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Premier League Rights- a new formation?

Monday 12th February

From Leicester City’s 5000-1 Premier League triumph to that “Agueroooo” moment in 2012 the top flight of English football has undoubtedly provided some of sports most memorable moments and fairy tale stories in recent times.

Rewind 25 years though and perhaps the biggest watershed moment of all came in 1992 when an announcement was made confirming that the Premier League was being formed. This was driven by the big five clubs at the time (Arsenal, Everton, Liverpool, Manchester United and Spurs) who wanted a larger share of TV revenue that they felt their dominance warranted them. Backed by the FA who sought to weaken the position of the Football League, an agreement was reached which created a new top flight with commercial independence from the FA and Football League, leaving the newly founded Premier League the power to negotiate its own broadcast and sponsorship agreements.

Whilst on the surface this seems very detached from the world of media and advertising, it’s impossible not to acknowledge the history behind how the Premier League formed out of financial motivation. It is these roots which set the stage for the staggering amount of money in the game today. Every time a new tender for the broadcasting rights are announced, record amounts of money have poured in from broadcasters which is why commentators are anticipating the latest tender, announced in December 2017, will be bought for in excess of £10 billion pounds.

Since the foundation of the league, Sky has successfully bid on the broadcast rights having paid £191 million for the seasons between 1992-1997 (a sum which would barely buy a world class player nowadays) to over £4billion for the 2016-2019 seasons , with BT paying in excess of £1billion for the remainder of the rights.  Given this upward trajectory of broadcast rights it’s no surprise then that the new tender is expected to fetch over £10 billion, especially when you consider the shift from traditional TV broadcasters towards streaming services whose financial muscle means they could blow the competition out of the water should they choose to flex them.

One interesting aspect of the new tender is that the right to more games than ever before will be sold with 200 out of 380 overall games up for sale (an increase of around 42 games a season) without even mentioning the various highlights offerings. These 200 games have been cut up by the league into 7 different packages being sold (each package containing between 20-32 games) which will see the introduction of Saturday night 7.45PM kick offs, which in itself will look to steal ratings from shows like Strictly and X Factor.

Whist it is conceivable that one broadcaster could pay for all rights, a rule has been set which means that no one broadcaster may acquire more than 148 games – a rule that in practice means we could see a minimum of the two broadcasters splitting the rights and in theory up to 7 broadcasters sharing them. In reality though, it is much more likely that there only be four serious contenders.

The first contender of course is Sky, a broadcaster who outbid ITV to the initial rights in 1992 and has held them ever since. Sky has effectively built its business around having the Premier League rights and recently restructured its offering opting for a  ‘vertical’ packing of it sports rights, with new channels dedicated purely to football as well as their other trophy sports. Given this restructure which relies on football broadcasting coupled with the heritage that Sky has with the Premier League and the alignment of the two, it is fairly inconceivable that they won’t secure a decent share of the rights.

BT has also positioned themselves as a football broadcaster in recent years having acquired around a fifth of the current Premier League rights and of course taking the Champions League away from ITV. Given the direction that BT has taken they will surely seek to retain their status as a Premier League broadcaster.  In December Sky and BT also announced a deal that will see them sell their channel’s on one another platforms, a move which many feel is a collaborative approach to rebuff competition from the likes of Amazon and Facebook.

The main obstacle to Sky and BT’s hegemony comes in the form of internet giant Amazon. When assessing whether Amazon is a serious contender the first thing to consider is their sheer financial strength. Currently, Amazon’s annual revenue is 100 billion dollars. This is around three times Sky and BT combined. So whilst Amazon has the financial clout to outbid Sky and BT is the desire really there? In an article in Campaign recently, Man United Chairman Ed Woodward told investors that he expects Facebook and Amazon to enter the auctions referencing Amazon’s deal with the NFL to live stream Thursday night games as evidence that they are serious about entering this arena. It wouldn’t be the first time Amazon have outbid Sky, recently they outbid Sky Sports for the rights to broadcast the ATP World Tour Masters 1000 and Masters 500 events helping to fuel conjecture that they are gearing themselves up for a Premier League bid. Whether they do or not remains to be seen but the simple facts are they have the cash to back themselves and are testing the water with other sports. If they were to bid it certainly would be in line with their business model of cannibalising their competitor’s market share and a sure way to drive Prime subscriptions.

The other player being discussed is Facebook who have also made movements into the sports broadcasting/streaming sphere recently.  In a surprising move early last year they bid 600 million dollars to broadcast the India Premier League Cricket. Facebook have also publicly state that they feel Facebook is  a natural home for sports content and want to use this as a way to bring in more fans around the world.

With the rise of streaming services showing their interest around sports streaming/broadcasting it makes sense that Netflix are being talked about too. However they have said this is not an area they are interested in. Instead their focus is around original content and a recent behind the scenes documentary they have agreed with Juventus, is much more indicative of the role they see themselves playing in sports broadcasting/streaming- for now anyway.

For the average football fan it’s hard to dissect what this actually means and where the benefits lie, if at all. On the one hand having more potential providers may well drive down the cost of watching your team play. For example a one off Amazon Prime package suddenly seems very cheap compared to a yearlong Sky package, whilst a free Facebook service would surely only be welcomed as a good thing? On the flip side though even the most ardent armchair fan will surely have to question whether they can justify paying for a potential four different subscriptions.

Aside from the average football fan, the real excitement must surely be amongst advertisers. On the most basic level more live televised matches than ever before means more spots in televised football matches, more image rights and more video rights on other platforms like Twitter to tag up with branding. If indeed Sky and BT do maintain all of the rights, then this I imagine will be welcomed by the betting giants and other marketing giants who can afford blanket sponsorships to dominate Sky or BT’s Premier League offering. If though the dominance of Sky and BT is broken by the likes of Amazon and Facebook then this is where I see more opportunity for smaller brands to join the party. If we do see the rights ending up being split across multiple platforms then this would mean that smaller brands with fewer budgets might be able to afford to get their name associated with one of the smaller seven packages available.

Before too long we will know the outcome of this tender. The general feeling is that this time round Sky and BT will buy the rights between them, but with Amazon as a potential rank outsider! However, this isn’t going to the case for ever. Consumers shift in viewing habits away from linear TV lends itself well to the streaming model and the appetite from Amazon and Facebook to fill this space is certainly there.  So whilst we may not see a dramatic shift in the next few years this is most definitely a space to watch and when this shift does happen the brands to react quickest and understand how to use this to their brands advantage will be the winners.

Article Written by

Mark Lomasney

Account Manager, Total Media Group Ltd

Other than being an Account Manager here at Total, Mark is also known as being just a bit of Leicester City fan. He's often found trying to get himself an invite to Jamie Vardy's party.

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