This was the major news in football finance this week, and it deserves a few words. In case you missed it:
BT Sport has announced an exclusive £897m three-year deal to broadcast live Champions League and Europa League football matches.
The broadcaster has won the rights to show all 350 fixtures each season from 2015 after talks with European governing body Uefa.
A BT spokesman said it had “shaken up the UK TV market” and would make some matches, including finals, free to air.
If that £897m price seems excessively high, remember it’s not really live sports that BT is after, but rather live sports as part of BT Sport’s attempt to compete with BSkyB in the UK, using football as a “battering ram” to get football-loving subscribers to buy into “triple pay” packages which include phone, television, and the lucrative growth industry of broadband television.
Why is this domestic UK deal important for global football?
Well, for UEFA and the elite clubs in the Champions League, it will mean an even greater windfall from the competition and more money into players’ pockets:
When TV cash goes up, guess where Premier League clubs spend it? Predictably & consistently for 20+ years (attached) pic.twitter.com/61ingPqeyP
— sportingintelligence (@sportingintel) November 12, 2013
It will also prompt more questions over the effectiveness of UEFA’s Financial Fair Play which prevents clubs from spending beyond their means. After all, the theory goes, how is it fair to prevent smaller clubs from spending above what earn to compete with the elite Champions League teams when the latter get higher and higher revenues from European competition?
I would only answer briefly that revenue disparities between rich and poor clubs have a limit–there are only so many players an elite team can pack into the squad, and there are also as-yet-unexplored ways smaller clubs can mitigate revenue disparity to compete there way into the upper part of the table to get a rare slice of the European pie, including smarter player recruitment strategies.
That however is not what I want to focus on. Instead I want to speak to these comments from media analyst Claire Enders, quoted in the Guardian a few days ago:
[Enders] described BT’s deal as an attempted “death strike” on Sky, that could come back to bite it. BT’s Premier League deal last year had already inflated the cost of sports rights. There was a real risk of “mutually assured destruction” for the industry, Enders said.
“Sports rights will continue to spiral upwards … the view that consumers can absorb these massive increases is wrong.
“Exactly what signal are you sending that you have so much money to burn to your customers that face an increase [in their bills] again this year?”
Remember, live sports has always been the telecom provider’s means to get into consumer’s homes. This is what has inflated the massive rights bids in the last few years for the Premier League. But both Sky and BT Sport have banked on the UK’s love of football to sustain the increasing cost of cable subscriptions in the near-term, which will face a major test as the economy continues its plodding recovery and on-line and on-demand options become more and more attractive.
I’m not convinced however that either BT or Sky are naive about the future of television in the age of on-line and on-demand viewing and improvements in live-streaming over broadband internet.
Here’s BT Sport’s chief executive Gavin Patterson for example explaining the company’s strategy in making a play for the Champions League rights:
“I don’t define our strategy based on Sky or any competitor per se. We sense there is an opportunity to grow into in this market. The key to us is a competitive broadband proposition and triple play. Sport is just one aspect of that,” he told the Guardian.
BT Sport spent most of the first decade of the 21st century preparing a foray into the broadband market, only to lose subscribers to Sky on the back of their own “triple pay” deals. Patterson’s strategy is BT’s way of fighting back, a recognition perhaps that the lure of live sports is still the best means into consumers homes.
Yet this may also be an elaborate game of musical chairs ahead of what could be a major shift in the market from television to broadband. As cable subscription fees hit a price ceiling, many customers will want to cancel their cable and keep their broadband for on-demand and live-stream viewing instead. When they do so, the will likely be happy to just stay with their existing “triple pay” provider. As more and more viewers cut their cords and demand for broadband increases, the price of internet access will rise in part too to make up for loss of cable subscribers. It makes sense for companies to gobble up any broadband customer they can now ahead of the shift.
That’s good for cable and internet providers, but will this possible future be good for football?
That is far from certain. Remember, the massive cost of rights bids don’t just reflect consumer demand for football, but also the desire of cable companies to use football as a means to get into consumers’ homes. Would that strategy still be important in a broadband world in which any on-line customer with a Internet connection could theoretically subscribe to an on-line package deal either BT Sport or Sky (or indeed Google or Apple) to watch live football (assuming net neutrality still exists ten years from now, an admittedly big ‘if’)?
The fact is the cost of rights to live football is inflated as part of an aggressive strategy on the part of cable companies trying to shore up their customer base before the fall of traditional TV, what one analyst called “an armageddon scenario.” If and when that strategy ends, so too could the salad days of wildly inflated rights fees for live football, and with it, the enormous pay day for big clubs and elite players. It’s not certain whether UEFA, the Premier League, or individual clubs will have seen it coming.