Broadcasters

The value of rights to broadcast a sports event can depend on who participates. The value of rights to events such as the 2010 FIFA World Cup finals in a particular country will be diminished if that country fails to qualify, as viewing figures will be lower. Conversely, a broadcaster benefits from a good performance from its own team as more people then watch.

Even where participants are known, results can affect the value of rights to future matches. For example, if one team wins a seven match series 4-0 then the value of the rights to the final three matches will be diminished.

Rights are often sold in advance of the finalists being known, so a broadcaster could suffer if it pays a fixed price and its home team then fails to qualify. Where rights holders agree terms after qualification they face risk, because if nations with valuable broadcast markets are eliminated then the amounts raised from selling rights will fall. SportingWins enables broadcasters and rights holders to hedge such risks.

For example:

• A television company estimates that it will need to bid €22 million to secure the rights to televise the FIFA World Cup 2010 finals.
• The company calculates that the rights will be worth €30 million if its national team qualifies for the finals, but only €20 million if it does not.
• SportingWins evaluates the chance of the team not qualifying at 28%.
• The broadcaster pays SportingWins €2.8m to hedge the €10m difference in value if the national team fails to qualify.
• If the home team fails to qualify SportingWins pays the broadcaster €10m.

By hedging its risk the broadcaster brings certainty to its bidding and budgetary processes, as it can expect a profit of €5.2m in all circumstances, rather than risk losing €2m if its national team fails to qualify.