Written by Media, Sport

The £5 Billion League

You know how this is supposed to be austerity Britain? Well you wouldn’t know that looking at the sums announced earlier today as the conclusion of the next three years’ of live Premier League coverage were concluded.

The total cost of the rights was £5.136 billion for the seasons 2016/17 to 2018/19.

Sky has retained the lion’s share with 126 games a season compared to BT who have 42 games a season.

The Premier League tweaked the model this time around and upped the number of games they’re selling from 154 to 168 a season. Matches are sold in 7 packages: 5 packages of 28 games and 2 packages of 14 games.

The Premier League also tweaked who get what picks. There is a complicated system in place to let TV companies determine which games they put into which slots. On top of this, there are issues surrounding clubs participating in Europe and potentially issues with policing of games (ie. the times police are happy for derby matches to take place).

Let’s go through some numbers.

While the talk was of there being an increase from £3.1 billion to perhaps £4.4 billion, we in fact saw a 70% increase in rights.

If the comments of Richard Scudamore are to be interpreted correctly, other parties showed an interest in the rights (possibly Qatari owned BeIn Sports and Discovery), but BT and especially Sky maintained their stranglehold.

The cost per match – on average – goes up from £6.5m to £10.2m.

I thought it’d be fun to put this in perspective with some other TV costs.

(These are based on recently reported figures – but the entertainment industry’s economics are opaque. And yes, you get more hours of television for your money from a Premier League fixture than an episode of a TV series. That said, these rights fees don’t include production costs.)

What’s interesting is that BT has constrained its costs to a much greater extent than Sky.

BT points out that it is paying 18% more per game than under the current agreement. Whereas Sky is paying 69% more per match than previously. And because Sky has more games than before that means an overall 83% increase.

That does mean that BT has fewer first choice fixtures than previously, but the packages they have are now predominantly the Saturday 5.30pm fixtures alongside some midweek games. Whether this is because BT has already forked out nearly a billion pounds for Champions’ League (and Europa League) rights from the 2015/16 season isn’t certian.

But it does mean that BT could potentially keep their sports channels free and only charge for the Champions’ League.

While Sky has the cash to do this deal, at the end of the day, they have to make those rights pay for themselves. So do we see big increases in what Sky Sports costs to subscribers? An 83% increase has to be accommodated.

And do we see the rights paid for other sports start to diminish? Although BT has bought some rights that Sky previously had, leaving Sky with some cash in hand, it’s a drop in the ocean really. So this might begin to hurt other sports.

For example, the current Sky deal with the Football League represents a 26% decrease in what was paid previously.

Will Sky more and more want to shore up the rights they really need – Premier League football, Cricket, Golf, Rugby League, Rugby Union – and pay much less for other rights?

And you know how the Championship playoff games is always billed as the biggest game in football? Well it’s only going to get bigger. The jump from Championship to Premier League is going to be extraordinary. While getting into the Premier League could be fantastic, the fall in future could be shocking.

It’s widely reported that the NFL is the only sport earning more for domestic rights now. The NFL has deals with all three major free-to-air networks, as well as ESPN and a satellite deal with DirecTV. According to Wikipedia, that means something north of $6.5 billion per season from 2015. This chart puts the Premier League deal in perspective.

But of course the US market is something like five times the UK one. And of course it’s interesting that nearly all NFL games are played on free-to-air television. (I should note that there are local TV deals not accounted for here for the NFL. But then arguably Premier League clubs also have revenues from online video and their own channels).

But perhaps the biggest question coming from this deal is working out how do clubs stop the money just putting all this extra money straight into players’ pockets? The players deserve what they earn, but there is more than the Premier League, and fairer distribution even within the clubs will be important. In particular, some club employees are actually pretty poorly paid.

And there are still international rights to come! And those get shared equitably – which is fantastic for smaller clubs. If there’s anything like the increase in rights that the domestic rights have seen, that could be a £10bn league.

So who’s rubbing their hands today?

Park Lane car dealers; Hadley Wood and Cheshire estate agents; football agents the world over.

And who’s done badly?

Well us. If you’re a football fan, then those rights need to get paid for somehow.

At a time when inflation is low, but wages are lower, when do subscribers finally say, “That’s too expensive – I’m going to have to stop subscribing.” I’m not convinced that people won’t eventually cancel subscriptions if the costs go up too much.