Buddy Can You Spare Me a Dime?
Monday, 20 October 08, 06:01 PM · Comments (27)
Loads-a-money related questions from the trading desk of Mr. S Hortseller
As with so much of the modern economic world, the financial future of the Premier League has been predicated on an ever-rising market. What if that market stalls or starts to contract, if only temporarily? How much of a buffer do the Premier League clubs have against a serious contraction in income? To some extent the Championship has been through this with the debacle in TV rights a few years back but in the happy-clappy world of the 39th game, we have only ever been looking up.
Reading the following wise words of Mr. Hansen, (yes, I know the two concepts are mutually exclusive but it's 'be nice to honorary Scousers week') led me to wonder about when the financial situation might really start to hurt. Is there anyone out there sufficiently versed in football finance to give us an insight?
If I am correct in thinking that 2010 is the date for the new contract, then while on the one hand clubs are contractually entitled to their monies for the next couple of what could be difficult years (assuming TV companies don’t go belly up), on the other the Premier League will be negotiating in the teeth of a worldwide recession that is predicted to last until at least 2010. So while you could argue that TV and subsidiary rights income streams will be returning by then it is unlikely that the bidders will negotiate on that basis.
Do Sky still need the Premier League as much as they did when launching? I presume they do. And while other players have entered the market, surely without Sky's money the price paid for rights would plummet. The Sky model (if I understand it) depends on subscribers to attract advertising to maximise income. How robust is it? Have the additional technologies that Sky now offer proofed it against a high churn rate?
I assume that as people cut back on personal spending and advertisers spend less (although you should spend more when times is hard we’re told), the income stream is threatened. So does Premier League football become more important so as to hang on to those precious subscriptions? Does everyone gamble and pay more for the rights? Can the bidders access that kind of cash if the world economy is as badly threatened as we are led to believe? Does pay-per-view become more or less attractive? If all you need is a Freeview box and no subscription is it easier to sell individual games?
Will the rapid pace of technology such as high speed access to and better viewing platforms for the Internet help football buck the trend?
A lot of people now experience football via television and rarely go to games. For those who do, how long can they continue to pay Premier League prices? Comments like that of a Wigan fan in the Observer that the crowd at Liverpool seemed to be full of Irish and Japanese tourists is one that might chime with those who visit Stamford Bridge regularly. How long can they continue to come?
Vast areas of modern stadiums are given over to corporate entertainment. That won't last a deep recession. Post-Taylor Report stadia are all-seater. Can the rate at which they have been built, be safely adapted for standing? If the TV monies and the corporate cash start to dry up, how soon before the thought of getting large numbers of standing fans becomes attractive?
Would enough people return to watching football on that basis to make it economic or has the crowd demographic changed forever? In the past football has been an arena where societal tensions and changes in behaviour, particularly those affecting young white working class men have been played out. Will that be the case again?
Much of this depends on the economic situation over the next 5-10 years. The same people who predicted a soft landing in the property market and no recession 12 months ago are telling us that the recession will only last a couple of years before strong growth returns. They have no credibility so why believe them?
Football will survive but there is an air of unreality about the current season (no, not the silky attractive football being played by our beloved Blues). Serious structural economic changes are taking place. Those at the top have constantly trumpeted that football is now big business and old romantics who like their sport a little sepia tinged had better get used to it. Well the business world is rocking and football has to feel the tremors.
Any answers anyone? Apologies for the endless questions but these are troubled times and I’m a man with a troubled mind.
I’ve probably taken too dark a view and those clever people who are keenly implementing the US sports model on our game have it all under control.Like this blog? Help spread the word: 
27 Comments · Add yours
I'll try to touch on your points as much as I can. The simple answer is the difference between the haves and the have nots will grow. The Premier League will do fine, many teams, however, will not. The big 4 will stay dominant. Spurs are the next Leeds.
Why do I think so? Well, you are correct in believing that the US model is coming, and fast. Sky will still pay for the league rights, but ESPN, the worldwide behemoth of TV sports, has been said to be interested in buying the rights. Not just for the US- for the UK as well. This is, of course, ESPN/ABC/Disney.
Quite simply, the Prem is going global. 2 NFL owners (Glazer and Lerner) now have Prem teams. A group from Abu Dhabi now owns Man City. These things are all obvious. But what is not is that the global influence means that the revenue streams will be more global as well. Why do you think ManU puts such an emphasis on their Asia tour?
