Euroleague Basketball: The mirror the European Super League looked itself into
Updated: Feb 7, 2022
In April 2021, as you probably already know, 12 major European football (soccer) teams made public their intention to stop participating in the official international competitions organized by UEFA and create a closed league of their own, The European Super League, which was supposed to include up to 20 teams each year.
And, as you probably also know, the project lasted for about 48 hours after fans from several of the founding teams, sport organizations and even governments protested in such a way that some of the clubs decided to back out of the initiative for the time being.
The reasons behind the creation of this new competition were purely financial.
The 2020 pandemic certainly caused a major toll on the annual revenue figures of each of the founders of the European Super League, as shown in this graph by the BBC.
The expectations from a business perspective for this new project however, were massive. Joe Pompliano summarized the revenue projections across the major sources quite well in his “Huddle Up” newsletter:
Each founding member would have received $400 million just for joining the league. To put some context to this number, consider that Bayern Munich, who won the 2020 Champions League, earned around $130 million in prize money throughout the tournament…
Media rights were rumored to reach an annual $3.5 billion, way above the current $2.4 billion that is being paid for the rights to broadcast the Champions League.
Given that it was conceived as a “closed” tournament without relegation, sponsorship deals were probably going to be more valuable and durable.
In this post we will not be going into the details of why this project failed.
Our question is, despite the fact that the project has been currently put on hold, has there been any similar case in European sport before?
It turns out, Euroleague Basketball was a prime example given the origins and nature of the competition.
So, the goal of this post is to review those origins, identify the pillars behind its success and why it became one of the models that the European Super League wanted to resemble.
The origins of Euroleague Basketball
In the early 2000s, the richest European basketball clubs decided to launch their own private league, thus breaking away from the competition organized by FIBA (who had been organizing the tournament since 1958). The key difference vs the European Super League initiative was that the Union of European Leagues actually supported this decision.
While at the time, both parties were able to reach an agreement for both competitions to co-exists, the truce only lasted for 15 years, when, in 2015, FIBA tried to regain control of the Euroleague by threatening national teams and players with being excluded from official international competitions such as the World Cup, Eurocup, etc.
(Does this sound familiar?)
This attempt by FIBA was unsuccessful because Euroleague had the support of the majority of the participating clubs and was able to sign a 10 year / €630 million deal with IMG that ensured the viability of the competition. Finally, it must be clarified that the founding teams of the Euroleague did not abandon their national competitions.
Euroleague´s business results
So, since 2015, how have the business results of the Euroleague evolved? Has it proven to be such a successful model that it influenced the major football clubs to follow suit?
Let´s look into the following aspects:
Euroleague´s basketball revenue
In the seasons prior to the Covid-19 pandemic, the Euroleague was enjoying fantastic financial results. Between the 2015/16 (the first one it was fully separated from FIBA) and the 2018/19 seasons, revenues grew 2.3 times according to Sport Business. In part, this was driven by increases in attendance and media coverage, better broadcasting deals across the different markets and additional / improved sponsorship agreements and commercial partnership programs both at the competition level and at the club level.
Nonetheless, by that same season the league was able to double its sponsorship revenue during the same time period and had agreements with almost 30 partners. Sport Business also suggested that the success of the new sponsorship model was based on three pillars:
Making sure the agreements had a data-driven approach
Switching to a model that relied on targeting specific demographics
Talent: Ensuring the right leadership and technical skills
José Luis Rosa Medina, Senior Director of Corporate Partnerships & Licensing summed it up as follows:
“On a conceptual level, we changed the way we sold sponsorship from a platform model to demographics model. That has been the most important change. To be able to do that, execute on a sale and deliver accurate activation and integration between different departments, we needed different knowledge and different people.”
In terms of broadcasting, the organization saw the value of its rights increase in value significantly. Prove of this would be the 50% increase that Dazn paid for the rights to broadcast the competition in Spain in 2018 or the fact that in 2016, one year after the launch of the current competition, Euroleague TV rights were believed to be worth an annual €20m, which was 3 times as much what they were worth before then.
Imagine if the European Super League had achieved similar numbers...
The commercial partnerships framework of the Euroleague can also be considered a success. For example, the organization declared a 94% growth in value delivered to commercial partners in digital channels during the 2019-2020 season vs the previous year.
Fan Engagement in the Euroleague
Euroleague fans are passionate about the competition. It cannot be overlooked that, as Sport Business explains, it had better engagement rates across digital platforms than the UEFA Champions League, the Premier League, La Liga or even the NBA during the 2018 / 2019 season.
Moreover, the Euroleague, back in July 2020, reported the following amazing statistics regarding fan growth in the 2019-2020 season vs the one before, despite it being a much shorter season. These were some of the most remarkable figures:
15% average growth in fan interest across EuroLeague markets, (+9% vs the general growth of interest in basketball as a category). This increase was led by France, Israel, Turkey, Spain and Germany (who, along with France, was granted a permanent license during this season).
