The recent £5.136 billion deal for sale of the Premier League’s UK live TV rights for 2016-19, coincided in the week I was recuperating from a knee operation
Accordingly I had somewhat more time than usual to dedicate to monitoring the press speculation about the bidders, the fact it had clearly progressed into a second round, and peruse and engage on social media.
Is football a matter of life and death?
I watched the Premier League’s press conference and it got me thinking back to Bill Shankly’s infamous quote, “Some people believe football is a matter of life and death, I am very disappointed with that attitude. I can assure you it is much, much more important than that”. I then tweeted my view that the auction outcome was hugely important for Sky as a result of having lost Champions League to BT from the commencement of the 2015 Season. A follower then responded that was a warped view of important, and it was “obscene” not important”.
I tend to agree to disagree and then slightly agree with this riposte.
Supply and Demand
So why then from 2016 will a Premier League UK broadcaster pay in excess of £10 million for each live match? Why do companies that are publicly listed, and whose share price is hugely important, pay what is viewed by the average punter, as exorbitant amounts of money? Why do global corporations want to, and feel they are obliged to cover the Premier League? Supply and demand!
The Premier League is inarguably what it is, because of Sky’s money. Since 2004-07 Sky has paid in excess of a billion pounds for live Premier League rights. For 2013-16, Sky and BT Sport cumulatively paid £3.018 billion.
A 70% increase in the rights value for 2016 and the subsequent two Seasons sees BT’s 38 live games increasing to 42, and Sky’s 116 to 126. 168 matches (out of 380) in total; that does not include Saturday 3pm matches, due to the constraints around broadcasting during the “closed period” (to protect attendances at matches etc). Scotsman Article
Scudamore made an extremely accurate statement at his press conference: “Am I surprised? Little old Premier League here, it’s gone much further than football as a market, it’s a bigger percentage play”. And that is exacly why the value was driven so high. So much is at stake. The Premier League has tailored its product to broadcasters’ needs (as they know what the consumer wants and accordingly will pay for it, handsomely). There is the quad play factor (internet, phone, TV and mobile from the same company – note that BT has just acquired EE); the auction process is driven to deriving maximum revenue; there is market tension in not knowing who else is bidding yet hearing lots of rumours (Netflix, Google, Bein Sports and Discovery were all mentioned); and broadcasters need content, given that live content is “king”.
Stadia are world class, and the talent is of the highest calibre. Yes it is easy to look at Mario Balotelli and other high earners, and question why they are paid the exorbitant wages they command through highly paid agents, but if you can forget Moody Mario and look at the environment in which fans can attend matches, safely, and the positives generated by the Premier League, then maybe just maybe, you might be able to reconcile and justify this broadcasting revenue.
Grassroot and community projects all over the country benefit, (http://review.premierleague.com/communities) and no doubt stand to gain even more from the commencement of the 2016 deal. There will be a huge clamour (The guardian article). The Premier League is not just the organising entity for England’s top football Clubs; it is a world-renowned business in its own right. It is a global product, and with that standing has been able to take its brand worldwide, and influence business (and regularly features on Downing Street missions abroad), politics and launched a plethora of good cause initiatives such as Kickz in partnership with the Metropolitan Police, or Premier Skills (in numerous territories) or Magic Bus in India. The Premier League’s press release of 10th February 2014 cited £168m investment over the 2013-16 period providing opportunities for young people – in good causes and school sport. The broadcast partners, all over the world, are generally an intrinsic supporter and voice in generating the positive messaging, and are able to film ancillary content that can be shown in 175 countries, and to over 650 million households.
The importance for Sky
Sky’s business model has been built on the Premier League since 1992 when it spent £304 million. Who remembers the first televised match? Nottingham Forest v Liverpool. The importance of remaining in the Premier League will not be lost on Clubs like Forest, Middlesbrough, Leeds, Wigan and Bolton to name a few who were for so long used to the riches of the Premier League. On the other hand, I am sure there were some who were celebrating Wigan’s demotion; not due to their style of play but moreso the constantly huge swathes of empty seats in their stadium.
From 2004 until 2011 I was at the Premier League, where I spent a lot of time working with Sky to protect their commercial rights, i.e their exclusive ability to broadcast live Premier League matches in UK pubs and clubs. Foreign decoder cards were being supplied to pubs at a cheaper price than it cost for a Sky commerical subscription, and provided more matches, and we engaged in a number of crinimal and civil actions to protect the Premier League’s intellectual property rights; ultimately the value Sky had paid for its exclusive rights. It is assumed Sky recoup substantially more of their outlay via commercial subs, as opposed to domestic subs, hence the legal actions I was involved in that went all the way to Luxemburg’s European Court of Justice, and that indeed are still continuing in the UK. Protection of IP provides comfort to licensees that the rights owner will protect its customers’ rights, and try and ensure their value is not diluted (substantially, if at all). Clearly the Premier League has been successful in this respect, because its customers keep coming back to the table with decent sized cheques.
The cost of winning or losing
Sky were outwitted by BT Sport in the 2013 auction, and BT have shown they are a sustainable player in the sports rights market, with deep pockets; as evidenced by snatching UEFA Champions League live rights from Sky, for Season 2015 onwards; leaving a large gap of prime time broadcasting space on Sky Sports.
It was interesting that the Premier League created a Friday night package for the first time. This can be viewed as being beneficial to BT, whom if they had been successful in obtaining Pacakge E, could conceivably had live sport (football) on almost every night of the week, with English, Scottish and European football rights. Sky obtained it, and with the retention of flagship packages which enable them to do Super Sunday, their offering is attractive and compelling. The churn factor has to be at play. If significant content is lost from a platform, will its customers move across to a competitor? That then reflects in the P&L, and the share price.
Going back to that tweet, of course it is a warped view of importance, given the current affairs and situations we face on a daily basis, when you know that the owners, players and agents are going to be the main beneficiaries of this waterfall of income to the Clubs. Even if Richard Scuadamore once again signed of his embargoed announcement to Clubs with “Don’t spend it all at once”!
However from a business point of view, this auction process was hugely important for the UK sports rights market because if Sky had lost out heavily to BT or anyone else, there would have been a huge gap in their premium content programming which could have had a knock on effect for their business. With the best will in the world, subscribers were not going to hang around for Sky’s netball coverage, when they could be enticed to migrate to BT with an attractive wifi and phone package.
Wait until the central sponsorship and international rights deals (where there is clearly growth potential) are concluded, and my Twitter follower may well be able to use the word “obscene” again, whilst the rest of the sports world might agree but will look on with envy.
Football may not be a matter of life and death, but it clearly plays a huge role in society.