Chadwick, S. (2015), "English football’s Premier League TV rights auctions reveals opportunities for academic researchers", Sport, Business and Management, Vol. 5 No. 2. https://doi.org/10.1108/SBM-03-2015-0007
Emerald Group Publishing Limited
English football’s Premier League TV rights auctions reveals opportunities for academic researchers
Article Type: Editorial From: Sport, Business and Management: An International Journal, Volume 5, Issue 2.
The world of football was seemingly aghast in February this year as England’s Premier League announced details of the next contract for the domestic broadcast of its matches, commencing in 2016. The Premier League had previously revealed that it would bring forward the tendering process for domestic rights to “take advantage of market conditions”. As opportunities for researchers, the adaptive nature of the Premier League’s decision, as well as the role played by market-intelligence gathering and internal decision making appear striking.
The apparently advantageous conditions were both a display of supreme confidence on the part of the Premier League, as well as an acknowledgement that likely competition to acquire the rights was potentially going to be more intense than ever before. Perhaps the biggest surprise therefore was not the size of the bid made by the eventual winner Sky, but the relative weakness of alternative bids. The crafting of Sky’s business model, alongside the formulation, organisation, implementation and evaluation of corporate strategy would make for interesting analyses or case study development.
Having pursued an aggressive rights acquisition strategy in recent years, it was anticipated that Al Jazeera, through its BeInSport brand, might pose a big threat to the established order in English football. However, this bid ultimately faded, as did other mooted bids from the likes of America’s ESPN and Discovery. Al Jazeera is an emergent media conglomerate which, for the time being at least, seems to be building a business through rights acquisition and production of content. It would make for some analyses if, for example, research was undertaken examining the relevance and effectiveness of such a strategy.
In the end, as was the case in 2012, the domestic rights to broadcast live Premier League matches were awarded to Sky and BT Sport. Without a doubt, the League took advantage of market conditions, the total contract value reaching £5.1 billion for the period 2016-2019 – an increase of 70 per cent on contract value for the period 2013-2016.
During the 2012 bidding process, BT Sport was the new kid on the block paying almost £740 million for the right to broadcast games; this time the company paid closer to £1 billion. Sky, which had paid nearly £2.3 billion in 2012, had to spend nearly £4.2 billion this time round. Staggering in any terms, particularly in the way that it propelled the League into second place on the list of the globe’s biggest league TV rights deals (after America’s NFL). Staggering too though when one considers that the first Premier League TV cost Sky only £190 million for the period 1992-1997. For economists and statisticians, there is clearly some potential work to be done in gathering and analysing time series data to highlight trends, influences and outcomes of inflating contract values.
The specific implications of Sky and BT Sport’s joust are now beginning to emerge; for example, each Premier League match is effectively costing broadcasters £10 million in rights acquisition fees, a 56 per cent increase on the previous arrangements agreed in 2012. It is also becoming apparent that any club that becomes a member of the Premier League will, due to these astronomical figures, automatically enter Deloitte’s global rich list of football clubs.
This is hardly surprising as some have estimated what is likely to be a phenomenal growth in Premier league club earnings. The highest earning club in the 2013/2014 season, Liverpool, generated £97.5 million from television. One estimate suggests that under the new contractual arrangements this figure would have been closer to £152 million. It is intriguing that, while Liverpool played attractive football during the season in question, the club did not win the League, nor has it ever done so. What Liverpool was successful in doing was to score a large number of goals; for clubs in general, this may have implications for team strategy and tactics, and player acquisition and development. The implication is that scoring more goals is the key to generating higher television revenues, a matter that researchers may seek to explore.
Additional figures show that in the future, even the club relegated in bottom place is likely to earn upwards of £92 million. Furthermore, clubs relegated from the Premier League will benefits from increased parachute payments generated by the latest TV deals. Parachute payments cushion the blow for relegated clubs of the costs incurred by being in the top league, and the revenues lost once relegation has taken place. At the moment, in the season following relegation, clubs receive around £26 million. One estimate suggests that in 2016 this figure will grow to a figure around £39 million.
Set in a broader context, English football is set to be propelled light years ahead of its European rivals. Already ahead of the game and with a clear strategic advantage over other rival leagues, the Premier League’s new contract looks set to generate two and half times the revenues of Italy’s Serie A; more than four times the revenues of the Bundesliga in Germany; and almost five times the revenues of Spain’s La Liga. The dynamics of the market place, the nature of competitive advantage conferred on English clubs, and the financial implications of skewed financial allocations are three examples of possible research opportunities.
