As Sky’s stranglehold of the Premier League rights increases, the overall value takes a hit

The separation of the Premier League from the rest of the Football League in 1992 was a decision that transcended sport. Prior to this era, football’s reputation in the UK had been eroded by the chaotic influence of a mass culture of hooliganism, which resulted in a chain of major incidents of fan violence and a general feeling of contempt towards the game.

Few could have predicted the scale of economic potential there was to be found in the advent of the new Premier League ‘product’, which was conceived in the interest of boosting its marketability to global broadcasters and which has since grown exponentially. It was a move that enabled those in England’s top division to capitalise on international television companies’ investment, who were enticed by its unique competitiveness and the sense of unpredictability absent in other European leagues.

Talk of a seismic shift in the landscape of sporting rights and consumption has been simmering for over a year now, with rumours of digital mediums coming to the fore and threatening to challenge the monopoly of the likes of BT, Sky and the other pretenders, but which ultimately has not materialised.

In the wake of last week’s triennial auction for the broadcasting rights of the Premier League it was announced that the incremental rise of cost for the Premier League rights suffered a decline for the first time in nearly 2 decades, leading many to question whether the Premier League bubble is set to burst.

 

Why the sudden drop in price?

 

As has been the way for the last few decades, Sky Sports emerged victorious from the new TV deal. Having fended off major competition over the years from the likes of Setanta, ESPN and now it seems BT, the power dynamics are set to remain skewed in the favour of Sky. They have been awarded 4 of 7 available packages equating to 128 live matches between 2019 – 2022, which includes ‘first pick’ on fixtures as well as the inaugural Saturday 7:45pm and the desirable ‘Super Sunday’ slots, saving an unlikely £600m from the 2016 deal in the process.

In contrast, BT will have to fork out an increased sum per match to broadcast 32 live games, as per the single package it has opted for, citing a need for “financial discipline” as to why it will not seek to redress Sky Sport’s near monopoly. The overall price for the 5 packages shared between the two translates to £4.464bn for 3 seasons, representing an unforeseen drop from the £5.1bn amassed in 2016 and which bucks the linear growth of the last 20 years.

Often the motivation for these bidding wars is simply to drive subscriptions and users. The reality for those in the broadcasting business is that if you have sport, you will inevitably attract a worldwide audience to whom you can sell then sell other services, such as broadband.

Sky’s entire business model was predicated in 1990 on acquiring football which oversaw their emergence as the unparalleled market leader, having the predominate cable tv position. The idea that people are buying market share that they can subsequently monetise is also evident outside of the sphere of Football. Uber for example, in spite of its global ubiquity does not generate profit from its worldwide services. Rather, it operates in order to gain as many lots of users and eventually they will strike their profit.

Yet BT’s reluctance to lock horns with Sky now casts doubt over the effectiveness and sustainability of purchasing football in the interest of boosting consumer traffic. Those in the Football Association will be hoping that Amazon and the other digital pretenders will be ready to enter the fray by 2021 and create a bidding war. With BT now holding back, the value of the Premier League could be subject to further decline in the future.

 

Has the sporting aspect gone stale?

 

While the distribution of the remaining two packages comprised of midweek matches is likely to be resolved in the coming days, with talk of digital platforms such as Twitter and Amazon being earmarked as potential suitors, the abrupt fall in the value Premier League TV rights is symptomatic of wider moral and sporting flaws, through which the British public have become increasingly disinterested in the product and its repetitive format.

In June, The Financial Times reported that average viewing of Premier League football on Sky TV had plummeted to a decade low after having spent £4.2 billion to acquire the rights until 2019. Perhaps this can be tied in with the growing feeling of disgruntlement which resides in many clubs below the impermeable big six, who are gradually becoming disillusioned with financial inequalities embedded throughout the league.

The Premier League reached its zenith in the 2015/16, when Leicester City defied all reasonable logic and odds, as stormed their way to a title, showcasing elements of unpredictability and a galvanising intensity which have been integral to the broader image of England’s top division.

However, this was just a miraculous suspension of the theory that money inevitably prevails and those features which the league has prided itself on are diminishing rapidly. In last year’s campaign, the emergence of small leagues within the league became salient.

Life at the bottom end of the table was effectively settled by April, with Sunderland, Hull and Middlesborough having sealed their descent into the Championship through a consistent output of mediocrity. While at the opposite end of the spectrum, Chelsea’s resurgence had ruled out any hope of an exciting title race of the likes witnessed in 2012 between Manchester United and City which went down the wire and was decided in such euphoric circumstances.