This is why the Big 4- those who play in the Champions League, with global recognition will continue to do well. I get the sense that the big teams have seen an opportunity in the future and have leveraged themselves to beat out the other clubs. For Chelsea, of course, the funding comes from the inside. Those with substantial obligations, like Arsenal, ManU and Liverpool may find things tougher going. This may be why Man City may weather this storm. Or their owners could realize it is more difficult to win the champions league than to buy Robinho... and get bored and sell out.
Maintaining a global presence will be key, and so only 4 teams will be able to be dominant. One non CL hiccup year might be fine, but too many and a total implosion may ensue.
American NFL teams generate most of their revenue through TV rights. Because of this, and also due to fewer games, the premium for a ticket is high. You can't get one for less than £50. As revenue sources swing away from gate receipts on a % basis, expect ticket prices to climb.
Just to pick up on the Sky point and them needing the Premier League, I honestly think they do. The money they've invested into the technological side of HD shows that they don't want to fall behind anyone and will continue to try to tempt current and new subscribers to buy in. They're new pricing deal even in today's current financial climate is tempting quite a few people to upgrade, or buy the product from new.
I think Sultana Sports have certainly screwed up in thinking that people would buy into their package on top of paying for Sky. The mainly exclusive rights to England games hasn't got people clamouring to pay the silly £12.99 a month along with the 40 Premier League games they show, and they don't have HD for any of their games. Afterall when Sky had those games, subscribers could buy them as pay per view at £8 a time, or buy a season ticket for £50 at the start of the year, some accountant at Sultana has got his sums hopelessly wrong.
But currently for all of the global financial woes, football in the Premier League seems to be immune to what's going on outside it at present, the transfer fees spent in August by teams raised a few eyebrows. I certainly think with the influx of foreign owners especially the Glazers and Lerner as Groy has alluded to, will want at some point to individually sell the TV rights.
I appreciate at some point down the line ticket prices will have to go up, but at least with us prices have been static for the past few years, and even reduced for some games. Talk to Utd and Arsenal supporters in how much their prices have gone up recently, and you get disgruntled mutterings.
Perhaps the bubble will burst and it will become unsustainable, it's certainly looking that way in F1 at present with Mr Whiplash stating that the sport is in trouble and can't sustain anywhere near the budget the top teams spend per year, hence all the current cost cutting ideas that he's throwing around, Interesting times ahead for sports in general.
Clive-
Just wanted to point out that the NFL is in fact tremendously collectivist. The TV profits are distributed equally, and a large percentage of merchandise is sent to the general pool to be distributed (if I remember correctly). The league also has a salary cap. They are very interested in parity, and understand that the league itself is the product, not just the individual teams.
I don't know if that means anything in the present situation, but in the NFL, capitalism is definitely not king. Much more of an oligarchy.
I think that the Prem is far more similar to Baseball than the NFL. Teams sell TV rights to games, the league is run by idiots, there is a huge gap between the haves and have nots, there are player selling teams and player buying teams.
Clive -
Your comparison between the old Prem Plus sub and Setanta's pricing is somewhat flawed. I'm no particular lover of Setanta but the package they offer on satellite is pretty decent. Your £12.99 per month gets you a bouquet of channels including two main Setanta channels, a golf channel, NASN and a raft of club channels. They have a very decent portfolio of football covering the Premier league, FA Cup and Internationals as well as the Scottish, French and German leagues. If you consider that it is independent from Sky and doesn't require you to subscribe to any Sky package then it represents pretty good value. They do, however, need to sort out HD pretty sharpish as the contrast with Sky's coverage is very noticeable.
"I think that the Prem is far more similar to Baseball than the NFL."
Groy - That may well be true. But it's very unlikely that a team outside of the "big four" will ever win the Premier League. Whereas, this year at least, the Tampa Bay Rays have made it to the World Series after winning the American League Eastern Division ahead of the Boston Red Sox and New York Yankees. The Rays' payroll is one-fifth that of the Yankees', and they were the worst team in baseball last year. That's like Fulham challenging for this year's Premier League title after just surviving last season. Or are such comparisons are silly?
There's a discussion of these issues in last week's The Game podcast from Times Online: LINK ('Mark Hughes, England and billions of Premier League debt' - starts around the 19' mark).
On a (much) lighter note, some crackers here.