Viewing these latest developments in a positive light leads once to conclude that this is a golden age for top-level English football, and that broadcasting contracts are gifts that keep on giving. And one gets the sense that the bubble is in no immediate danger of bursting; Sky will be back again for more in the future, the company has to – its business model has been driven by Premier League football for more than 20 years. One should expect BT Sport to be hanging around for some time to come as well. Al Jazeera will no doubt continue to monitor the situation, and one of the American media conglomerates will no doubt make a play at some stage in the future. In the same research context as before, long-term industrial change, the sustainability of business models underpinning the activities of these corporations, and competitive strategy standout as being important areas for academic researchers to consider.
The short- to medium-term financial health of the League therefore seems to be guaranteed. What happens longer-term though has to be conceived of in somewhat more cautious terms. Sky bid big for the latest contract because it is tying football very closely to its quad-play packages in the UK. That is, instead of simply being sold a satellite TV subscriptions as they once were, British consumers are now being encouraged to buy their broadband internet access, television, telephone and wireless service provisions together as a bundle. The quad-play environment is replete with all number of research possibilities, for example ranging from the cognitions and behaviours of consumers in relation to bundling, to issues of service quality, modes and channels of consumption, and issues in social and new media marketing.
Right now though, several market analysts are somewhat guarded about the appetite of the British to buy products in this way. This sounds some alarm bells, indeed we have been here before: wild predictions about the growth of digital subscription television during the last decade ultimately led to the demise of ITV Digital, inflicting such damage on football that some clubs are still recovering from the carnage ten years on.
As such, while the latest Premier League deal provides grounds for optimism and confidence, the Premier League and its clubs should be careful not to let such attitudes morph into arrogance or a failure to respond to market conditions. Indeed, the pressure is now on Sky in particular to realise the potential revenues of quad-play, while at the same time stripping away costs from its business in order to cover the vast expense of their new TV deal. Should either of these things fail, then come 2018, Premier League officials and club Finance Directors may be feeling rather less bullish.
For the time being though, the power brokers at the League’s London headquarters have a spring in their step, although many people are rather more sceptical about the consequences of yet another blockbuster deal. Businessman Sir Alan Sugar has reiterated his view oft-stated view that football is characterised by a prune juice effect, where money fed into sport very quickly leaves via agent’s fees and player salaries. Indeed, some commentators already foresee an era of Premier League players earning £1 million per week. Correlation, multiple regression and other quantitative data analysis techniques would seem to have a role to play in modelling and forecasting the implications of rising contract values on related dependent variables such as player salaries.
The inflationary pressures of increased transfer fees and rising salaries are potentially a major threat to the stability of Premier League clubs. What might seem like a revenue bonanza may ultimately prove to be a zero-sum game as playing talent from around the world ramps-up their demands in what is seems an inevitable influx of overseas playing talent. Perhaps engaging game theory in order to try and understand the dynamics of English football would be pertinent at this time.
There is virtually no doubt that this will happen, with consequences being likely for clubs across the English league structure, clubs overseas, and for the England national team. For the last 20 years, rich English clubs have got richer while poor clubs seem to have got poorer, and the cost of making the leap into Premier League territory often causes tremendous financial instability for clubs pursuing their top-level dreams. For those clubs left behind, football has rapidly become a sport monotonously played out against a backdrop of resigned inevitability.
Some overseas clubs may take a similar view, television revenues having enabled Premier League clubs to engage in the kind of factory ship trawling we observe in the fishing industry. Even in Spain, arguably the Premier League’s biggest rival, talent has been drained out by the likes of Arsenal and Manchester City and one senses such migratory trends will only intensify, especially if there’s a promise of £1 million a week at the Emirates or Etihad Stadiums.
This means that clubs like City will routinely find places in its starting eleven for Jesus Navas and David Silva (both Spanish internationals), but have previously cast to the margins English players such as Jack Rodwell and Scott Sinclair. Things could well get worse; indeed an endless stream of critics are already recounting the chronicle of a death foretold. By 2019, the Premier League may well be the richest sports league in the world, but quite where the England national team will be in the England rankings remains to be seen.
Labour market issues therefore seem to loom large in the aftermath of not only the latest Premier League TV contract, but also the stream of inflating previous contracts. The migration patterns of players needs to be examined more closely, alongside the influence of rising salaries. The loss of playing talent is also worthy of further examination as one of the ways in which the Premier League has been able to establish a distinctive competitive advantage has been through the acquisition of other countries’ strategic assets – that is, their best players.
