Premier League overseas TV rights: English top flight makes concessions to Big Six but still treads carefully
You would be forgiven for missing it but, muffled somewhat by the noise surrounding Amazon’s purchase of a Premier League broadcast package and the news of chief executive Richard Scudamore’s imminent departure, today saw another significant announcement regarding English football’s top division.
From the 2019-20 season, when the next set of broadcast contracts takes effect, the formula for distributing the proceeds from selling live rights is to change.
Currently, revenue from overseas broadcasters is shared equally among the 20 clubs in the league. Under the new deal, some of that revenue will be allocated based on merit; teams that finish higher in the table will receive more.
The decision follows months of bargaining, forced by the so-called Big Six clubs – Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham – who believe they drive interest to the world’s most popular league and should therefore receive a larger slice of the pie.
The promise of a bigger share of cash to a well established elite has, however, exacerbated concerns about the ability of smaller teams to ever bridge that gap.
Overseas rights on the rise
Overseas broadcast rights are worth around £1bn a year to the Premier League under existing contracts, which translates into equal payments of around £41m per club each season.
But, in contrast to flat domestic TV revenues, those figures are expected to rise sharply in the next cycle and beyond. As yet, only five of 80 international deals have been concluded but there has already been major growth: the rights in China, for instance, were up 1,000 per cent on the previous cycle.
Premier League sources expect the bulk of the outstanding deals to be done in the next three to six months.
The change, approved yesterday when it received backing from at least 14 of 20 teams at the Premier League’s AGM, will see any uplift in overseas revenue distributed on merit.
Assuming that overseas revenue rises, no team will receive less than the £41m they currently do but clubs higher up the table will get a larger share of the extra cash.
Compromise
It represents a compromise between the Big Six and the rest of the division and takes the heat out of a situation that simmered for most of last season.
Other arrangements were discussed in that time, with one formal proposal, which would have seen 35 per cent of overseas revenue allocated on merit, rejected in October.
Liverpool co-owner John Henry reiterated his view that the bigger clubs were being short-changed earlier this week when he said: “You cannot stick with the same media strategy forever any more than you can stick with the same football tactics forever.”
While they rejected some of the proposals, smaller clubs clearly feel sufficiently threatened by possibility that global behemoths like Liverpool could break away and form a rival competition, such as a European super league.
The European picture
Big clubs gaining more power is a wider trend. Next season, European governing body Uefa will distribute revenues from its Champions League and Europa League according to a new formula that favours teams that regularly appear in those competitions.
It is a more drastic measure than the Premier League’s, with Deloitte noting in its Annual Review of Football Finance this week that Uefa’s move may necessitate “alternative regulatory measures” in order to redress competitive balance.
While there will be concern at the direction of travel announced yesterday, the change is a small one and its impact has been capped so that the top team in the Premier League does not receive more than 1.8 times the amount of central revenue – comprising domestic and overseas television rights and relatively modest commercial income – of the bottom team.
That is an increase on the current ratio of 1.6:1 but less than the ratio of 2.1:1 at the league’s inception in 1992. It is also far more equitable than the other major European leagues – Germany, Spain, Italy and France – whose ratios are all above 3:1.
Unlike those leagues and indeed Uefa’s new model, the Premier League does not award merit payments based on results over longer periods, such as five or 10 years.
This means that smaller clubs which enjoy a high-achieving season – Leicester in 2015-16 being the obvious example – can cash in fully without their achievement being watered down.