Next round of football broadcasting rights may bring great change

By FootballBusinessMatters

I guess one of the effects of having 3 year cycles for broadcasting rights contracts is that no sooner is one cycle in place then the games start for the next. Clearly the 3 year cycle is timed to allow sufficient time for pay back for the rights holder but short enough to keep taking advantage of the inflationary cycle football finds itself.

The latest episode in football clubs and their respective organisations extracting the maximum it can from any rights holder appeared in the form of comments made by Manchester United’s Ed Woodward during their regulatory earnings call.

In that call he predicted that both Amazon and Facebook would try to win the rights to screen matches in the Premier League, Champions League and Europa League in the 2019-22 award.

The introduction of additional competition is welcome at a time when viewing figures for live sports have not only stalled but fallen in some markets. Not only are the top numbers looking unhealthy but there’s a significant demographic switch taking place.

For example, ESPN’s “Monday Night Football” has fallen by 5%, and Sunday afternoon audiences for Fox and CBS are down 11 percent and 19 percent, respectively. (source: Nielsen)

Even in the UK the trend is down with Sky losing 14% of its average audience year on year, last season. To balance that, initial figures for 2017/18 show a steady improvement.

The second factor is age, TV viewers are getting older, whilst younger viewers prefer viewing via social media on presumably mobile devices. What’s not clear is how that impacts advertising as it can be argued a more mature audience has greater spending power thus making advertising more attractive.

When Twitter streamed 10 live NFL matches earlier this year, the demographics were very interesting, contrasting with the experience of traditional TV channels. More than 55% of the audience were under the age of 25.

Additionally, 25% of the audience were international. In a heavily geographically segmented rights market like football (our football not American football) this might cause an issue as it’s difficult to see how other broadcasters can be offered exclusive geographical packages when global platforms are streaming the same product.

Nevertheless, it’s clear the huge global internet platforms are keen to enter the market, and it’s inevitable that football will be included.

It’s early days, and I’m sure not everyone has worked out the ramifications so perhaps the internet giants need do more than just stump up huge amounts of cash in order to win rights packages. However, what is for sure is that they are trying to do so.

Facebook have entered the market to acquire digital rights to the Indian Premier League, whilst Amazon will stream their first NFL game this week.

Facebook won the rights to live stream 46 Mexican soccer league games, including playoffs; at least 22 Major League Soccer matches with an additional 40 highlights episodes. Outside of football they’re broadcasting free the World Surf League; 2017 CrossFit events and some 2017-18 UEFA Champions League matches.

Football is the most popular sport on Instagram. Instagram says one in five (21 percent) of its users are football fans, which amounts to over 140 million of the social network’s 700 million-plus users

Of course, the satellite and cable companies that have built their businesses on the backs of live sports dismiss the threat, at least for the time being.

Simon Green, Head of BT Sports finds it difficult to see the business model for the internet giants “It’s hard to say how the sporting-rights market is going to play out with those brands. What is their business model?”

Industry analysts consider that the entry of new competition will force rights prices even higher, possibly by as much as 45%.

That being the case, the existing 3 year Premier League deal valued at £8.1 bn (including overseas rights) will be dwarfed increasing to over £11.7bn, or putting it another way, teams receiving £120m this year for mid-table performance would see that increasing to around £170m.

The effect of such inflation would be very interesting. Yes, it would see further enormous increases in transfer values, but certainly with regards to the Premier League, wouldn’t see corresponding increases in wage levels because of the constraints of Short Term Cost Control. The increase in prize and broadcasting monies would however see a further increase in the gap between the successful clubs and the less successful, something that UEFA through Ceferin is keen to avoid. Equally the Premier League, whilst wanting the “big clubs” to be globally competitive must realise that an uncompetitive league is not good for business nor fans.

The net effect would be that clubs become hugely profitable, even more so than now. There’s a limit to the infra-structure and stadium spending clubs can do, therefore the excess cash can only be returned to shareholders.

The impact on fans? Personally, I think it would be positive. Whilst the increased competition for rights pushes the prices for rights up, the entry of the internet giants should reduce subscription prices, and in some cases eliminating them altogether.

The key to making sense of all the extra cash that flows into football as a result of the above, must be making sure that clubs use the cash wisely and return some of those riches into their local communities and grassroots football. As a result society as a whole would benefit from football’s riches not just the broadcasting giants and club owners.

There are huge changes ahead in the manner which football is to be delivered to non-match going fans, I hope the custodians of the game, and our clubs will make use of the riches in a manner not only to keep the game attractive to us fans but also to a greater wider use.

Interesting times.

One thought on “Next round of football broadcasting rights may bring great change

  1. Good read that.

    With the final paragraph summing up nicely maybe some fears about future massive tv rights deals.

    If the increased revenues are not suitably or better, more evenly distributed between the clubs and furthermore agreed values or percentages allocated to local community projects and the grass roots of the game, schools and local associations… then football could shoot itself in the foot.

    The last thing we need is transfer fees and player wages going even further into the stratosphere.

    Football needs to remember from whence it came, re-discover its roots and engage better with its core suppport… the working man and families wanting a fillip of excitement and passion once or twice a week.

    Don’t get me wrong, we all like to watch the best football we can and the Premier League is arguably that in terms of domestic leagues, but equally, maybe moreso, most football fans long to see local, homegrown players come through and succeed… and in order for that to continue, the grass roots and academies need to be supported effectively and for the long term.

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s