It is important to understand that the ripple-out effects of the latest TV deal are not just confined to players’ wallets and club bottom-lines. The grassroots of English football, for so long the Premier League’s undernourished sibling, has highlighted how stark the divide has now become between the top and lower levels of the game. While the Premier League might claim it has a progressive approach to revenue redistribution, many people claim this mode does not go far enough in securing the heart and soul of the English grassroots game. The relevance of uncertainty of outcome, competition design and league structure studies therefore remain important in the field of sport business and management research.
Nor are fans happy; mirroring the anti-corporate sentiment seen in some other parts of Europe, fans of Premier League club Crystal Palace staged a protest questioning how the TV deal will benefit them. Ticket prices for Premier League games have risen dramatically in recent years, and calls are being made for some of the League’s latest windfall to be used to subsidise ticket prices.
Unless there are tangible developments in such areas, fan unrest is a distinct possibility. Quite where this might lead is a moot point: keep in mind that when the Premier League began more than 20 years ago, ticket sales accounted for more than 50 per cent of most clubs’ revenues. Now, television revenues account for more than 50 per cent of most clubs’ revenues. We may be some way from consumer boycotts of football, but forms of direct action may begin to manifest themselves, particularly as governance issues continue to prevail. In each of these cases, there is much to consider from an academic research standpoint.
There is no doubt that the Premier League is a commercial phenomenon, a driver of industrial activity and a cultural asset. Its strengths and successes, especially in terms of revenues generated by TV deals, are something to rival the achievements of other businesses like Apple. But with success comes responsibility – to football in general, to clubs, to players, to fans and to communities. The Premier League needs to get the balance right between revenue generation and commercial success, and its duty in ensuring the future health of English football and the preservation of its illustrious history. Whether or not this process is televised is not the point, leading and protecting the domestic industry is.
Given the growth and prominence of the Premier League, as well as other leagues across both European football and sport in general, this is a field in which there are growing research needs. In addition to need though, academic researchers should be able to build sustainable portfolios of activity in a number of business and management disciplines. While the Premier League officials no doubt see the television deal as a bonanza and a great return on investment, with careful thought academics could benefit too in terms of a flow of research and publications.
Notes on papers appearing in this edition
In the first paper, Nissen examines coach dismissals in European professional football from an institutional perspective. In presenting a theoretical framework that can be used to understand coach dismissals in professional football, analyses a total of 90 management accounts from 18 Danish professional football clubs using a qualitative content analysis approach. The accounts cover a period of five consecutive seasons. The analysis shows that dismissing the coach is a frequent occurrence in Danish clubs. This finding is included in the discussion, in which it is suggested that a coach dismissal may be the outcome of mimetic, coercive or normative isomorphism. By focusing on the dynamics of club-stakeholder relationships, the proposed framework can be seen as an attempt to clarify key features of the decision-making process surrounding coach dismissals in European professional football. Furthermore, the framework suggests that in order for a club to stay attractive to its stakeholders, and thereby increase its chances of securing future financial support, club directors should pay attention to their external environment. In contrast to existing research, this study does not aim at assessing whether a coach dismissal pays off in terms of wins on the pitch. Instead, a qualitative approach has been selected in order to offer a framework that aims at providing an in-depth understanding of coach dismissals in professional football.
Williams et al. investigate the experiences of the women who comprise a distinct NFL women’s only fan club. Employing semi-structured focus group interviews were undertaken, which were analysed using margin coding for a NFL fan club. The focus group data were triangulated with secondary sources such as participant observation, field notes, and documents (e.g. web site and written documents from fan club). The data analyses revealed the following eight themes: philanthropy, team affiliation, events, social media, brand elements, fan identity, apparel, perks. The paper examines the experiences of women fan club members, which could potentially provide the franchise with insights on how to enhance the member experience. While the present study represents only one case, the researchers believe there are key factors to call attention to for NFL marketers considering a brand extension aimed at women. The results provide marketers with useful information to enhance the experience of current women only fan club brand extension and potential future women only fan club brand extensions. Given the increase in NFL fandom among this segment of the population, it will be crucial for NFL marketers to increase their efforts to leverage their respective sport team brands with female fans.
