Special report: Ligue 1 in ‘crisis’ and braced for a ‘fire sale’ of clubs and talent this summer
https://theathletic.com/2666927/2021/06/25/special-report-ligue-1-in-crisis-and-braced-for-a-fire-sale-of-clubs-and-talent-this-summer/
Forget Didier Deschamps, Kylian Mbappe, Paul Pogba and co for a moment — as usual, they are doing just fine — the most important person in French football right now is probably an accountant called Jean-Marc Mickeler.
Chief executive of the auditing division at Deloitte, the financial services company, Mickeler also runs French football’s financial regulator, the Direction Nationale du Controle de Gestion (DNCG).
Earlier this month, as France’s world champions got ready to start a Euro 2020 campaign that many believe will end in glory, Mickeler had a wake-up call for anyone sleepwalking towards the coming catastrophe.
“Without a massive injection from existing shareholders, it is very unlikely that the majority of clubs will be able to survive the 2021-22 season,” he told French TV channel LCP.
The DNCG usually publishes an annual report on the domestic game’s finances in February. We are still waiting.
“No idea when it will be made public but it will very grim reading,” a senior source at a Ligue 1 club tells The Athletic.
“French club football continues to be a mess,” says Dr Nicolas Scelles, a French academic who lectures at Manchester Metropolitan University’s sport policy unit. “Mickeler’s comments about some clubs not being able to survive the season were quite alarming. In these circumstances, a fire sale of talent may happen, although this depends on the ability of foreign clubs to invest in players.”
The loss of talented players could have a negative impact on France’s UEFA co-efficient, the ranking system Europe’s governing body uses to decide access to its club competitions, and beyond. The crisis in Ligue 1 is almost certainly going to make the French league weaker, with a good chunk of its best players moving to the Premier League. But that could end up hurting England and helping France.
And it all spans from an over-ambitious television deal that could have ramifications for French football — at domestic and international level — for years to come.
To be fair to Mickeler, he is busy. Earlier this week, the American investment funds in control at Bordeaux agreed to sell the six-time French champions to Luxembourg-based businessman Gerard Lopez.
That deal is subject to DNCG approval, which might not be automatic as Lopez previously owned Lille, last season’s surprise champions, but was forced out of the club when Elliott Management and JP Morgan, the US-based lenders who gave him more than £200 million to buy the club, lost faith in his ability to repay.
Under Lopez, Lille developed a lot of talent and made a fortune on transfers. Unfortunately, they still lost more than 200 million euros (£170 million) between 2017 and 2019, thanks to a large wage bill, huge stadium costs and mediocre broadcast, commercial and matchday revenues. Just like most French clubs, then.
Bordeaux, who finished 12th in Ligue 1 last season, have been in administration since April. Ordinarily, that would have resulted in relegation but the DNCG is making allowances and has given clubs until July to find buyers.
Bordeaux have been under US ownership since November 2018, when Florida-based General American Capital Partners (GACP) paid $82 million (£59 million) for the club. Its partner in the deal was King Street Capital Management, an investment firm from New York.
The purchase price did not seem like a lot to pay for a side that won a league and cup double as recently as 2009 and was returning to Europe in 2018-19, having finished sixth the previous season. But Bordeaux lost money — €21 million in 2017-18, €26 million in 2018-19, €35 million in 2019-20, at least €55 million last season — and that led to GACP and King Street falling out, with King Street buying GACP’s shares in 2019 and borrowing more money from another American private-equity business, Fortress.
That, however, did not alter the club’s course. Fortress is understood to have made a secured loan of more than €50 million. It knows it will not get all of that back but will want €30 million or so to walk away.
Part of the problem predates COVID-19 as Bordeaux, like Lille, moved from their historic home to a much larger and posher stadium, where they are tenants, in 2015. Even before the pandemic padlocked the gates, neither side has filled their new venues very often.
But, again like Lille and almost every other French side, the plan was to balance these losses with player sales. After all, it was at Bordeaux that three of France’s first World Cup-winning team, Bixente Lizarazu, Christophe Dugarry and the great Zinedine Zidane, developed before going abroad.
This is fine, in theory, but vintages like that do not come along very often and that was before French football was hit by the equivalent of an earthquake, and then a tsunami.
“If it was just COVID-19, a proper level of funding would have allowed for us to pass through this crisis with a minimum number of casualties,” explained Mickeler. “But facing this crisis and the defaulting of Mediapro, it was mission impossible.”
