October 11, 2017
Much has been written and spoken about recently on the attempt by the “big 6” to grab more of the seemingly ever increasing broadcasting revenues paid to the Premier league clubs.
Backed by Richard Scudamore, Premier League Executive Chairman, and somewhat incongruously Everton, West Ham United and Leicester City the “big six” attempted to change the existing rules on equal payments to all Premier League clubs arising from the overseas distribution rights.
In doing so the Premier League would have adopted a model of “merit payments” similar as to how an element of the domestic rights are distributed.
Currently the total revenues distributed to the clubs, are allocated as follows:
|Equal share||Shared equally among all clubs||
|Facility fees||Based on domestic TV appearances||
|Merit Payment||Based on final league position||
|Overseas TV||Shared equally among all clubs||
|Central Commercial||Shared equally among all clubs||
The distribution therefore gives payments ranging from Chelsea £150.8 million as Champions down to Sunderland in 20th place receiving £93.5 million.
The proposal put by the “big 6” wanted to change the current equal distribution of the overseas TV monies to a model similar to how the domestic revenues are shared. Assuming the model was identical this would result in Chelsea having received an additional £14.9 million, totaling £165.7 million and Sunderland’s share falling by £14.9 million to £78.6 million.
The ratio from the highest receipts to the lowest would rise from 1.61:1 to 2.11:1. This is a significant rise, and in my opinion further stretches the claim that the Premier League is a highly competitive sporting competition. There’s a real danger in this proposal that by reducing the competitiveness even further the league becomes less interesting particularly to overseas markets.
Now, Richard Scudamore and the “big 6” are far from stupid and seldom would do anything that would harm their income streams, willingly at least. So why are they proposing such a move?
Their argument is that as the largest and most successful clubs with the biggest global followings they should enjoy a greater share of the rewards. However, I believe there’s a different reason.
It’s my belief that this is a response to the fact that 6 teams can never fill 4 Champions League places. In the absence of winning the Champions League, 2 teams that budget for participation in the Champions League will each year be disappointed and have a resulting shortfall in revenues through only qualifying for the Europa League.
By taking a greater than equal share of the overseas monies they can effectively cover much of the shortfall created from the certainty that any 2 of the 6 face each year.
The response of the other 14 has been interesting. 11 have flatly refused for obvious reasons. It is believed however that 3 clubs, thought to be Everton, West Ham United and Leicester City have supported the redistribution. The assumption must be that they believe finishing in the top 10 will result in a net increase in income, despite the fact that the teams finishing higher will see greater increases thereby further increasing the income chasms that already exist.
The key number to changes to Premier League rules is 14. When established the Premier League determined that a 66% majority was required to change rules.
Given that there is a “big 6” and the other 14 this is very interesting. Rather than being subject to the demands of Richard Scudamore and the largest clubs, the “14” have it within their power to determine changes in rules themselves.
How about the “14” take on the “6”?
So how about a reversal of the idea that partial merit payments are made on overseas monies by looking at the way the merit payments for domestic revenues are calculated?
Currently the bottom club (Sunderland last season) receive 0.4% of the merit payment pool, this increases position by position to the Premier League Champions receiving 9.5% of the overall pool.
This is calculated by the bottom club receiving 1 share, 19th club receiving 2 shares, 18th club receiving 3 shares all the way up to the Champions receiving 20 shares.
What would happen if all clubs received an equal share, 5%, of the merit pool? (i.e. effectively ending the merit pool arrangements and increasing the equal share element of the payment system)
The effects of equal distribution of domestic TV monies would be as follows:
|Current £m||Change £m||New £m|
|West Ham U||116.6||1.0||117.6|
The only variation in monies received would be the element relating to appearance on live domestic TV, the so-called Facility Fees.
The effect though is huge, the ratio between the top amount received to the smallest amount falls from 1.61:1 to 1.19:1.
Some of the 14 would have to vote for something that would almost certainly reduce their own income in the current (or next) round. However, the argument would be that the increased competitiveness would assist increasing overall revenues negating the potential loss.
The “big 6” would scream and shout, no doubt. They’d warn that their ability to attract the top talent would be damaged, their ability to compete in Europe would be compromised thereby reducing the attractions of their clubs to their sponsors, further reducing income and damaging the Premier League.
I don’t buy the reducing the attraction of the Premier League. Surely as a more equal and level competition with a greater probability of different results and therefore a greater variation in league positions is healthy and makes the product more attractive?
From the beginnings of the Football League in 1888 up to 2011 there had never been the same 7 clubs occupying the top 7 places twice in any order. Such was the competitiveness of football over 112 seasons. Since 2011 it has happened 3 times, 2012, 2014 and 2017. (thanks to http://www.angryofislington.com for that fact)
The Premier League is losing its competitiveness. The “big 6” want to reduce it even further. The irony is that the other 14, far from ceding to their demands, have it in their control to change the rules in favour of a more equal and therefore competitive competition.
Do they have the courage to do that?