Football fans are rejoicing at the news that their efforts resulted in the put down of another money grab effort by the twelve or Europe’s most popular and richest clubs to start a league of their own. Victory laps are being done yet, the culprits, the brazen clubs continue to remind us that there is a long battle to come.
As of right now, Real Marid, Barcelona and Juventus have not withdrawn from the European Super League (ESL) project. Joan Laporte, Barcelona President speaking to Catalan TV had this to say:
“We will speak more about it when the time comes but for now we understand there is a need for it, even though our members will have the final say’
“Big clubs contribute a lot of resources and it’s absolutely necessary that we have our say on the distribution of money [in European football].”
He echoed the primary sentiment of the ringleader of this venture, Real Madrid’s President Florentino Perez:
“We’re going to continue working, the project is on standby.”
Finally, when you read the cadre of pseudo-apologies from the English clubs they never commit to not seeking to enter such a venture again. In fact, their comments leave the door wide open for the eventual participation in the ESL at some time in the future.
Supporters will read those comments and be frustrated, after their feelings of elation at having felt they stopped the venture in its tracks. While clubs have acknowledged fans’ “power,” when you consider what was at stake for these clubs, its easy to not wonder if it was little more than lip service.
Why though? The fan wrath was intensely loud and passionate, why would the clubs risk that level of anger again? Simple, money. There is too much money floating around in the game and they want it.
Their view is, they are the draws. People tune into the Premier League and Champions League to see the likes of Arsenal, Manchester United, Liverpool, Real Madrid, Barcelona and so on. They aren’t watching Aston Villa vs West Ham or Ludogarets vs Slavia Prague.
That’s not to diminish those ties or any potential ties like that but they don’t have the draw that the bigger names do. With the way monies are being distributed, the big names want to control that.
So how did we get here? How did a sport, which is based on the merit of competition and challenges on the pitch get to this point? Look no further than the years 1991-1992.
1991-1992 Football Opens Pandora’s Box
1992 will go down as the year that football began down the self-destructive path it finds itself at now. Two of footballs biggest competitions, the European Cup and the English First Division decided to embark on new paths, each with a similar goal in mind – control.
The European Cup first launched in the fifties as a 16 team straight knockout tournament with only the champions of Europe’s domestic leagues invited to participate. In 1991, UEFA overhauled the format adding a round-robin group stage and changing the name from the European Cup to the Champions League in 1992.
1992 would also see the launch of something more significant on the European scene. Clubs from England’s Football League First Division decided in February 1992 to breakaway and take advantage of the a new lucrative TV rights deal.
The league was formed on the backs of the big 5 in England at that time, Arsenal, Manchester United, Liverpool, Everton and Tottenham. Arsenal’s David Dein sounded out the FA to gauge their interest in the league. With their history of distrust of the Football League, the English FA released a report in June 1991 that essentially argued for the creation of the Premier League with the FA as its ultimate authority.
The first division clubs resigned en masse in 1992 and the Premier League was formed as a limited company in May of that year. The newly launched league was given commercial independence from the FA and it had the ability to negotiate its own broadcast and sponsorship agreements. And to validate the decision, the argument was made was that this new league with its commercial possibilities would allow the teams in the league to compete with the continental giants (sound familiar).
Fast forward to today and promise of the league has been met with sustained largess and riches that even David Dein and Greg Dyke probably didn’t forsee.
The Premier League’s Riches
No other statistic highlights the power and potential of the Premier League than this – at its formation in 1992 the 20 clubs combined revenue was £353 million and according to Deloitte’s Annual Review of Football Finance 2020 the current revenue is approximately £5.1 billion. That translates to a compound annual growth rate (CAGR) of 5.1%. If that CAGR holds with the next 5 years that revenue growth could pass £6.1 billion.
And through it all the disparity of the leagues richest clubs continued to grow with the average annual revenue of the leagues top 6 averaging out to £500m per year.
The Premier League saw its revenue finally break the £5 billion range for the first time in the 2018/2019 season which was an increase of 7% over the previous year. The primary driver for this increase was the league’s broadcast revenue which accounted for 61% of total revenue for that year. Commercial revenue increased by 9% and accounted for the remaining bulk of revenue increases for the year.
It is however, the broadcast revenue and its continued growth that is of the greatest interest to the Premier League clubs. And why not? Based on current trends, its only going to improve due to the continued interest in football’s most popular league.
According to Top Media Advertising:
- An average of 1.5 million people turned their TVs on to watch a Premier League game during the 2018/2019 season.
- Premier League global audience rose to 3.2bn for 2018/19 season
- Premier League reached 1.03 billion homes around the world last season.
- Top-flight Premier League viewing figures are increasing a 21 per cent year-on-year, according to Sky Sports
With that kind of growth in viewers is it any wonder that the broadcast companies and advertisers are clamouring to offer deals to bring the league into more homes. However, this is where one of the core issues creates friction among the league’s big names
Understanding the Broadcast Rights
As we mentioned previously, the launch of the Premier League in 1992 was primarily driven by a desire to take advantage of and control the broadcast rights for the league. Having Sky Sports as the league’s broadcaster was a significant catalyst in changing the model.