His reference to the impact of the pandemic needs no explanation but the second half of that double whammy was meant to be French football’s vaccine against the virus: a bumper, four-year TV deal.
The abridged version is that the ambitions of the Ligue de Football Professionnel (LFP), the body which runs the top two divisions, met those of the Barcelona-based, Chinese-backed media company to make an unholy mess. The former hoped to close the revenue gap to the Premier League, La Liga, Bundesliga and Serie A; the latter wanted to become a pan-European powerhouse.
Plan A for Mediapro was Serie A but the Italians, worried about the company’s ability to make money from a standing start, wanted a guarantee. Scared off, Mediapro turned its attention to Ligue 1. LFP boss Didier Quillot was much more accommodating and when Mediapro blew incumbent Canal+ out of the water by bidding €780 million (£670 million) a year for 80 per cent of the rights — an increase of 60 per cent on what Canal+ had been paying — it looked like he had earned every cent of his €500,000 bonus.
In the meantime, Canal+ was left with a hole in its schedules where Paris Saint-Germain and Olympique Marseille used to be, so it did a deal with beIN Sports, the Qatari-based broadcaster that had paid €332 million (£283 million) a year for the rest of the rights. Concerned it had probably overpaid, beIN was happy to let Canal+ pick up the bill.
Let’s fast forward now — past the decision to settle the suspended season on a points-per-game basis, past the £100 million-plus in rebates, past a round of government loans and past Canal+ boss Maxime Saada predicting that Mediapro would need nearly seven million subscribers to its newly launched Telefoot channel — to the start of last season.
In August, Mediapro made its first payment of £130 million. There were similar amounts due every other month but LFP never saw them because Telefoot somewhat undershot Saada’s target. The official figure has never been released but industry sources believe Telefoot had around 600,000 customers when Mediapro defaulted on October’s payment. By December, it was all over.
Mediapro blamed COVID-19, and used emergency laws to hold off creditors, but eventually agreed to pay the LFP a fine of €100 million (£85 million) for breaking the contract. Telefoot was shut down. The deal that was meant to take Ligue 1 past the €1 billion-a-year mark in broadcast revenue was in tatters by Christmas. Quillot had the grace, at least, to decline his bonus.
Having taken another loan to get the clubs through to 2021, the league tried to sell the rights Mediapro handed back via a new auction in January. Canal+, its mood not improved by being proved correct, asked a court to make the LFP put all the rights out for tender, including the 20 per cent it was sub-licensing from beIN. The court said no.
That did not help the league much, though, as neither Amazon, Canal+, DAZN or Eurosport met the minimum price, forcing the LFP back to the negotiating table. A compromise was eventually reached which saw Canal+ get all the Ligue 1 games, and most of Ligue 2’s, for about £30 million more than it was paying for beIN’s 2020-2024 package.
With the money banked from Mediapro, this meant the top two divisions shared about €670 million (£572 million) from their domestic deals last season. They had been budgeting for £974 million. So, on top of a season played behind closed doors, French clubs finished last season without £400 million of broadcast revenue they had expected last summer.
“Nineteen of 20 clubs in Ligue 1 are up for sale now,” says one experienced club broker, before adding that Qatari-owned PSG would be, too, if the Gulf state had already staged its World Cup.
The TV horror show does not end there, though.
On the morning of Euro 2020’s opening match, Canal+ failed with another challenge to the LFP’s refusal to re-tender all of the rights, not just Mediapro’s packages. A competition court decided there was insufficient evidence to rule that the league had abused a dominant market position.
This gave the league the green light to re-tender Mediapro’s 80 per cent for the next three seasons. And by that afternoon the league had its second shock winner.
Instead of going with a joint beIN/Canal+ bid of €668 million a year for all Ligue 1 and Ligue 2 games, which included a bonus based on the companies hitting subscriber targets, the LFP went for the same total — perhaps slightly less — by holding Canal+ to the €332 million it is paying beIN for those two games a weekend, plus two other smaller deals it agreed in 2018, one with beIN for some Ligue 2 games and another with telecoms firm FREE for clips. It then found a new owner for those Mediapro rights… Amazon Prime!
The American e-commerce giant paid €250 million a year for the same number of Ligue 1 games that were meant to cost Mediapro €780 million. It also picked up eight Ligue 2 games a weekend for €9 million a season, less than a third of what beIN pay for two games of second-tier action, although Amazon has agreed to pay €25 million in production costs.
