John Humphrys discusses the rising costs of football in an economically troubled world
It may be the wettest summer any of us can remember, but at least we’ve got wall-to-wall jamborees to amuse us. First there was the Diamond Jubilee, soon there will be the Olympics and in between we have Euro2012.
All this is very good, no doubt, for distracting us from the real world of persistent recession and quite possibly looming economic catastrophe. But as we watch European footballers on astronomical wages kick balls around for their country in Poland and the Ukraine, the perception that football lives on another planet seems confirmed by the latest deal between the English Premier League and the broadcasters. The price being extracted for the right to broadcast the top games is going to rise by 70% from the beginning of the season after next. Does this make sense? And who benefits?
How the costs came to rise
Twenty years ago English football inhabited an utterly different world. Back then, we could watch the top games live for free on ITV or the BBC. Or if we wanted to actually turn up at the grounds to watch their teams in person we could do so without having to break the bank to pay for the ticket. All that changed with the coming of satellite television.
The pioneer of satellite television in Britain, Rupert Murdoch’s Sky, saw that the way to make money in this new broadcasting era was through sport, especially football. If satellite broadcasters could get exclusive rights to show matches live, such was the devotion of many fans to their game that they would be prepared to buy a dish and pay good money to do so. Those who didn’t would have to put up with the second best of watching recorded highlights on the old free channels. In 1992 the Premier League of England’s top twenty clubs struck a deal with the pay-to-view broadcasters for the exclusive rights to broadcast the top games live. It cost the broadcasters £304m over the five years of the deal.
This transformed the finances of the clubs and also of the players. Footballers’ wages started to become a thing of wonder.
By the time of the last deal three years ago, the satellite broadcasters were having to fork out £1.8 billion over the three years for the right to show 138 matches live each season. Now, in the new deal announced this week, from the three seasons beginning in 2013/14, the cost to the broadcasters has gone up by an astonishing 70%, to £3.018 bn for the right to show 154 matches a season. By the time internet and overseas broadcasting rights have been added, the Premier League should have got itself a deal worth about £5bn.
"The entry of a new player"
One of the reasons for this huge increase in the cost of exclusive live broadcast rights is the entry of a new player: BT. You may think BT is simply a phone company that can’t possibly have anything to do with football, but you’d be wrong. The company has invested well over £2bn in bringing superfast broadband to two thirds of homes in Britain and it wants to make sure it gets a return on its investment. Its strategy is to sell to its subscribers what’s called “triple play”, the opportunity to supply not only a phone service but also broadband and television services via its fibre broadband. Rather like Sky twenty years ago it sees football as the way to make this work. So it has bid for the exclusive right to show some of the top games live and intends to set up a new interactive football-focused channel so that its subscribers can watch them. It’s paying £246m a season over the next three-year deal to show 38 of the top matches live, most of them at Saturday lunchtime.
For the rest, BSkyB has agreed to pay £760m a year to show 116 matches a season. They will end up forking out £700m more over the next three years than they did in the last.
The result of the new deal is that each of the twenty Premier League clubs will get around £14m a year more than they have under the existing deal, or a total of between about £60m and £75m each every year. So will this be good news for the fans who actually bother to turn out to watch their teams from the stands? Not if history is any guide. Far from using their windfalls from the broadcasters to cut the cost of season tickets, the clubs have found themselves hugely increasing the cost of those tickets. Some of the top-end season tickets in the Premier League have increased by over 1,000% in the last twenty years. That’s because many of the clubs, notwithstanding the windfall, are actually running at a loss.
"The economics of the madhouse"
Last year, despite a record income of £2.3bn, Premier League clubs lost £361m in total. Only eight of the twenty clubs made a profit. The money disappeared on players’ wages and a huge increase in transfer fees. When a player like Carlos Tevez can command an annual income of £10m it’s not hard see why clubs in receipt of the largesse of broadcasters can still be broke.
All this looks to many like the economics of the madhouse. Europe’s football governing body, UEFA, is trying to restore order by imposing rules to force clubs to break even. But this huge increase in the broadcasting fees being paid to the Premier League clubs seems nonetheless likely to stoke still further the wages of players and be pretty good too for those who sell flash cars and run the trendiest nightclubs.
On past form too BSkyB will do quite well out of the deal. Last year it earned £6.6bn from its ten million subscribers in Britain, out of which it made a pre-tax profit of £1bn. Some people will see an irony in the fact that at the very time the Murdoch empire is under the kosh at the Leveson Inquiry, its satellite broadcasting arm seems to be steaming ahead through deals such as it has just struck with the Premier League.
So who will pay for this huge increase in the cost of live broadcasts, given that each match will now cost about £6.6m? Some of it may be found in cost-cutting measures on the part of the broadcasters themselves, but the suspicion must be that the cost will fall on subscribers – on hard-pressed pubs who rely on the attraction of showing football live to get punters into their pubs, and on ordinary subscribers themselves.
Of course the deal is a gamble for both BSkyB and BT. They must be banking on the guess that even in these hard-pressed times football fans will go on coughing up for the privilege of watching something they used to see for free. Perhaps they calculate that as the real world gets tougher people will be willing to pay even more to be distracted. And perhaps they’re right.
What’s your view?
- Do you think the latest deal between the Premier League and the broadcasters makes sense or not?
- Do you yourself subscribe to satellite television and, if so, would you be prepared to pay more, if necessary, to watch the top games live?
- How attractive do you find the “triple play” offer BT is pursuing?
- What do you make of footballers’ wages: do you think they are justified by footballers’ skills and their scarcity value or that they bear no relation to anything rational?
- Do you think UEFA’s attempts to bring financial order to the game will work or not? And do you think that overall the influence of pay-TV has been good or bad for the game of football?
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