- EPL global rights sales appear to confirm the view of the experts: the market has peaked
- About half of the league’s 35% growth in international income was due to weak pound
- Radical new approach may be needed in the next rights cycle
Earlier this summer, the English Premier League made a tactical substitution, replacing Spencer Stuart with Russell Reynolds. Not up-and-coming talents in the league’s Asia Trophy showcase tournament but head-hunting firms tasked with what has turned into a surprisingly difficult search for a new chief executive.
Replacing the outgoing Richard Scudamore, who announced over a year ago he was stepping down, was probably never going to be easy. And after two favoured candidates – Discovery’s Susanna Dinnage and the BBC’s Tim Davie – backed away, that hunt may have been made even more difficult by the results of the latest cycle of global media-rights sales.
Analysis conducted this month by SportBusiness Media revealed the extent to which the once unstoppable force of the Premier League has hit the immovable object of the market. And, as someone once said, you can’t buck the market.
Overall cycle-on-cycle growth for the league, including domestic and international media rights, was eight per cent, from £2.907bn (€3.174bn/$3.538bn) per season in the 2016-17 to 2018-19 cycle to £3.143bn per season in the 2019-20 to 2021-22 cycle.
Domestic revenue dropped 7.8 per cent, to £1.686bn per season, in the 2019-22 cycle. This was driven largely by the drop of 9.6 per cent in the value of live rights, to £1.548bn per season. The value of domestic live rights had grown by 70 per cent the last two times the league came to market. The international increase expressed in sterling was to £1.457bn per season from £1.079bn per season, or 35 per cent.
Most sports bodies can only dream of earning $10bn-plus in a three-year cycle. It leaves the English league comfortably out of reach of its rivals in Spain, Italy, Germany and France.
But the numbers mask an important fact: while international growth compensated for the domestic drop, half of that growth was due to the depreciation of sterling in the wake of the UK’s June 2016 vote to leave the European Union.
Without the sterling dip, growth would have been around two per cent. Or put more brutally, close to flat. And if the Premier League is struggling for media-rights growth, what does that mean for everyone else?
As Phil Carling, managing director of football at the Octagon agency, put it: “The significance of these numbers is that the English Premier League is the bellwether for the market as a whole and comfortably the most sophisticated in terms of its approach and development. The key issue is the decline of the subscription-based pay-TV model, which is being eroded by piracy and digital alternatives, especially in the under-35 demographic. The EPL broadcast machine has been wholly reliant on the success of this model.”
Carling is not alone in seeing difficulties ahead. Consultant Phil Lines, who headed up the league’s international rights sales division for eight years, from 2002 to 2010, argues that monster deals in China and the US also help hide a worrying underlying trend.
“If they had to negotiate deals now in the US and China, they wouldn’t get the same value,” he said. “I think those two deals distort the current picture. The figures seem to show a little dip on domestic but it’s still going well on international, but I don’t think that’s the way sports media rights are heading. The deals in China and the US were done at the height of the rights market, probably the peak – around 2015-2016 – but I don’t think deals will be repeated at that level.”
He added: “If I were a club, I wouldn’t be going out setting record transfer fees. If the TV rights peaked in 2016 and the transfer prices are still going up, that’s a problem isn’t it?”
And while a weak pound helps boost the sterling numbers, it is not – overall – a blessing for the league’s 20 member clubs. They still have to buy many of their players in euros and pay salaries that are competitive with those in other economies. In the last few days, the pound has slumped to a 28-month low against the dollar and the Euro as a result of growing expectation that the UK – under new prime minister Boris Johnson – will exit the EU in October without a negotiated withdrawal agreement.
There are other concerns for the league when surveying global markets ahead of a next round of sales, from 2022-23 onwards.
1. The FAANGs didn’t bite. With pay-television markets maturing in many part of the world, rights-holders have been praying the big tech and social media companies will spark the next platform wars that drive up values. But there were no international bids from Amazon, which dipped its toe gently into the domestic rights market with a handful of matches. Facebook agreed deals in Thailand and Vietnam that fell through after unforeseen problems emerged when negotiating the long-form agreements. And that was it.
2. Five markets account for almost half of global revenues and in four of those markets – China, sub-Saharan Africa, the Middle East and North Africa and France – there are strong arguments for doubting whether the league can continue to grow.
In China, the league struck at the perfect time, with the market overheating, but that moment has passed. In Mena, league rights-holder beIN Media Group is being crippled by piracy and is cutting spending on rights. In sub-Saharan Africa, the league rights-holder SuperSport is facing a major regulatory squeeze which could hit the broadcaster’s investments in rights. And in France, a period of fierce competition in the market has been replaced by a more collusive culture.
