Potential amendments to arena rights
The global impact of sport on society– both historically and in the modern day – is well documented. Whether considering its positive effects on people's physical and mental health or its ability to unite highly diverse groups of people, sport is clearly one of the most powerful cultural phenomena worldwide.
Beyond the ritual and ceremony of sport itself, the ever-increasing professionalism and global reach of sporting competitions have led to investments and revenue on an enormous scale. Media companies have played a significant role in this development, especially through their involvement in negotiating broadcasting rights. In Brazil, the popularity of football has led to a huge demand for broadcasting matches. This has become one of the main sources of revenue for football clubs, while also guaranteeing broadcasters regular audiences and revenue from advertising and sponsorship deals.
The concept of "arena rights" (ie, broadcasting rights) directly relates to a form of royalties paid to athletes for having their image broadcast during sports events. For athletes, it is a legally protected right that is separate from any professional contract into which they may enter with their respective clubs.
Football clubs in Brazil currently manage arena rights. Both the home and visiting teams must give prior authorisation for a match to be broadcast. In most cases, television networks acquire exclusive broadcast rights to guarantee an audience that can be reached by sponsors.
Arena rights in Brazilian legislation originated in the Copyright Law 1973 (Law 5,988/73), which gave sporting entities the exclusive right to authorise electronic broadcasting for paid-entry sports matches. This law also determined that 20% of the fee that broadcasters paid clubs for authorisation would be distributed equally among the participating athletes.
In 1988 article 5(A)(XXVIII) of the Constitution established the protection of individual participation rights in collective works and the protection of image and voice rights (including for sport). Article 217(I) of the Constitution established the duty of the state to promote formal and non-formal sports practices while respecting sporting entities' autonomy in defining their own legal nature. This provision was crucial for sports clubs be recognised as more than merely sports associations, making it possible for them to also be organised as formal companies.
In 1993 Law 8,672 (known as "Zico's Law" in honour of Arthur Antunes Coimbra ("Zico"), a former Brazilian footballer and secretary of sport) took effect, seeking to regulate the work of professional athletes and the management of sports clubs. This law revoked the articles of the Copyright Law pertaining to arena rights, introducing new wording that included them directly within the scope of sports law rather than only as a civil right.
A mere five years later, Zico's Law was revoked when Law 9,615/1998 (known as "Pelé's Law") took effect, which still stands today as the principal legislation governing sports in Brazil's legal system. Despite revoking the previous legislation, Pelé's Law only introduced modifications to the text that concerned arena rights.
Under article 42 of Pelé's Law, sports associations have the right to negotiate and authorise (or prohibit) any form of broadcasting of the sporting events in which their athletes participate. Moreover, 20% of the fee that clubs received for authorisation was distributed equally among these athletes. Due to this regulation, athletes had the right to receive revenue corresponding to broadcasts of sporting events in which they were involved, while broadcasting rights for such events would depend on negotiations between the home and visiting teams.
Pelé's Law was eventually changed by Law 12,395/2011, which reduced the percentage of fees due to athletes and corresponding unions from 20% to 5%. As these fees are considered to be civil in nature, they are not classified as part of athletes' salaries.
Potential amendments to arena rights
With the publishing of Provisional Measure 984/2020 in June 2020, significant changes to arena rights were proposed in light of the covid-19 pandemic. The new measure sought to change the wording of article 42 of Pelé's Law by providing that only home clubs – as the entities in charge of hosting a given match – needed to authorise broadcasting and negotiate with networks. Therefore, visiting teams were not involved in this decision-making process.
These changes also transformed how sports clubs addressed broadcasting rights, especially given the rise of new streaming technologies that are set to be a major competitor to traditional television networks. As an example, Brazil's national basketball league recently ended a 10-year partnership with networks Globo and SportTV, opting to broadcast matches across a variety of channel and digital platforms, including:
- Facebook; and
However, as Congress failed to formally vote the provisional measure into law by the regulatory deadline, it became invalid in October 2020.
On 14 July 2021 the House of Representatives approved a bill (PL 2336/2021) based on Provisional Measure 984/2020.
The bill is now set to be debated in the Senate – if approved, it will be subject to presidential approval.
However, should the bill eventually become law, its regulations would not apply retroactively to contracts signed before it took effect. For example, contracts concerning the first division of the Brazilian football league will be in effect until 2024. They would thus still follow the current legislation, which requires both home and visiting clubs to authorise and negotiate broadcasting.
If Pelé's Law is indeed changed, important negotiations for broadcasting rights affecting competitions from 2025 will need to take place. The proposals set out in PL 2336/2021 would affect only the configuration of future competitions that are not under contracts already in place.
Changes to Pelé's Law arising from the bill would theoretically allow clubs – including smaller ones – to have greater bargaining power in broadcasting negotiations for matches. There is also the possibility of a shift in trends that may serve as a disincentive towards pay-per-view subscriptions, which are usually purchased by loyal fans who wish to watch matches that are not always broadcast on free-to-air or pay-tv networks.
It remains to be seen how the contractual transitions brought on by the potential changes to the legislation will take place, considering the scale of the contracts typically signed between large television networks and large football clubs. There is also the question of how fans will adapt to these changes, which will undoubtedly affect how football is watched.
For further information on this topic please contact Paulo Marcos Rodrigues Brancher or José Roberto de Almeida Junior at Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email ([email protected] or [email protected]). The Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados website can be found at www.mattosfilho.com.br.