With Sky Sports involved, the advent of subscription-based broadcasting came to the forefront with the ability to now turn homes into turnstiles capturing more fans than at the gate, so long as they were willing to pay for it.
Right now, the clubs within the league own their individual rights but collectively cede negotiation of those rights to the league. The league has a mandate to license the rights to approved broadcast partners.
Over time both domestic and international rights have continued to see significant increases. It should be noted that the recent domestic deal for the rights saw an 11% decrease from the last package. However, with the growth in international rights, that difference was easily made up.
However, it is the domestic market where the greatest increases can be seen. What is not captured and what can not be quantified yet, is the impact of streaming services into this picture. With the COVID-19 forcing the league and providers to scramble to bring the league into the homes of the fans, new services, like Amazon and Paramount+ (in the US) began showing the leagues for a subscription fee.
The Big Bad Broadcast Rights Issue
The issue for the Big 6 is the distribution of the money that comes in from any and all rights. Right now the domestic rights sharing is based on a 50:25:25 model. 50% of all rights are shared equally among all 20 clubs in the league. 25% are shared on a merit-based model, which is determined by the final league position for the season. The final 25% is a facility fee for televised matches and is varied as it will be paid based on the amount of times a club’s games are shown live domestically.
The overseas rights are distributed 100% equally.
It was widely believed that this distribution model doesn’t sit easily with the league’s big five and Spurs. The traditional league giants and recent add ons; City, Chelsea and Spurs all are of the belief that they drive much of the interest in the Premier League. It’s under that premise that they feel that the distribution models need to be renegotiated to favour them. Absent that, they would likely begin to look to other means to get the lion’s share of the monies they feel they are entitled to.
To summarize the impact of the broadcast rights, the Sports Business Institute of Barcelona said this:
The EPL is a powerful brand/product which has made the most out of its reputation over decades since 1992, when EPL was formed. The value of the EPL TV rights has been drastically increasing in the previous cycle until 2016-2019 period. An epic battle between broadcasters has been carried out in the last years to acquire the rights.
It is evident that there is a new media landscape in front of us that is transforming the established business models of the industry. Tech giants such as Amazon have entered the EPL media market and are willing to compete in this space. New ways of sport content consumption have arrived and the traditional broadcasters will have to rethink their strategies in the near future when it comes to offering attractive sport content.
Why The Sleazy Six Will Try Again
It would be easy to just wind this up and say that – money, is the biggest reason that these clubs plus their continental friends will try again. It wouldn’t be a disservice to end that way because it is true. However, there is more to it than just the money.
They want the ability to control the uncertainty that has arisen in the wake of COVID-19 and could make many clubs, even popular Premier Leagues, struggle to make ends meet. Former Tottenham chairman Alan Sugar had this to say on the matter:
“There’s a lot of problems ahead for the Premier League,” the former Tottenham chairman told the Associated Press. “There’s no question of that. I think the situation is dire.”
“Some clubs just simply can’t afford it,” Sugar said. “They work from hand-to-mouth. I know it sounds ridiculous, but they spend every single penny they can on player transfers and player wages, and they rely upon the income coming in to pay their bills … and if you stop the income coming in, then where are they going to get the money from?”
While the bigger clubs are better off than the rest, they are not immune from the problems. For instance Arsenal, have failed to grow their revenue with their continued drop down the table having an impact on their merit payments. Add into that the 58% increase in wages across the league in 2018 -2019 as well and clubs are going to have problems based on the COVID-19.
With all that in mind the big 6 are going to be looking for contingency plans for other sources of income. That is why the European Super League appealed to them. The quick ingestion of cash along with the protected nature of closed league which basically insures its members won’t struggle too much from outside influences.
Fans should be proud of their efforts this week, but they should no way be naïve enough to think that this battle is over. The first rumbling of a European Super League was mentioned as early as 1992. Charlie Stilitano of the International Champions Cup, and his company broached the idea 3 years ago and it was only last year when Premier League executives teased the idea of Project Big Picture. Each time, the idea grows and the parties involved get closer.
Finally, given the statements made by all parties, its clear that they are going to look to find a way to get this done. They are going to continue to explore ways to insulate and protect themselves while making as much money as possible. And given their arch-nemesis is UEFA, they might get an event that finally forces fans to throw their hands up and agree to it. Or not. Either way, they will try again.
Where does that leave the fans?
The unfortunate side effect of football becoming a global business is that fans have become nothing more than a mere afterthought. Local fans are now being called “legacy fans” as the big clubs look to optimize and grow fanbases outside of the traditional local markets.
That doesn’t mean fans shouldn’t give up hope. It’s likely many of the ideas offered to reign in the clubs won’t occur. You can’t force owners to sell shares in a free market economy and some fans (of the non-sleazy six clubs) may be okay with how their ownership is structured so support of implementing a 50+1 structure is off the table. But fans were able to show this week that their voices can be heard and the owners will take notice.
We may not get a seat at the table but through the events of this week and things like “We Care Do You” fans can make clubs react and the more they react to fans the more likely we are to see some of our reforms and desires come into play.
This tale of money is discouraging. It truly identifies the break down of the sport we all love, but we shouldn’t discourage we continue on and work to driving for as much of the change we want, that we can get.
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