The bottom line is the league chose to hand Amazon the sports rights deal of the century in the hope it is the start of a beautiful friendship. The basis of this deal is the belief Canal+ will not be able to get out of paying for the rights it is renting from beIN. The sums involved for the proposed beIN/Canal+ partnership and the Amazon/Canal+ forced marriage are similar. In fact, they are basically what beIN and Canal+ paid for the LFP rights between 2016-17 and 2019-20, just over £560 million.
So, French football is regrouping around the promise of a long link with a streaming giant, while appearing to do the dirty on its broadcast partner of more than 30 years. The LFP would deny the second half of this equation but Saada is lawyering up.
For Amazon, this was a no-brainer: a gift-wrapped opportunity to build its position in the world’s seventh biggest economy.
But at what cost to Ligue 1?
Canal+ has already announced it will not broadcast its games, massively cutting the audience for Ligue 1. If there was insufficient evidence of market abuse before, Canal+ is confident the gap between what Amazon is paying for its suite of rights and what it is shelling out for two games a weekend will be all the proof it needs.
“Why didn’t the league think to accommodate all three broadcasters, Amazon, beIN and Canal+?” asks a senior figure in the broadcast industry.
“That is what the English Premier League does. Surely there is a smarter way to proceed than antagonising the biggest media company in France and your broadcaster since 1984?
“The Canal/beIN bid was bigger, more certain and they’ve got more eyeballs. The real danger is piracy will go through the roof after this. Everyone will just watch football via the internet.”
The next payment from Canal+ is due on August 5 and few in France think it will arrive without a fight. But did it really have to go like this for the self-styled “league of talents”?
“Two years ago, France was very attractive to anyone looking at investing in the European market,” explains Tim Bridge, a director at Deloitte’s Sports Business Group.
“There was a lot of optimism about the TV deal and it was felt that it was easier to get into the Champions League in France than the other big leagues. On top of that, you had the league’s reputation for developing talent and the money that could be made from player trading.
“There had also been a compromise on the distribution mechanism for the TV money, with the nine biggest clubs agreeing to split the domestic deal evenly with the other teams in return for getting all of any uplift in the international rights. The idea was that Mediapro’s money would improve the overall product but it would be the biggest clubs that attract international audiences. That was the idea, anyway.
“We don’t see any deeper, underlying reasons why French football should be in crisis but there is no disputing it faces a huge challenge now, with uncertainty the biggest issue. They are probably going to have to go backward to go forward in the same way that the English Football League had to rebuild after the collapse of ITV Digital (in 2002).”
The optimism Bridge refers to is what attracted GACP and King Street to Bordeaux, and they were not alone.
In 2016, US-based Chinese entrepreneur Chien Lee and Pacific Media Group bought OGC Nice. A year later, the same investors snapped up English side Barnsley. They then sold Nice to British billionaire Sir Jim Ratcliffe in 2019, reinvesting the money in clubs in Belgium, Switzerland, Denmark and then France again, in shape of Ligue 2 side AS Nancy.
Also in 2016, former Los Angeles Dodgers owner Frank McCourt bought Marseille. And even after the arrival of COVID-19, RedBird Capital, another American fund, bought Toulouse and Manchester City’s owner, City Football Group, snapped up Troyes.
In 2018-19, the last full season before the pandemic, Ligue 1’s aggregate revenues were £1.6 billion, a third of the Premier League’s £4.8 billion, and £500 million behind Europe’s fourth-richest league, Serie A. But Ligue 1’s turnover grew by 12 per cent that season, almost double the Premier League’s growth rate and this was before the Mediapro deal. The French league’s revenues were also two and a half times greater than the combined wealth of the Russian league, sixth in Europe’s earnings table.
“In the short term, their position as the fifth richest league is pretty secure but there are potential threats on the horizon,” says Bridge.
“For example, a combined Dutch-Belgian league could knock them out of the Big Five and then you have the recent announcement by European Leagues that nine smaller leagues (including the top divisions in Denmark, Norway and Sweden) are grouping together to sell their international rights.
“That’s a smart move and while the French league won’t be losing any sleep over them just yet, it could be a threat in four or five years’ time.”
A source who has advised French clubs on financial matters believes there is no doubt that most Ligue 1 clubs “are in fire-sale territory and they will not just be selling their players”. Le Havre, Lyon, Marseille and St Etienne are just some of the clubs rumoured to be available.
