How the Premier League is conquering global markets
Published 10 November 2016 By: Austin Houlihan
In this series of feature blogs, the Sports Business Group at Deloitte offer their views on some key activities in the Premier League and the global football markets. This first blog examines the Premier League’s continued growth in the value; how it is performing across global markets; its growth drivers; and the competition for broadcasting rights among established players and new emerging media platforms.
Continued revenue growth among Europe’s top leagues
European club football’s remarkable revenue growth is set to continue, and in some cases accelerate, over the next five years, fuelled by continuing increases in media rights fees for top-tier domestic leagues and UEFA’s top club competitions.
Commentators have regularly questioned whether this media rights growth can continue, but again nearly every major domestic league’s negotiations for the next rights cycle resulted in substantial revenue growth. What is as marked as overall media rights growth, is the difference in media rights revenues being generated by domestic leagues.
The Premier League enjoys a vast revenue advantage through its domestic rights deals led by Sky and BT which will deliver over double the value of the next highest generating leagues, Serie A and La Liga.
Even more than domestic rights though, it is the Premier League’s earning potential through international markets which sets it apart.
Global dominance of the Premier League
The £1.1 billion per season that the Premier League will generate from international (non-UK) markets for the three seasons from 2016/17, makes the league comfortably the world’s highest earning sports league from media rights in non-domestic markets. This is well over double the revenues generated by the next highest league, Spain’s La Liga, which itself concluded vastly increased deals for the three seasons from 2015/16. The major US leagues don’t come close in terms of media rights revenues from international (non-US) markets.
As interesting as the overall growth itself, is the regions which are driving this growth.
All regions delivered double digit revenue growth in the most recent negotiations. The Premier League’s popularity in Asia remains huge, and the region continues to be a key market in contributing revenues. But whereas Asia fueled overall rights fee growth in previous cycles, with growth from territories such as Singapore, Malaysia and Thailand, these markets have slowed somewhat, and – whilst they still remain core – another crop of markets are driving growth, some in Asia and some elsewhere.
Asia media revenues increased c.10%, whilst other regions enjoyed higher rates of growth. European revenues increased by c.75%, and now contribute a similar proportion of the PL’s overall international media rights value to Asia, at around a third. Substantial increases were achieved in Scandinavia and France in particular.
Elsewhere, the US (NBC) and Sub-Saharan African (Supersport) license values grew rapidly, and are now amongst the top five licensees by revenue contribution, the former through a six year deal through to 2021/22.
The Premier League’s virtuous circle of growth
Certain fundamentals remain key to the Premier League’s global appeal, and underpin not only its media rights growth, but also the virtuous circle that maintains its advantage over other leagues.
The League is hugely competitive throughout its 20 clubs. Any club can beat any other, and does so regularly. This uncertainty of outcome drives value. This is highlighted by the 2015/16 season, with Leicester crowned champions, whilst West Ham United and Southampton also threatened and outranked some of the established elite.
The Premier League does not have it all its own way though. Its clubs have not enjoyed success in the Champions League in recent seasons, and at the top end are challenged by a small handful of elite clubs for the truly top global talent. However, the clear financial lead the Premier League clubs enjoy over continental rivals means that they compete for, and sign, top talent from all around the world.
The multinational nature of clubs’ playing squads, and increasingly clubs’ coaches, owners, sponsors and investors also helps to spur the global interest, and audience, for the League.
These fundamental pillars create a virtuous circle for the Premier League’s continued growth and success. Indeed, in many ways, one could be tempted to say the League could sell itself. However, the League is not complacent and promotes itself to international markets in many ways, including kick-off scheduling conducive to driving audiences in key markets and an effective rights sales process which aims to optimise value.
Competition for premium content among established broadcasters
Established Pay-TV platforms in many markets remain aggressive in competing for, where possible exclusive, premium audience driving content. Whilst the rights fee outlay can’t necessarily be refinanced through subscriptions and advertising for sports content alone, the fact that these operators are willing to fund the cost through other parts of their business, underlines the important of top-tier domestic league football to their business models.
In more recent years, telecommunication companies have identified top sports content as a means to drive their consumer platform offerings and to retain their customer base. As such, they have emerged as competitors to established “Pay” platforms, driving rights fee growth to premium sports properties. The UK, France, Spain, Australia and Portugal are all examples of markets where such companies have competed strongly for premium sports content.
In certain markets, particularly with dominant single Pay operators and/or limited competition subscriber, OTT (over-the-top) subscription services have also emerged to offer an alternative platform for broadcasting sports content.
Will alternative media platforms emerge to create a new world order?
An open question remains: how might live premium sports content owners evolve their relationship with the new breed of global media platforms such as YouTube, Twitter or Netflix? At present, these corporations remain largely in the shadows in terms of acquiring premium live sports rights (although we have seen Twitter dip its toe with the NFL1)
Continuing and growing appetite for live rights from established players keeps driving rights fees upwards. In such a climate, rights owners may be less inclined to experiment. And, equally, these major alternative new platforms may be less inclined to commit large amounts (despite having substantial resources) to acquire such content unless they can see a clear route to a return on investment.
However, partnership and experimentation will continue. The NFL will broadcast ten Thursday night matches per season through Twitter from 2016, which will be available worldwide. This is to a certain extent a financially de-risked project, as rights to the same ten matches have already been sold to established US networks NBC and CBS for $450m per season. Established rights owners and/or licencees have recently taken to supplementing coverage through their own broadcast platforms, with live coverage through YouTube, such as BT and BeIN Sport’s coverage of the UEFA Champions League final.
Rights owners also continue to use such platforms to deliver non-live content including highlights, clips, features and archive in efforts to expand audience reach and interest.
The Sports Business Group at Deloitte is a team of 20 people based in the UK, working exclusively on consulting and financial advisory projects with clients across all sports around the world, including in respect of sports regulatory and dispute matters. This article was first published in the Deloitte Annual Review of Football Finance (2016 edition). The report and further information is available at www.deloitte.co.uk/sportsbusinessgroup
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- Tags: Africa | Broadcasting | Lega Serie A | Malaysia | Media Rights | National Football League (NFL) | Premier League | Singapore | Thailand | United Kingdom (UK)
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Austin Houlihan is a Director in the Sports Business Group with over ten years of experience working in the sports business sector. He has considerable experience working on strategic, media and commercial development assignments with governing bodies, clubs, and other organisations in the UK and internationally across a number of sports. Austin is currently the Programme Director for the IRFU’s bid to host the 2023 Rugby World Cup.