LINK
@Ethical
Yes I agree my comparison is somewhat flawed, but Sky has a host of various sports channels also, and have cherry picked the best packages because they got in there first and are financially better off to offer silly money, but if memory serves me correctly the Sky Sports package sub is less than Sentanta's
The main stay of Sky Sports is Premier league football and with 90 plus games a season it gives them a huge advantage over competitors. I would love to see more competition with lower prices, but I fear if that happened there would be more fragmentation of games onto various channels, and if we wanted to see them all we would end up paying more.
@Groy
I have to confess I have limited knowledge on how American Sports Franchises work within the selling of TV rights apart from the talk initially when the Glazers bought Utd and the possibility of them negotiating their own TV deals. I don't know if that is dead in the water but considering the £700 million debt they have on the club, I'm sure that any opportunity of making more money must be high on their priority list.
@Tony
Just seen the jokes on the link very funny :-)
More recognition that Chelsea are the best side in Europe:
LINK
No.1 seeds in Europe, 8 of the best players in Europe (10 if you count Bosingwa and Deco), Spurs getting relegated, can life get much better under Scolari? I hope Rafa's spoilers don't ruin this good feeling on Sunday.
And Big Phil wants 2 more in JAnuary:
LINK
@ 3 (Groy)
With all the fears Europeans have towards the American sports system, comparing soccer to baseball is definitely more apt that comparing soccer to the NFL. the NFL is essentially communist sports, where the strength of schedule and draft picks have enough impact on teams to constantly change the standings.
The MLB, by comparison, is laizze faire. The Yankees and Red Sox can spend as much money as they want, which leads to wild amounts of money for the best players(sound familiar?). There are three levels of development (A-AAA leagues) that allow teams to hold on to their good youth.
Looking further, all the big market teams have created regional sport networks with rights to 85-90% of the games in the MLB. The YES network has been a huge source of revenue for the Yankees in recent seasons, because fans are forced to pay for the network to watch games. So basically, if the big 4 could get their hands on the rights to their games, they could alleviate some of their financial woes because the worldwide audience who watches the EPL games mainly for them (me and my american footy fans included) by forcing their fans to pay directly to them, without splitting it up among the smaller teams.
With the EPL contract up in 2010, there has been some noise about ESPN securing rights for US broadcast over the much smaller FSC (Fox Soccer Channel). I feel this is the best way to get soccer to be accepted more. With the quality of ESPN coverage (HD!!), as well as access to the best league in the world, US fans would increase. Euro 08 was broadcast for the first time in the US this summer, with great ratings. If US kids could turn on the TV and have regular access to Man U and Chelsea instead of the Columbus Crew and New England Revolution, they might be more interested in playing soccer past the age of 8. Also, I wouldn't have to pay $16/mo for setanta and for FSC. ESPN would also pay out the ass for the rights, something the FA is surely interested in.
@ Blue Bayou
Very thoughtful and interesting piece - really enjoyed reading it. Not a B movie reference in sight, either - you are indeed a man with a troubled mind...!
Such a huge can of worms, the whole 'future of football' debate; many theories but very difficult to see exactly where the game is heading, save that everyone is fairly convinced that the global market is going to be key - sadly, simple economics and the law of supply and demand will probably dictate the path. Beyond that, it's crystal ball time, really.
Interesting - Mourinho has branded Drogba a diver (alongside Ronaldo, Torres and Van Persie) i.e. one from each EPL CL team. Is Jose turning against us?
LINK
Wicked games, ZOneAndOnly, wicked games (if he hasn't been 'misquoted'). And let's be brutally honest here, Jose has a point. That said, it's not as big a part of Drogba's game as it used to be.
"I hate diving, but I'm not happy if a player is kicked by somebody in the box and he tries to remain standing."
I know it's "part of the game", but I don't like reading things like that. I wonder if Scolari instructs his players to go to ground? I'd like to think not.
It's simply mind games from the Special One. He knows that it's inevitable he'll face an English side in the CL (most probably us) and when that happens the refs will be ultra aware of any diving from Didier, Torres or Ronaldo. I'd say the biggest diver though in the Premiership who never gets mentioned is one Stevie G. You'll see that on Sunday. If we're 1-0 up in the last few minutes, look at for his super-hero run into the box, as he then runs into a defenders leg and then falls over.
@ ChelseaBlog "I wonder if Scolari instructs his players to go to ground?"
