Around the World in 7 Seconds: Football Broadcasting Explained
Delving into the mechanics of football broadcasting and how the broadcasting media model was vital to the birth of the disastrous European Super League
Football — Sport or Business?
The recent catastrophe of the European Super League (ESL) was a watershed moment for club football. Much about the shambolic league itself has already been discussed and dissected. Instead, this article will explore the revenue model that allows top football clubs to hold so much economic heft and explain why the ESL framework was drafted in the first place, with a focus on British football.
Most English clubs were constituted at the turn of the 20th century as local hubs for the blue-collared workers’ game. The last four decades have gradually eroded those roots and today football clubs are run like any other business. Two reasons stand out for this shift of perspective.
First, the introduction of live streaming of sporting events directly to cable television. This suddenly made football accessible to millions worldwide, instead of restricting events on the pitch to the few thousands seated in the stands. The other inflection point was the establishment of the English Premier League in 1992, when the top 22 clubs (later reduced to 20) of the former English First Division broke away to form this elite league. The Premier League was characterized by pomp, a global fan base and, perhaps most crucially, record-shattering capital injections for its clubs in the form of TV revenue. This concentration of power has distorted expectations and blurred the definition of success. Securing fourth position in the league has a financial reward of ~18x (£32.6 million), in comparison with winning the FA Cup (£1.8 million), England’s premier domestic cup competition. That estimate accounts for prize money alone, excluding the dizzying millions made through TV rights by qualifying (by virtue of finishing in the top 4) for the Champions League, Europe’s biggest club competition.
TV Rights Explained
So, why is the cash flowing into clubs’ coffers and where from? Clubs historically generated a bulk of their revenue from ticketing sales, garnering additional income from the sale of branded merchandise. In current times, broadcasting revenue has comfortably overtaken both income streams. An analysis of the financial statements of Manchester United, whose shares are floated on the New York Stock Exchange (NYSE), paints an interesting picture.
Of the £627 million made by the club in 2019 (pre-pandemic), the largest segment came from broadcasting deals (domestic and foreign) alone. Established broadcasters in the UK, like Sky Sports and BT Sports, bid to secure exclusive rights to broadcast these games live. By accumulating a portfolio of lucrative IPs like the Premier League and Champions League (along with other premium sporting events), they can differentiate their content from competitors and attract masses of subscribers. Corporate sponsors are quick to reward them too, with advertisers vying for primetime eyeball share.
Besides tangible sources of income like subscriber and advertisement fees, broadcasters also increase their brand value and soft power by owning these rights. Since the start of the Premier League era, marquee corporations have witnessed both sales and brand recognition multiply by sponsoring teams, stadiums and even the league itself. Consumer-facing brands like Carslberg and Samsung increase customer stickiness through football sponsorship (case in point: I am still a loyal Vodafone subscriber 18 years after I first saw the brand plastered across David Beckham’s chest while he played for Manchester United). Even traditionally “dull” businesses have struck a chord with young fans, many of whom are just entering the workforce. Several of them go on to be insured by AIG and Axa while banking with Barclays and Standard Chartered, after seeing these brands emblazoned on their icons’ shirts. Similarly, Sky and BT see their brand equity and goodwill compound by associating with football.
From ‘Beautiful Game’ to ‘Greedy Game’
In 2018, the Premier League received a whopping £4.5 billion for the UK broadcasting rights, shared between Sky and BT for three seasons (until the 2021–22 season). The 20 Premier League clubs are entitled to ~50% of that fee. However, the league follows a centralized, uniform model for distribution of TV rights, meaning all clubs receive an equal share of the pie. Of course, the handful of big clubs that consistently occupy the top 6 positions in the table generate far more revenue by way of prize money, European football and the television income that comes with that. Never content, their owners thirst for more. Their view is that the clashes between top teams is what drags the rest of the league into the limelight, and therefore should be appropriately rewarded. With this argument falling on deaf years, they moved unilaterally to establish the ESL with six other top teams from continental Europe.
The ESL, funded primarily by investment bank JP Morgan, was designed to secure financial security for its member clubs (and make their owners seriously rich). Founding clubs were “permanent members”, with no threat of relegation. According to their own estimates, each club stood to make ~£300 million per year just for participation, from media and marketing rights. For context, that would be ~4x the amount last season’s European champions Bayern Munich earned for winning the continental trophy (the club was widely lauded for refusing to join the ESL). The cash influx would further fuel the vicious circle that has gripped club football. Wage inflation would cause tremors in the transfer market. Players would become more out of touch with reality. And ordinary football fans, on whose backs the game was built, would continue to get priced out of their sport.
The backlash was prompt and widespread. Players and managers were quick to distance themselves from the league. Football associations promised harsh punishment to be doled out. Fans of both member clubs and those excluded from the ESL rallied together against what they saw as owner avarice. Tellingly, five of the top 6 clubs’ owners were foreigners. They believed that the glamorous league would expand their clubs’ reach, especially in the fast-growing Asian market. In their myopic view, a new fan was equal in economic utility to an older, loyal fan. But they completely misread the situation and hurt fan sentiment. Ominously, Sky — which backed the breakaway Premier League in 1992 — was a vociferous opponent of the ESL. Even the British government swiftly stepped in to counter the proposal.
The Way Forward
The golden era of TV broadcasting for Premier League clubs is waning. With reputations damaged by their role in the ESL, the bargaining power of the top clubs with broadcasters has dwindled. Having bid against each other for years, pushing the price of broadcasting to astronomical levels, Sky and BT have called truce and now jointly share the rights, leaving less on the table for clubs. Even this duopoly is ripe for disruption. OTT giants like Amazon and Disney are increasingly on the lookout for sporting content to keep their customers engaged. With lower Average Revenue Per User (ARPU) and Customer Acquisition Costs (CAC), these platforms could upend the sports broadcasting market with potential bids. Clubs may also choose to stream games to fans directly through their websites, prompting further cord-cutting.
Football has always been dominated by rivalry — Ronaldo versus Messi, red verses blue, city against city. The ESL threatened to pose a more sinister rivalry, one that pitted common fans against their clubs’ rich owners. The fans won out, which will bolster confidence in a notion that is at the very core of football — that the game is always about the fans. And football will hopefully always unite more than it divides.
