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Fox, Telemundo set for US$500m windfall on 2026 World Cup

Tuesday, May 30, 2017 - 18:46

[LONDON] Choosing Qatar to host the 2022 World Cup was controversial from the beginning. Setting aside the questions swirling around the bidding process, summer temperatures regularly hit 50 degrees Celsius, which even Fifa's experts said posed health risks for the world's best players and the millions of fans expected to travel to the 32-team event.

By picking the Gulf state, Fifa set in motion a series of tortured decisions, solving one problem only to create another - and leading to an unintended windfall for broadcasters Fox and Telemundo that could be worth as much as $500 million.

Because of the extreme Qatari temperatures, the governing body of global soccer wanted to reschedule for the cooler autumn months. But Fox and Telemundo had already agreed to pay US$1.1 billion to air the 2018 and 2022 World Cup. That price assumed the traditional June-July schedule, which gives the broadcasters a tremendously popular sporting event at a time when there's little else going on.

A fall tournament, on the other hand, pitted soccer against college and professional football and the start of basketball and hockey. Disgruntled, the networks told Fifa they were "reviewing their options".

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To stave off legal action, Fifa executives offered Fox and Telemundo the chance to buy the rights to the 2026 tournament in a closed auction, without opening the bidding to competitors.

"They bought themselves out of a problem," said Patrick Nally, the Englishman who pioneered sports sponsorship at Fifa.

"At that time it was all about putting fires out, rather than what is the most lucrative and aggressive tender process we can make."

The networks were getting a bargain, and it's gotten better over time. The 2026 tournament is poised to return to North America for the first time in more than 30 years, with an expanded field of 48 teams playing more games than ever.

New details of Fifa's contracts reveal Fox and Telemundo bought the 2026 television rights in the lucrative US and Canadian markets for the same price as the 2022 event.

Telemundo agreed to pay at least US$350 million with Fifa getting a US$115 million bonus if the US ended up hosting; Fox's fee was US$300 million, with a US$180 million bonus.

Global soccer may have made an additional US$500 million by soliciting competing bids, said a member of Fifa's governing council who asked not to be identified because the contracts aren't public.

Frank Dunne, editor of TV Sports Markets, a global sports rights researcher, agreed that Fifa left money on the table.

"Whatever the bonus mechanism, they would have done better by having an open process."

Fox, which is owned by 21st Century Fox Inc, didn't respond to requests for comment. Telemundo, a division of Comcast Corp, declined to comment.

Canada's Bell Media also received the rights to the 2026 tournament, with a US$5 million additional fee if World Cup games were played in Canada. At the time, the country wasn't considered likely to host on its own, and Fifa's then president Sepp Blatter wasn't a fan of multi-country proposals.

North America 2026?

But then Mr Blatter was ousted in the wake of an international corruption scandal, and his successor, Gianni Infantino, reversed the moritorium on joint bids. The US responded with a bid for 2026 that includes games in Canada and Mexico. As of now, the North American group is the only bidder.

A decision could come as early as next year. The last US World Cup, in 1994, set attendance and revenue records that still stand, even though that tournament featured just 24 teams.

The outcome could hardly have been better for Fox and Telemundo. The 2011 bidding competition was hotly contested. Meanwhile, prices for sports rights have only continued to rise, with live events considered one of the last kinds of programming to reliably draw large audiences to network television. The two networks avoided another bidding war with Walt Disney Co's ESPN, which was eager to reclaim the World Cup broadcast for 2026.

During the 2014 World Cup in Brazil, network president John Skipper and other ESPN executives openly discussed their future bid plans with soccer officials. Meanwhile, Fifa had already privately agreed to the outline of its extension with Fox and was close to a similar arrangement with Telemundo.

In February 2015, six months after those conversations in Brazil, Fifa officially announced the extensions for Fox and Telemundo. Skipper learned that ESPN had been shut out from the official Fifa press release.

"It's a less-than-ideal way for a former partner to hear about it," he said at the time. He raged privately too, making repeated unsuccessful efforts to contact Jeffrey Webb, a Fifa vice-president and leader of the Miami-based Concacaf, one of soccer's six regional governing bodies, whom he'd recently hosted at the Super Bowl. Mr Webb was arrested months later and extradited to the US, where he pleaded guilty to corruption charges.

Beyond the US and Canada, Fifa soccer rights in the Western Hemisphere are locked up for years to come, limiting revenue for an American tournament. The previous leadership awarded rights through 2030 across South and Central America, sales encouraged by Julio Grondona.

Now deceased, the former head of soccer's finance committee had been one of the sport's top power brokers, dubbed "co-conspirator #10" when the US.

Justice Department launched its sweeping corruption investigation. Central to the case: the sale of TV rights in return for kickbacks.

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