The authoritative Swiss Ramble takes a look at the impact of the new three-year TV deal on clubs’ revenue, particularly the changes in the distribution system for the overseas TV deals. My observations are in square brackets,.
In 2018/19 each club received equal shares for 50% of domestic TV £34m, overseas TV £43m and commercial income £5m. Each league position was worth £1.9m (merit payment), while each match broadcast live was worth £1.1m (on top of £12.2m for a minimum of 10 games).
Each club received a total of £82m from equal payments with the only differences in Premier League TV distribution due to: (a) league position, ranging from Manchester City £38m to Huddersfield £2m; (b) live TV games, Liverpool £33m to £12m for four clubs [somewhat surprising to find Watford in this group].
Total Premier League TV rights for 2019-22 cycle rose 8% (£0.7 bn) from £8.5 bn to £9.2 bn. UK domestic rights actually dropped 7% (£0.4 bn) from £5.4 bn to £5.0 bn, but this decrease was more than offset by overseas rights increasing by 34% (£1.1 bn) from £3.1 bn to £4.2 bn. The increase in PL overseas TV rights is particularly striking. These now average around £1.4 bn a year, up from £1.1 bn in the 2016-19 cycle. As recently as 2007-10, these were only worth £200m a year. [In part this reflects the attractiveness of Premier League football to East Asian gambling cultures as it is seen as free from fixing].
Overseas rights are now worth almost as much as UK domestic rights: 45% compared to 55%. In 2001-04, they only accounted for 11% of the total. It would be no great surprise if they overtook domestic rights in the next 2022-25 cycle. [Will this lead to a renewal of pressure to stage some games overseas?]
Overseas TV rights have always been distributed as equal shares by the Premier League, but this was changed in the 2019-22 deal. Clubs will continue to share current levels of overseas revenue equally, but any increase will be distributed based on where they finish in the league. [This was the result of pressure from the top six with the threat of a breakaway to a European Super League always in the background].
Based on the 7% fall in domestic rights and 34% increase in overseas rights, domestic revenue will drop by £110m, but overseas revenue will rise by £295m, resulting in a net increase of £185m a year to be shared among the 20 clubs in the Premier League.
The change in distribution for overseas revenue means that final league position is increasingly important. As Scudamore put it, this is “a subtle change that further incentivises on-pitch achievement.” Well, yes, though it is also likely to further grow the gap to the Big Six. [However, note that FFP rules have changed in a way that benefits challenger clubs like Everton and Wolves. VAR may give smaller clubs more penalties away from home].
One result of the change in overseas rights distribution, exacerbated by the fall in domestic rights, is a big difference in the additional income from the new TV deal. For example, the increase for the 1st placed club £21m will be twice as much as the 10th placed club £10m. The top 10 clubs all benefit under the new distribution model, while the bottom 10 clubs would have done better under the old approach.
As an example, City will earn £71m from overseas rights, i.e. £13m more than they would have with the old approach. In summary, all 20 Premier League clubs will earn more from the overseas rights increase, but it will be yet another case of “the rich getting richer”. In fact, half of the total £295m increase goes to just six clubs.
Estimated Liverpool Premier League TV money for 2019/20, based on same league position and live TV games, would increase by £19m (12%) from £152m in 2018/19 to £171m. This means that their Premier League TV revenue would have grown by £25m (17%) from £146m in 2017/18. Comparable estimates for growth in TV revenue for other top clubs are:
- Manchester City, up £22m or 15 per cent.
- Chelsea, up £22m or 16 per cent.
- Tottenham Hotspur, up £18m or 12 per cent.
- Manchester United, up £7m or 5 per cent. [Presumably influenced by league position].
- Arsenal, £16m, up 11 per cent.
The Premier League noted that the maximum that any club can receive in total payments is 1.8 times the amount received by the lowest earning club, up from the current 1.6 times. The Swiss Ramble's estimates indicate that the ratio would indeed be 1.8 (though still the most equitable in Europe).
The Zurich-based analyst comments, 'On the one hand, it is difficult to argue with the Big Six’s view that they deserve more, as overseas fans are more interested in watching their games, but on the other hand the change in distribution makes it even more difficult for anyone to break into their exclusive club. Incidentally, it might also damage the “product”, as there is a risk that the Premier League becomes less competitive. The possibility of top clubs losing against less fancied opposition has been one of the competition’s key selling points up to now.'
One comment says, 'The bubble will burst eventually, but I’m not sure what will be the thing to "pop" it. Too many predictable match outcomes brought about by an unfair market for talent is one possible pin.' Possibly, but people have forecasting that the bubble would burst for years and it hasn't.
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