The Premier League in an SVOD World – Running the Numbers

The Premier League in an SVOD World – Running the Numbers

This week, Amazon Prime in the UK has begun the first of its streaming-only games offered to Prime subscribers. You will recall that during the last UK round of Premier League TV rights, a package comprising of the entirety of one mid-week “matchday” and all the Boxing Day games was offered.

In the end Amazon bought the rights, and many have wondered if this could be the beginning of a change in the way Premier League football rights are monetised.

Separately, UEFA is said to be looking at selling Champions’ League rights direct in some markets where there’s no longer quite the demand for broadcast rights. In the UK, BT recently renewed their rights, so there won’t be a subscription video on demand (SVOD) UEFA-run system in place in the UK anytime soon.

In terms of the Premier League, the most recent overall UK TV rights package was down on what is had been previously, coming out at £5 billion compared with £5.4 billion three years earlier. The suggestion is that Sky and BT are broadly happy with what they’ve got, and are not prepared to spend substantially more. To do so would simply mean raising prices for their customers. When you set that against a backdrop of an overall shift away from satellite and cable and to SVOD services like Netflix, there’s an existential threat to the larger bundles that the likes of Sky and Virgin Media sell, and now is not a good time to significantly increasing their subscription costs.

But let’s do some back-of-a-napkin sums to see what would need to change for the Premier League to shift to a direct SVOD model.

We’ll make some assumptions. First, that the Premier League would need to move all the games it plays out of the Saturday 3pm window. At the moment, there’s a widely observed “blackout” rule that prevents TV broadcasters showing football between 3pm and 5pm to protect live audience attendance at all levels of the game. The Premier League, Football League and the FA all adhere to this.

But the Premier League could certainly move all its fixtures into earlier or later slots, or play games on Fridays, Sundays and Mondays. They already have games across the weekend in these timeslots after all.

The next key issue we’d have to work around is the issue of a monopoly supplier having all the rights. Remember that as things stand, the Premier League need at least two rights-holders to avoid those competition concerns.

I’m going to completely avoid the question of whether the UK’s internet infrastructure is sufficient for to enable millions to watch HD (or 4K) football simultaneously (see my last post for details on the impact of radio listening on that). Nor am I exploring issues around people who simply can’t stream HD or better video because their internet isn’t up to it. Both of these are significant concerns. Remember that live video is much harder to sustain that pre-recorded video.

And finally we must surely assume that the Premier League would not accept any outcome that saw them make less money than they currently do. Indeed, these numbers are going to be based on simply maintaining the current revenue levels.

Let’s do the sums! All figures are based on the 2019-2022 seasons.

Total Global TV Premier League Revenues – £9.2 billion

Total UK TV Premier League Revenues – £5.0 billion (Sky/BT/Amazon)

UK Rights per season – £1.667 billion (The numbers above are for three seasons)

Season duration – 10 months (Would you subscribe to a Premier League SVOD service when there was no live football? Let’s assume that it’s essentially “free” during this period)

Revenue required to achieve equity with current TV deals – £2.167 billion

Note that I’m assuming a 30% cost of sale which is almost certainly too low. That’s for building a service, hosting, distributing, marketing, and production costs (currently those costs are essentially swallowed by the Premier League’s rights-holders). I suggest that it’s low because marketing in particular is expensive, and we haven’t even considered the fee that, say, Apple will want to take just for the privilege of selling subscriptions via their App Store. But we’ll stick with that 30% for now.

Assumed monthly subscription – £20

Note that this is high compared with what Netflix, Amazon, Disney+ or anyone else is going to be charging. But I think that this is the absolute minimum that they could charge.

Recall that Sky Sports currently costs around £18-27 a month, but may require you to subscribe to other services or pay for kit hire, while BT Sport costs £10-£30 depending on other services you have. Both charge HD fees on top of this.

Numbers of subscriptions required (i.e. households) – 10.8 million

To be clear, that’s a big number.

Neither Sky nor BT publish the number of subscribers they have for their sports services, but I don’t believe that Sky has as many as 11m Sky Sports subscribers. 4-6m seems a likelier range. And BT’s numbers will probably be substantially lower.

Obviously both groups’ offerings include a wider package of sports beyond Premier League football.

And in fairness, I should also note that I have excluded revenues from pubs and clubs in this calculation.

But would nearly 11m people pay £20 a month to just watch Premier League football? What about fans of Football League teams or Scottish teams? Or La Liga or Serie A?

Current Sky Sports and BT Sports viewers get a wide selection of sports for their money. Would viewers give those up in return for paying less and getting fewer sports?

I think the maths is challenging.

If we raise the cost to £25 a month, we still need 8.7m subscribers, and if we jump to £30 a month, that number falls to 7.2m. If we lower the cost to £15 a month, then we need 14.4m subscribers.

To put those numbers in perspective, a piece of research commissioned by Ofcom and published earlier this year suggested that Netflix has 9.9m subscribers in the UK, while Amazon has 7.7m. Going into the market knowing that you had to get to a significantly bigger number that either of the existing SVOD market leaders is challenging to say the least.

The final thing to consider is that if the price gets too high, piracy issues come into play. Dodgy streams are relatively easy to come by, and technology facilitates that. Kodi is widely (mis)used to get foreign streams in spite of extensive anti-piracy initiatives led by the Premier League.

All said and done, I just can’t see how a Premier League SVOD service can make financial sense. Sky and BT can amortise some of their Premier League costs in running their services across multiple sports and services. It’s possible that Sky don’t make enormous profits from sport at all, using it to make the rest of their offer more attractive. BT is almost certainly losing money on BT Sports. They’re using it as part of a broader phone/broadband subscription incentive scheme.

Even though many viewers would love it, the numbers just don’t seem to stack up.

A Premier League SVOD service in a country where rights are not generating too much would be interesting, but it has been overseas rights growth that saved the Premier League’s bacon this time around. The experiments that UEFA is consdering will be interesting, although I fear that going it alone is a psychologically harder thing to do than as part of a bigger bundle.

The NFL is always the most interesting TV rights case, where they do really seem to have their cake and eat it. They sell rights to NBC, CBS, Fox and ESPN (Disney), while also keeping some rights for their own NFL Network, with some Thursday and UK games as well as Redzone – their live show that cuts between all the fixtures. Beyond that there is the Sunday Ticket which is for games that don’t feature local teams (the US networks have to show local games to local audiences). Finally there is NFL Game Pass which does a similar thing to the Sunday Ticket, distributed via an app.

One way or another the NFL manage to sell the same rights to multiple parties, and keep them all happy. That’s not something the Premier League has managed. And unlike many of the US deals, the UK deals that the Premier League offers, do allow the broadcasters to distribute games via their apps.

While you can envisage the Premier League offering, say, a Manchester United Season Ticket that got you all their fixtures live, that would surely mean less value to Sky and BT of their exclusive rights.

In the end, sports administrators want more money for their product year on year, but pushing those revenues much beyond inflation means something has to give somewhere.

Amazon seems to have shown that it’s possible to stream live sport at significant volume – although I’m sure some didn’t have as good an experience as I did. Compared with the experiences that Australian Optus subscribers suffered at the 2018 World Cup, it’s been a walk in the park. But financially, it doesn’t add up right now.

However, this certainly remains an area to watch.



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