“Some clubs may not have much choice if foreign investment is the only option,” says Dr Scelles. “Unless the French government is willing to rescue professional sports again?”
Selling a club is not easy at the best of times, though. Selling a player, though, is a lot easier.
According to the Swiss-based International Centre for Sports Studies (CIES), only Brazil, with a population three and a half times greater, exports more players than France, and French stars make up the largest foreign contingents in the Bundesliga, La Liga, Premier League and Serie A.
The impact of this outflow of talent can be measured in many ways. For example, the five biggest net spenders in the Big Five leagues over the last 10 windows are Manchester City, Manchester United, Barcelona, PSG (almost literally in a league of their own) and Inter. At the other end of the spectrum, net gainers, are Lille, Lyon, Italy’s Atalanta and Monaco.
Of the 40 Big Five clubs in credit for transfers over the last five years, 16 of them are French. Among the big leagues, Ligue 1 also gives the highest percentage of minutes to under-21s, and it also sees the biggest percentage of its youth internationals move to foreign leagues.
So, if French football has always been a net seller, does it matter if Lille’s title-winning team gets gutted, Lyon have to let some of their starlets go or Rennes cash in on Eduardo Camavinga a little earlier than they hoped?
“The league has always relied on selling players but the risk the clubs face is they might have to sell one or two more than usual, and that will have an impact on the pitch and, eventually, UEFA’s country co-efficient,” says Bridge.
Like the financial ranking, France is fifth, behind England, Spain, Italy and Germany, but in the last three seasons only PSG and Lyon, with a surprise run to the Champions League semi-final in 2020, have really flown the flag. Last season, PSG made the last four again but Marseille and Rennes combined for one group stage win between them.
French sides fared no better in the Europa League, with Reims failing to get out of the qualifying rounds and Nice finishing bottom of their group, winning only one out of six games. Lille fared only slightly better, reaching the round of 32 before being knocked out by Ajax. As a result, a once healthy lead over Portugal in sixth place is being eroded.
They have flipped places before, most recently between 2012 and 2016, but now is not a great time to be outside the top five, as the fifth-ranked league is in line to get a fourth place in the Swiss-model Champions League that is on its way in 2024.
Even next season, there is an advantage to being the fifth-best league as you get three teams in the Champions League, two in the Europa League and just one in the new Europa Conference League, as opposed to three, one and two for the sixth-ranked league. Slip below sixth in the coefficient table and you lose one of your three Champions League slots, with your runner-up having to fight through qualifying.
This would have been unthinkable 20 years ago when Ligue 1 emerged from a decade in which it had been the second-best league behind Serie A.
French sides did not win many European trophies — Marseille won the European Cup in 1993 and PSG claimed the Cup Winners’ Cup in 1996 — but they were serial contenders. As well as the big two, who both claimed runners-up medals during the 1990s, Auxerre, Bordeaux, Lens and Monaco all made semi-finals or finals.
So, in terms of quality, the league has been in long-term decline.
“We have a proprietary ranking system that also looks at clubs not taking part in European competitions,” explains Omar Chaudhuri, chief intelligence officer at sports consultancy Twenty First Group.
“We rank Marseille, who finished fifth in Ligue 1 last season, 91st in Europe, which puts them in the same bracket as lower Premier League clubs like Burnley and Crystal Palace. That gives you an indication of the relative strengths of the leagues. Once you chop out the top three or four clubs in France, the quality drops pretty quickly. It doesn’t have the depth of the Premier League.”
So how do we explain the fact that France, with a similar population and levels of wealth to England, has won two World Cups and two European Championships since England’s sole success at international level?
“International football is a bit different, as you tend to get a pattern of peaks and troughs,” says Chaudhuri. “It’s probably less systemic than many people think — you only need to find 11 great players from a population of 60 million or so and France is pretty good at that.
“Where perhaps there is some evidence of a link with the club game is the issue of B teams: Spain, Germany and France are examples of countries where they appear in the pyramid and that would appear to be an effective way to develop talent.
“But there is possibly an even stronger link between clubs running out of money and them being forced to play youngsters. Some of the big talent factories in recent years have been Southampton, Schalke, Feyenoord and Lyon, and they all got younger after they ran into trouble.
“The situation in France could even help in terms of player development. The inverse of that would be the Premier League, where we can see how it hard it is for young domestic talent to get playing time, as they are perceived to be a risk, which actually isn’t supported by the data.”
It’s certainly a different way of looking at the club versus country debate.