15% growth in television audiences, led by France, Italy, Israel and Germany.
Social media growth across all platforms, averaging increases of 11% in followers, 21% in reach, 25% in video views and 46% in engagement.
12% higher "live" attendance and a 75% increase in the average arena fill rate.
Based on these results, on could conclude that fans seem to prefer an "elite" regional competition...
A stable basketball competition
It is interesting to notice that one of the key factors that has driven the success of Euroleague was one of the most criticized by those who were against the creation of the European Super League.
This concept is none other than “stability,” which is reflected upon the fact that 11 of the 18 teams that participated in the 2020-2021 edition were guaranteed a 10 year license in a league without any form of relegation to a second tier division.
Ultimately, this was one of the reasons why broadcasters and sponsors were willing to commit to the project for the long term and also what drew interest from other stakeholder and even new potential team owners. Euroleague President & CEO, Jordi Bertomeu, had this to say on the matter:
“This has been the main reason why we have been successful in growing the business. With the knockout system, it’s always about seeing if the clubs are lucky, or who they get in the draw. We could have spent five years without watching a single match between Real Madrid and Panathinaikos.”
Critical to ensure this stability was its Financial Fair Play Regulations In the 2018-2019 season, team shareholders had their contributions limited at 65% of the team's revenue with the idea of gradually reducing it to 40%. Originally, this was suppose to take place in the 2022-2023 season; because of the pandemic though, the deadline for this was pushed a few seasons. The intention was to ensure that each team had sustainable business models in play without having to rely too much on external sources of funding. Moreover, those who do not comply with those limits would face a penalty that ranged between 10% and 180% of the amount the given team overspends. Finally, there is a process in place to review and approve each commercial partnership, to ensure these are properly valued.
Another key element for the league was the “revenue distribution model” among participating teams. Even during the season impacted by the Covid-19 pandemic, in which the competition was cancelled (and not postponed) the Euroleague was able to respect the model. Eurohoops.net explains the revenue distribution model quite accurately:
Contrary to the previous seasons, where 54% of the revenues were distributed via the market pool, the number was changed to 79% for the upcoming season. Together with an increase in the minimum guaranteed revenues of the clubs, the revenues are expected to be a little bit higher than the initial projection of the 2019-20 season and only 21% of those revenues will be given as performance bonuses according to each club’s results. The previous number was 46% divided according to the wins of each club.
Essentially, 21% of the total economic distribution is allocated based on the regular season standings. As such, each team will receive a payout that ranges between €150K and €1.5M:
The other 79% is split according to the current market pool and it involves concepts such as sponsorship agreements, broadcasting rights and so on. All in all, form the 2021-2022 season, a club who wishes to participate in the competition has to have a minimum budget of €7 million, which is a significant increase vs the €5,4 million that was requested up until that point.
From a business perspective, this scenario seems to make a lot of sense and demonstrate why the European Super League wanted to implement a similar model. In fact, we were in a meeting a few years ago with the owner of a professional football club in Madrid (one of the smallest ones) discussing the possibility of creating a women's football league. While he was totally supportive of the idea, his reasoning was that a closed league without an open relegation system, such as the Euroleague or the one that European Super League proposed, would attract even more investors and help speed up its professionalization.
Another issue though, is factoring in the “fan” element into the equation, which is what essentially triggered the demise of the current European Super League project.
A question up for debate: Will the Euroleague have a team in the UK?
In this sense, we wanted to finish this post with a question and a potential debate.
In the past, the Euroleague has made public its intention of setting up a team in London or Manchester, as Mr. Bertomeu once said:
“Our main priority in the UK at this moment is creating a team in London. This is where we are more focused in this moment, but we are not closing doors. We believe Manchester could be another interesting destination. We are conducting our research together with Nielsen and other partners to help us in taking the right decision and establish a franchise where we believe will be more successful in terms of the financial and market conditions.”
Now, our question is the following:
Given the recent waves of protest and backlash in the UK criticizing the concept of a closed competition (and thus, removing the merit-based system) that the European Super League proposed, would authorities in the country reject the opportunity of creating a Euroleague basketball team there?
There is an apparent interest in the UK market for “top quality basketball” as proved by the fact that the NBA plays official matches in London on an annual basis. At the same time though, the truth is that UK teams are not among the elite basketball markets in the region. Essentially, a franchise in London would “skip” the merit based system and enter the league for purely financial / business reasons.
What are your thoughts on this? Would the UK be consistent with the way it approached the launch of the football European Super League? Or would they accept the license (if this possibility does become a reality), benefit from the business opportunities that would rise and expand the popularity of basketball within the country? Let us know!
We hope this was a useful analysis to understand the success behind the Euroleague and why it was a “mirror” for the football European Super League, despite the fact that for now, the project “will not see the light of day.”
We will make sure to provide relevant updates on this topic as new developments take place, so make sure to stay tuned.
Meanwhile, keep safe.