by Tony Attwood
In February 2015 the Premier League announced that it had sold the television rights to its games for a record £5.136bn, 71% above the amount it gained three years before.
Sky paid £4.2bn for five of the seven TV packages while BT Sprout paid £960m for the other two in the record TV rights auction. The deal began in August 2016 and will finish in May 2019.
To give a more clear example of what all this means, after the auction, BT said that its cost equated to £7.6m per game. Sky said their bill was £11.07m per match.
Straight after the auction the Premier League chief executive Richard Scudamore said the money raised from the auction would be invested by clubs in making improvements to stadiums as well as “youth development and good causes” and said clubs would continue to “put on the best matches that they can”.
In effect as a direct result, the value of players on the transfer market shot up, and prices reached levels hardly imagined before, although the Premier League did say it planned to invest £56m in grassroots projects, including 50 artificial pitches. That’s about the income from five games – or one weekend’s worth of football.
Here is the historic pathway of TV revenue – and I run it here because it contains a rather interesting event within it.
Following the last round of bidding Ofcom started to investigate whether there is enough competition in the way in which the broadcast rights to Premier League matches are sold, following a complaint by Virgin Media in November. It then published its findings basically saying it had better things to do with its time than look at the way football was organised on TV. Nothing changed.
So if it is all going to stay the same let us take a look at the figures, and the oddities within.
There was a huge leap in prices bid between the first and second bidding round (the 351% rise). The rise in fact was even greater but I’ve ignored the fact that the first period covered five years and the second four. This is balanced to some degree by the fact that in each period the number of games on TV went up.
After that first increase there were all sorts of oddities. A second massive rise (79%) followed by an actual decline of 15% then another huge rise, then a tiny rise, and two more huge rises.
Which shouts out one message – the situation is unstable. It is a bit like the Stock Market which rises and rises and rises, and so people pour more money into the market, nodding when seeing the “market can go up and down” warnings, and then crying their eyes out when suddenly it corrects itself and goes down.
The fact is football is always run on a “whatever has just happened is what will always happen” basis. You can see that with Arsenal – one bad match and the team is rubbish and everyone should go.
But two rises of 70% after such previous instability means something has to give soon, and the signs that this will happen have appeared in a Bloomberg report that says that only Chelsea are now drawing more viewers this year, while the audiences for matches involving Tottenham Hotspur, Liverpool, Arsenal, Manchester City, and Manchester United matches have all shrunk. Which means subscribers are starting to unsubscribe and advertising revenue is down.
In fact the average live TV audience halfway through the season is down 11% of the first half of the season.
What really makes this bad news for Sky and BT is that they are committed to paying the income for another two and a half years. If this decline continues then by 2019 they will be haemorrhaging cash because advertising rates are organised very close to the actual event. Only sponsors commit to paying fixed rates way ahead – and even then, some have rates related to audience size.
And there is worse. Compared with the 2010-11 season, Premier League TV audiences are down 22% per game this year. And this in a season when no one is quite sure which way the league is going to go. Indeed in the Telegraph today eight of their esteemed pundits give their opinion on how the top six will finish, and everyone seems to come up with a different idea.
Worse again, the decline in watching big games is happening elsewhere. The NFL’s average audience up to first week of November 2016 was down 14% on the same period the year before.
Part of the problem is put down to the drift away from live TV in general, so suddenly live football has become an oddity. Part of it is that football on TV is no longer unusual – we expect it to be there all the time. Also it is now so easy to get an illegal live feed that people simply don’t need the sports channels any more.
And it is just possible that part of the problem is that there is a perception that there is something wrong with what TV gives its audience. This might be a realisation that the way the games are described really isn’t quite what is going on (a topic we’ve covered many times). It might be a perception that there is something wrong with the football and its refereeing. Or maybe people are just fed up with the lack of real insight and knowledge of the people paid to comment.
While it is quite true that the ranting of Paul Merson against the appointment of a foreigner as manager of Hull was not during a live match, the nationalistic anti-foreigner rave which he shared with Phil Thompson which had no facts to back it up was one rage too many for some. While such ravings might attract some right wing racial purists, it is not that attractive to quite a few others, and such an approach might not be doing the station much good.
But now let’s consider what might happen next.
Supposing at the next round of bidding it is quite clear that the drop in audience and advertising revenue has continued across three years. Then the bids put in are going to drop.
At this moment clubs will find themselves packed with players for whom they paid £50m+ as the base cost of a jobbing defender, with all on salaries of far in excess of £100,000 a week. Those players will suddenly become worth far, far less on the transfer market, and because they won’t willingly accept a drop in their income, they will become unsaleable.
That doesn’t mean this will happen, only that it might. Some clubs will ignore such a possibility and keep buying – right up to the moment that TV confirms it is paying far, far less for matches, and so risk collapse. Others will keep on, trusting that their owner will bail them out no matter what. And some will keep going even though they have no escape route, because they know nothing else, and then will suddenly hit the wall.
If I am still here reporting football in two and a half years time, I think it might be an interesting story that is unfolding.
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