I have noticed a new found "professionalism" with the way the team plays. I get the impression that Big Phil has made it clear to his players "play hard but fair" i.e don't resort to "falling over" your opponents legs. I hope this continues and other managers do the same.
If there is one thing that annoys me more than Liverpool comebacks.. its diving. Drogba has been guilty of falling down and a few others in the past but I have noticed players staying on their feet or hurdling tackles a lot more recently.
Just ask Mad Rafa what happened when he said Drogba and Diver in the same sentence a few months back.
No matter what happens with the economy people will make the necessary sacrifices to keep following their club. Weather or not they go to the stadium is the question and if ticket prices keep rising the odds of people renewing their season tickets in a bad economy are slim.
@15. haberdashers - on TSO's latest mind games, did he not also pronounce the other day that he wants to come back to manage in EPL after he wins something/everything in Serie A? Then badmouths stars in each of the "Big Four" - could this possibly be paving the way to his Second Coming with Abu Dhabi FC who might have managed to qualify for the Champions League by then......
David Conn on the credit crunch on football: don't panic.
LINK
To add to Groys point having come back from bangkok and bali - everyone i met out there is either Chelsea or Manchester United. There is a tiny smattering of arse and liverpool but nothing else.
Tonight - 3 - 1 Chels
Munkey
I just briefly scanned your comment and only got 'Bangkok' and 'tiny smattering of arse'. I was about to reach for the moderation button...
On Jose, in 3 years time when he's conquered Serie A and Big Phil has conquered the Premiership, who's to say that he can't return to his rightful home at the Bridge? By then the Arabs would have found a new sport (probably F1 which needs a bail out) to splash their cash in after finding that no matter how much money you throw at it, no-one wants to play at City. Seeing Jose in another Premier League dug-out would be heartbreaking, for me anyway, as he belongs at the Bridge. After Big Phil, i'd love him to return but my bet would be on him conquering La Liga with Barca.
As for tonight, well i see it as a dress rehearsal for Sunday. Roma will come for a 0-0 hoping Totti can pinch one on the break and it'll be up to us to break down their 10 men behind the ball approach. I'll go for a laboured 2-0.
I suspect that all the while Roman is in charge at the Bridge, the chances of Jose returning are zero. Can't see him staying at Inter for a prolonged period; maybe Spain next or possibly the Premiership if the right job came up and then there's the Portugal job which he will almost certainly move into at some point before he packs it all in.
Never go back is the motto here, anyway - it rarely does anyone any good; we've moved on and so has he and that's surely the best way to leave it now.
@24 - Hear hear, football is littered with dubious returns where success has hardly been the keyword. 3 top examples........
Howard Kendall? (3 times at Everton)
Keggy Keegle? (Twice at Newcastle)
Graham Taylor (twice at Watford and twice at Aston Villa)
@Tony
I think you should remove Keegan from that list, as he wasn't successful the first time round. :-)
@5 - Chelseablog (Sorry, can't remember your real name!)
The comparisons aren't silly- but they aren't exact. Yes, the TB Rays are in the World Series. Also, last year the Colorado Rockies were in the World Series. Both are recent expansion teams.
In fact, two other recent expansion teams, the Diamondbacks and the Florida Marlins have won the Series. So, there is something to be said about new franchises becoming successful...
But there is also something drastically different about the way baseball is played and the way the teams are comprised. You play 162 games, and if you win 100 of them it is quite unexpected. Also, no ties. But really, there is about a 20 game spread between a good and a bad team. Not a lot on a percentage basis.
The difference with the Premier League is rather drastic. Look at Spurs, they have one point (or something like that, I don't look that far down the table). Top teams barely lose any games and only tie a few. Your ability to overcome bottom of the league mediocrity is far harder.
But when it comes down to it, baseball is just a far different game. How the game is scored and the contributions of the players are far different. One day you can lose 10-0, and win the next day 8-0. So actual comparisons to the sport aren't really apt.
But the ownership structures and the way revenue is realized is very similar to the Premier League. If that happens, the Prem will become more like the Bundesliga- Bayern and then everyone else.
One of the oddities of the dominance of the NFL in America is the fact that the smaller teams get more airtime than they used to. This might seem somewhat counter intuitive. The big teams still get a lot of time, but because Fantasy Football is so popular everyone wants to know about all of the teams. If your team is wining, they get a lot of airtime, regardless of where the are from.