By Robert Freeman, of Proskauer
On January 11, 2022, a London High Court granted The Football Association Premier League Ltd. (“Premier League”) a $213 million judgment following the collapse of its broadcast deal with Hong Kong’s PPLive Sports International (“PPLive”) for rights to air live matches and highlights packages in mainland China and Macau. After the 2020 Premier League season was temporarily interrupted due to the COVID-19 outbreak, which forced the Premier League to modify its scheduling of matches, PPLive missed two installment payments under the contract. Non-payment by PPLive led to the legal battle with the Premier League. In January, the judge ruled in favor of the Premier League at the summary judgment stage without the need to go into extra time, noting that the League had hit the high bar for summary judgment due to the strength of its case.(The Football Association Premier League Ltd v PPLive Sports International Ltd, [2022] EWHC 38 (Comm) (11 January 2022)).
The Premier League, formed in the 1990s, is the top division in English soccer, where the 20 teams play each other twice (home and away). As with many sports, the broadcast rights, both domestic and foreign, have increased in value over time given the growing popularity of the League and improvements in streaming technology. The deal in question included rights to air both live and delayed Premier League football games over three seasons (beginning in 2019) in mainland China and Macau under two separate contracts, namely a Live Package Agreement and a Clips Package Agreement. At the time the agreement was entered, it was the league’s largest international TV deal. The broadcaster, PPLive, had already paid initial installments under the agreement for the 2019-2020 season. Thus, the deal was presumably moving along at a canter until the outbreak of COVID-19 in 2020, which forced the Premier League to blow the whistle on all games in March 2020 for three months.
When play resumed in June 2020, PPLive claimed there had been a “fundamental change to the format of the competition,” as defined under the agreement, necessitating a renegotiation of the terms and payment structure. However, the Premier League declined to revisit the agreement. Following the three-month shutdown, the Premier League resumed its season, albeit with some changes that were familiar to many sports fans at the time. Spectators were no longer allowed into the stadium and, in order to fit the remaining games of the season into the truncated period of time remaining in the season, several adjustments were made to the formation of the schedule, including more midweek evening games, later kick-off times and fewer weekend matches. Among other things, this moved the goalposts for when some live matches would be streamed in China to times that were less convenient or desirable.
Despite PPLive’s non-payment, the Premier League continued to provide PPL with the relevant feeds of matches under both agreements for the remaining 92 matches of the 2019/2020 season that ran from June to July 2020. During this time, PPLive missed a $210.3 million installment due at the beginning of March 2020, as well as a $2.7 million payment for highlights videos due in June 2020. With no installment payment forthcoming, the Premier League gave PPLive the “golden boot,” of sorts, and eventually terminated the $700 million three-year deal with PPLive before the start of the 2020/2021 season. The Premier League claimed that it was entitled to suspend all live feeds and licensing agreements, without incurring any lability, due to PPLive’s nonpayment. In October 2020, the Premier League brought suit for breach of contract against PPLive, seeking $213 million in damages.
PPLive’s strongest defense centered on one contractual point: following the interruption of the 2019/2020 season, the conditions under which it resumed were “fundamentally” different from a typical season, as defined under the agreement, thereby excusing its nonpayment. PPLive’s main contention concerned certain warranties in the Live Package Agreement, specifically, Clause 12.1(d), which provides, in pertinent part:
“[T]he Premier League hereby warrants and undertakes that: during the Term the format of the Competition will not undergo any fundamental change which would have a material adverse effect on the exercise of the Rights by the Licensee….” and that “If any such fundamental change to the format of the Competition occurs during the Term, then…the Licensee shall be entitled to enter into a period of good faith negotiations with the Premier League in order to discuss a possible reduction of the Fees….” [emphasis added]
Citing this provision, PPLive’s main argument was that the COVID-19 outbreak “fundamentally” changed the format of the Premier League competition it had contracted for during the term of the agreement and that, as a result, the Premier League was obligated to renegotiate the fees owed by PPLive (an action that the Premier League refused to do since it believed the requirements of clause 12.1(d) were not triggered by the changes). According to PPLive, the Premier League’s rescheduling of matches following the three-month shutdown meant that the proportion of matches broadcast during prime-time weekend slots in China declined significantly and more matches fell in less desirable mid-week or early morning time slots, thereby impacting viewership, subscriptions and advertising revenue, In short, PPL contended that the interrupted season and the conditions under which it resumed were very different to what PPL imagined when the contract was signed in February 2017.
Among other issues, the court had to make its own interpretation of Clause 12.1(d) as applied to the facts of the dispute. Thus, much of the court’s decision looked at whether the conditions under which the interrupted 2019/2020 season resumed in June 2020 could be characterized as a “fundamental change” to “the format of the competition,” such that PPL could potentially rely upon the contractual warranties, and compel the court to consider whether such changes had a “material adverse effect on the exercise of the Rights” by PPLive.
On this point, the Premier League’s strong defense yielded no goals, winning a clean sheet in the courtroom. The Premier League tackled this argument by emphasizing that there were no changes to the “format” of the competition (still less any “fundamental changes”). The Premier League pointed to the fact that the matches were played in the same way, under the same rules, the number of clubs did not change, and that the “competition” remained the same – games played between top professional Premier League football clubs in England and Wales.
Agreeing with the Premier League’s interpretation, the judge found that the conditions under which the season resumed did not amount to “fundamental changes” that would entitle PPLive to renegotiate a reduction of fees with the Premier League. In the court’s view, there was no change to the format of the League matches:
“Format of the competition does not include kick off times, the days when matches are played, or whether there are fans. Format of the competition refers to the way that the competition is undertaken between the 20 member clubs competing that season. How many times they play one another; the number of matches between all of them…; the fact they play one another home and away; how many points are awarded for different results; how the league table is organised. These are all elements of the format of the competition. None of these were changed when the season resumed.”
In the court’s view, “the risk of profitability in broadcasting to the audience in mainland China and Macau rested with PPLive” under the terms of the Live Package and Clips Package agreements. The interruption to the season, and the way matches in the resumed season were played, did not change that risk calculation. As the court stated: “In many commercial contracts events may transpire other than as anticipated by one, or even both, contracting parties. That does not mean that the court will re-write the parties’ bargain and impose different terms upon them to suit those later events. That is not the function of the law of contract.”
Having concluded there was no change to the format of the competition, the court went on to find that no trial was required as to whether the changes that had occurred had a material adverse effect on the exercise of the rights by PPLive. In the remaining pages of its opinion, the court rejected PPLive’s counterclaims or additional defenses to non-payment (e.g., unjust enrichment, force majeure), as well as PPLive’s argument that the Premier League breached the contract by refusing to enter into good faith negotiations to reduce the rights fees under Clause 12.1(d) following the temporary shutdown of the League in 2020 – here, the court found that since there was no “fundamental change” to the “format of the competition” then the obligation to negotiate did not arise under the terms of the contract.
In the end, the court held that the Premier League was entitled to terminate the agreements and awarded summary judgment with respect to PPLive’s breach of the agreement and unpaid installment payments under the Live Package Agreement and the Clips Package Agreement that were due in 2020. Whether and how the Covid-19 pandemic, and this litigation, might impact future sports rights negotiations and related contractual provisions remains to be seen but, at least in this instance, the Premier League took home the trophy.
