to the government as part of its drive to disperse employees around the regions, he added. “Many of these centres are in the north of England, I expect quite a few will get taken up as part of the government’s move of civil servants away from London. That’s the obvious tenant.”

Customer service

Both Slade and Chapple insist productivity, as measured by metrics like average call handling time and first call resolution, have remained consistent or even improved despite homeworking.

However the shift has presented new dilemmas for satisfying customers and maintaining data security. 

“At very least, a dog barking or a baby screaming in the background [of a call] will come across as unprofessional,” said Teresa Cottam, chief analyst at telecoms consultancy Omnisperience. “But if [the agent is] handling sensitive medical or financial data and their flatmate is next to them that opens the door to fraud and crime.”

Call centres are able to remotely monitor technology “to the nth degree”, she said, but adds the “human factors” remain “very risky”.

Huws forecasts that, regardless of the great WFH experiment, employees will eventually be asked to return to the office. “Face-to-face meetings and handshakes are in call centre managers’ muscle memory,” she said. “Juggling a hybrid workforce requires good management and they’re not really allowed to be good managers.”

Sir Peter Wood, who co-founded Direct Line, rues that the heyday of the call centre “has long gone”. “I used to man the phones just for fun and sometimes call customers back . . . when they were rude to my staff,” Wood recalled. “But the romance of call centres is a thing of the past.”



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