Hallmann and Wicker identify the determinants of sport-related expenditure of golf players and differences between light and heavy spenders. Although participation in golf has increased in several countries and is associated with an evolving golf industry, research on golf and golf players is rather limited. Therefore, the purpose of this study is to analyse the sport-related expenditure of golfers and differences of heavy and light spenders. Primary data from golf players were collected in Germany using a written survey which resulted in a convenience sample of n=197 golfers. The regression results indicate that the social motive, time for playing and training, handicap, age and income have a significant impact on sport-related expenditure. There are several significant difference between heavy and light spenders based on psychological, behavioural, demographic and resources variables. The study has practical implications as the underlying motives of golfers vary immensely indicating a range of target groups, sport managers need to address each target group differently to fully exploit the marketing potential. The authors conclude that the expenditure of golfers seems to be under researched and the results reveal that the average sport-related expenditure of golfers confirms that golf can be an expensive sport and that golf players are willing to spend on average one monthly income on their sport over a 12-month period.
Paul et al. investigate fighting, winning, promotions, and attendance in the ECHL, which looks at the role of fighting (in addition to other variables) as it relates to attendance at minor league hockey games (ECHL). Building upon previous research on hockey attendance, a regression model is specified with attendance as the dependent variable and fighting (measured as a running average of fights-per-game) as an independent variable. The sign and statistical significance of fighting is tested through the regression model. Despite recent tragedies in the hockey world and public outcries against fighting, fighting is found to have a positive and significant effect on attendance at ECHL games. Findings suggest that if fighting is removed from hockey in North America that teams will suffer attendance-wise and it will hurt the overall profitability of teams and leagues. Teams in the ECHL that do not fight often may wish to have more “enforcers” on the team which would increase the number of fights and increase attendance. Despite calls for its outright ban, fighting is popular with hockey fans. Even in a world where many game-day promotions are aimed at families, fighting appears to have a place in the game and is a desired attribute of this sport in terms of its entertainment value to fans. As the first study of the ECHL (AA-equivalent minor league for professional hockey) on a game-by-game basis, this paper examines the role of fighting and violence in the world of professional sports. The regression model also includes highly-detailed data on game day promotions used by all of the teams. The value of the paper lies in the public debate about fighting in hockey. The findings and implications of this paper are also of value to team and league management as it relates to fighting in hockey.
Arraya’s paper examines the relationship between task orientation, collectivism and goal-setting in sport. Drawing data from 49 players with three Portuguese elite male handball teams, three well-known questionnaires were employed to determine the relationships between the above factors in a case setting: Task- and Ego-orientation in Sport Questionnaire, the Jackson Psychological Collectivism Measure and the Goal-setting in Sport Questionnaire. The results reveal that the team and players are task-oriented, collectivist and possessing professional and personal goal habits. The correlations between questionnaire outcomes indicate that, when the team wants to set goals, it should consider the players’ orientation and the team’s collectivism. Thus, team goal-setting is more than only goal setting, because of the need for task orientation and collectivism. This research paper should provide managers and coaches with insight into the complexity of team goal setting. It also should provide insight into the chosen process related to human resources.
Petrović et al. conclude this edition with an analysis of emerging technologies and sports events: innovative information and communication solutions. The paper reviews the development and potential applications of emerging information and communication technologies (ICTs) in sports. The case studies are presented in details: computer system for tracking and visualisation in TV broadcasting and players/teams performance analysis in football. The paper concludes with the authors’ opinion that future implementation of digital technologies, in the first instance, goal-line technologies, to support accurate, practical and reliable decision making in sports is highly needed and represent a basis for further increase in the commercial value of the pre-eminent global sport. The research utilised an exploratory approach to data gathering due to the fact that the topic is new and data are difficult to collect. The topic is analysed using case study method. The research found that there is an emerging market to extend the reach of digital technologies adapted for sports industry and sports events. Increasingly, developers are exploring and exploiting the vast potential of the ICTs to create value in the field of sports events. The development of emerging technologies create new opportunities that sports industry demands a growing range of innovative solutions for the purposes of decision making to be tested and accepted in the near future. It is evident that digital video processing has found many applications in sports content analysis and TV broadcasting of competitive sports. The governing bodies should be aware of their role to support successful innovation which requires the coordinated action of all the actors who play vastly different roles in its commercialisation process. The paper emphasises how much technology has added to communication and economic potential of sports events, underlying that issue of video technology application to ease decision making in football is currently one of the most pressing matters due to constant arrival of new cases concerning “incorrect” decisions that add fuel to the controversy. The football authorities have finally recognised that the game has to be responsive to the concerns and suggestions of its customers.