On the final day of the last campaign, even Sky Sports were unable to conjure up any of the familiar cliches or marketing lines sold to us in the build up to kick off. There was only the matter one position in the race for fourth up for grabs, which hinged on a mostly exhilarating Liverpool side coming unstuck at home to relegated Middlesborough.

This time round, Manchester City are six wins away from sealing the most predictable of crowns before spring has even arrived in Britain. In August, Newcastle owner Mike Ashley vocalised his concern over economic disparities within the Premier League, affirming “I am nowhere near wealthy enough in football now to compete with the likes of Man City etc – not just Man City – where basically it is a wealthy individual taking on what is the equivalent of countries. I cannot and I will not.”

 

 

Indeed, Man City have spent spent over half a billion since Pep Guardiola’s arrival and correspondingly have raised the bar so high that even a title race next year seems almost out of the question.

The lucrative financial reward for survival (roughly £39 million) now completely outweighs that of winning a domestic trophy, which has fostered a culture of fear which pervades the league in which there is simply no time for long-term planning, or for promising young coaches and players to be afforded a real opportunity. It is no surprise to have witnessed the trigger friendly Crystal Palace abort their quest for more expansive football under the bright, inventive Frank De Boar after just 4 games, instead opting for a safer pair of hands in Roy Hodgson.

Predictably, the interchangeable faces of Sam Allardyce, Tony Pulis and David Moyes keep popping up and and their continued presence embodies the threat of commercial suicide that relegation has become.

The Premier League yields unprecedented financial power in comparison with the rest of Europe’s elite, but the compression on the previous deal for its TV rights indicates that it is becoming a victim of its own success and people in the UK are tuning out.

 

Who is looking out for fans and customers?

 

There is also big moral flaw that overshadows the hysteria and excitement of the Premier League auction. Richard Scudamore called it “a testament to the excellent football competition delivered by clubs”, something unequivocally good for the sport.

It leads one to question, who is looking out for the supporters? It is an issue which is continuously neglected and further emphasises a lack of care and empathy for fans, who in light of this new deal will potentially have to pay for 3 separate subscriptions.

In the economics of it all, there is a point at which people simply resist paying more. Additionally, the demand for live football has crystallised in the creation of new slots that speak of a considerable lack of empathy the interests of fans.

Earlier this season, the Premier League faced a backlash against its decision to place the match between Arsenal and Liverpool on Christmas Eve and while they eventually complied with popular demand for its rescheduling, it has only served to increase the chasm between the fans and clubs, raising doubts over the sustainability of huge TV investment for the welfare of football.

Moreover, the packages acquired Sky Sports will give way to the introduction of a new Saturday night slot and the Friday night 7:45 kick offs will become a regular feature. These changes add the complication of intentional scheduling for American and Asian markets, where deals for broadcasting grew by 50% respectively and suggests that the Premier League will look beyond its UK demographic and expand its global horizons.

 

Foreign markets are likely to keep the value of the Premier League afloat: what’s next?

To equate a cost of £4.464bn with some kind of crisis and to suggest the bubble is set to burst would therefore would be premature.

While this slump is viewers within the UK of the Premier League is certainly a cause for concern, there is so much latent potential in worldwide audiences to be unlocked that the creation of a European Super League in the near future could be an impending likelihood.

The sudden fall in value of Premier League tv rights is likely to accelerate the cavalier demands of the big six in England for a bigger slice of pie, which is not unreasonable given that their commercial appeal is what attracts the bulk of television investment. The financial persuasion of this may prove irresistible for the likes of Sheikh Mansour, Malcolm Glazer and no doubt Stan Kroenke who will be acutely aware of the kind of money a European Super League would generate.

The hope for fans of the Premier League is indeed that a digital medium such as Amazon, Netflix and Facebook will enter the fray and give the market a much needed shake up by 2021. The desired model is something akin to that of Amazon that last year acquired the rights to televise NFL’s Thursday night games and which was offered as part of an Amazon Prime account.

Digital platforms like Amazon Prime could conceivably offer a far more affordable package to its global coverage of around 90 million subscribers, which currently stands at around £80 a year compared with the required £75 monthly fee for both Sky Sports and BT Sport packages.

The expectation from many was that the likes of Amazon and Netflix would challenge Sky and BT this year. However Joe Weston of We Are Social spoke of some of the practical reasons for which the rumours did not materialise, arguing that “it comes down to timing. The Premier League rights – the jewels in the crown of the rights world – have perhaps just come around too quickly for the platforms to capitalise on. Can you imagine the outcry if the stream lagged? You only need to ask ITV what happens if you miss a crucial moment.”

In any case, 2021’s auction could prove to be the most significant event in football broadcasting since the separation in 1992.

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