With the dust having settled following the staggering £3.018 billion television rights deal secured by the Premier League (don’t forget, there’s more to come in the autumn when international rights are sold), we can draw two unequivocal conclusions from the league’s ability to raise its value to broadcasters by an astonishing 70%.
The first is that, with a handful of notable exceptions, the overwhelming majority of the £1.3 billion Premier League clubs will receive between 2013-16 will head straight towards players’ and agents’ bank accounts.
The second is that the development and eventual flowering of English football talent will be even further checked as foreign ‘stars’ arrive here to collect enormous salaries and play some football.
The longer-term impact this relentless flow of mostly very average overseas playing talent has had on England’s national team is evident for all to see.
After the new deal was announced, Richard Scudamore, the Premier League’s chief executive, said it would be worth at least £14 million more a year for each of the league’s 20 clubs.
He said he hoped they would invest a proportion of this windfall by investing in “infrastructure, stadiums, youth development and the community”. No-one is holding their breath in anticipation of this though.
The third, though less certain, conclusion, is that BT can become Sky’s most potent competitor since top flight English football became primarily a pure money game in 1992.
BT is spending £246 million a season to screen 38 live matches from 2013-14. Later this month, it will hand over a deposit of £22 million to the Premier League; thereafter, it will make six further payments of £119.3 million every August and January until early 2016.
The timing of these payments means that initially, the company’s earnings (or EBITDA to be accurate) will be reduced by £100 million and its free cash flow (operating cash flow minus capital expenditure) will fall by £200 million. But BT is big enough to absorb such an impact upon its balance sheet.
Its free cash flow will, it says, return to normal by 2014-15 – that’s around £2.5 billion – while its dividend and share buy-back programme remain unchanged.
In other words, BT appear to have calculated that it will have recouped the cost of buying the Premier League rights before the next round of rights negotiations, for the period 2017-20 take place, making it a potentially serious threat to Sky’s footballing hegemony.
For the time being however, Sky remain synonymous with Premier League coverage. In order to retain their absolute dominance, they were prepared to pay ‘whatever it took’ to win the five rights packages they desperately need for their business model to work.
It means the company is paying £6.6 million per match, more than two-and-a-half times what it paid in 2007, thanks mainly to the emergence of competition in the form of Setanta and ESPN.
Significantly, though Sky paid considerably more (around £100 million) than had been forecast, it knows what it’s doing.
The company’s success and business model is based upon broadcasting ‘footy and films’ that everyone wants to watch, a simple idea lifted years ago from French satellite broadcaster Canal+.