The other market with a big deal is the US, where the league sold its rights for six seasons to NBC in 2016. Here, there are arguably more grounds for optimism. With the US co-hosting the 2026 Fifa World Cup, and the all-conquering women’s national team hogging the headlines on and off the pitch, the signs for future growth are positive.
3. The Asian rights boom is over. The expanding Asian market has been one of the biggest drivers of growth for the league over the last two decades but in the new cycle four of the five biggest percentage drops anywhere in the world came in the region. These were in Hong Kong (a 51.5-per-cent drop), Thailand (50 per cent), South Korea (43 per cent) and Japan (34.5 per cent).
The league came very close this cycle to launching its own OTT platform in one market – Singapore – but the clubs got cold feet and decided to go for a traditional broadcast deal, despite a fall in value of over 30 per cent in its renewal with telco SingTel.
The league has been looking into OTT for some time. As reported exclusively by SportBusiness in November 2018, the league brought in consultants Alvarez & Marsal to advise on an OTT strategy from 2022-23 onwards.
Other rights-holders now consider it essential to have some kind of direct-to-consumer OTT option in their armoury, at very least for the ‘dark markets’ where they have struggled to secure value from traditional broadcasters. The IMG agency has been using this twin-track approach – launching an OTT platform while continuing to negotiate with broadcasters – with some success in its distribution of Serie A rights.
For Lines, a future strategy will not take shape until a new chief executive is appointed. “They might think they can see the way this is going and decide they need to launch their own direct-to-consumer global service. That would be extreme, but we just don’t know. If they stay true to form, they will continue to go with who offers the most dollars. I think there is unlikely to be any increase in the domestic market so there could be more pressure to go for the bigger dollars overseas.”
Carling points out that, fortunately for the league, its challenges are not caused by any decline in interest among fans. “The good news for the EPL is that its intrinsic product remains strong; in many people’s view the best. Consequently, the problem is one of platform not content.”
A new strategy would probably involve working across a combination of platforms, he argues, and may even see the return of free-to-air coverage “in markets where audience scale tops rights fees”.
The next cycle will be critical. “It will be pivotal in defining the new era for elite sports content, with the Premier League still leading the way”.
David Murray, sports rights and negotiation consultant, head of sports rights at the BBC for 15 years, from 1999 to 2014, looks at the challenges facing the Premier League in the UK.
Taking the UK as the most mature EPL market, the increase in football rights fees over previous rights cycles has resulted in Sky cutting back on its investment in a broader portfolio of rights, while at the same time raising subscription costs.
This has created the double whammy for subscribers of less content costing more. With less packaged content, the risk is that subscribers become more open to building their own more flexible OTT portfolio, helped by the fact Sky Now allows them to dip in and out of their favourite sport content. Sky’s latest results suggest Now TV growth is starting to cannibalise its own long-term subscriber base.
What does this mean for the long term? Apart from long-term downward pressure on subscriptions, daily or weekly Now TV purchases start valuing sport as events or matches, rather than as an annual package or portfolio of rights. The EPL will continue to sell its rights collectively over the medium term, but if the data demonstrates a Man United game is worth many multiples more than say, an Everton game, the way Sky sells the rights could continue to evolve towards a game-by-game approach, ultimately putting pressure on the way the EPL sells those rights.
This disruption of traditional subscription models will impact competition in another way. The traditional telcos such as BT, who have dipped their leg in the well of sports content, are beginning to realise that strategically it makes no sense bidding up the rights value when it is far cheaper distributing third-party content. BT is likely to evolve over time into a content gateway, offering OTT and subscription TV on behalf of others. This is the route the FAANGs will also take. It is hard to see any strategic benefit to Amazon in spending billions on the EPL when it can make a margin on selling third-party channels.
Sky is likely to resist selling its content on Amazon, as that would further erode both its long-term subscriber base and its control of the subscriber relationship. But if BT exits the acquisition market, and the FAANGs are not interested, where does that leave the EPL? The obvious answer is the threat, or partial launch, of its own OTT service.
Amazon’s experience in the UK with its own EPL service will help inform the EPL, and Amazon’s marketing and distribution potential would make it the perfect partner for any EPL OTT service. The threat of taking EPL content elsewhere should hold up Sky’s rights fees in the medium term. There is too much value wrapped up in the EPL for Sky to become too aggressive in lowering its bid.
But the days of the mega increase would seem to be over.