Premier League foreign rights talks reflect changing times, not just greed
On Wednesday, representatives from the Premier League's 20 clubs decided not to decide. Not right now, anyway. A proposal to change the way overseas broadcast rights revenue is divided was not voted on and, accordingly, was adjourned "to allow further discussion."
Which is league-ese for "kicking the can down the road."
The fact that it was up for discussion -- at the behest of Premier League executive chairman Richard Scudamore -- is significant. For the past two decades, the league has been the poster child for good governance, slick marketing, smart business decisions and seemingly continuous growth. Not to mention the ability to generate enormous amounts of cash.
Now, however, you get the sense that the much admired -- and much copied -- business model requires tweaking, in a way not seen since the league opted to contract from 22 to 20 clubs in the mid-1990s.
At issue are foreign media rights, which were so tiny when the Premier League was formed a quarter of a century ago that they were very much an afterthought. Back then, the real prize was domestic TV revenue, and clubs opted for a relatively egalitarian split: 50 percent shared equally, 25 percent based on television appearances -- each club was guaranteed a certain number -- and the remaining 25 percent based on league position; the top team got 20 times as much as the bottom team, the second top got 19 times more, and so on.
It wasn't a straightforward decision, and different leagues -- wealthier than the fledgling Premier League at the time -- experimented with different formulas. Some opted to allow clubs to sell their rights to home games individually. Others went for a collective deal but weighted it heavily towards league rankings or ratings. There was plenty of discussion, but ultimately it was felt that the aim ought to be "working to make the pie bigger" rather than giving the biggest slice to the ones who contributed most to making it.
And for a long time, the 50:25:25 split was regarded as the magical formula at the heart of the Premier League's success. The fact that the top club earns around 1.5 times as much as the one at the bottom set it apart from Europe's other big leagues.
There is little question that it was a decisive move; had the Premier League gone for the "individual sale" model -- like Spain and Italy at the time, though both have since moved to a collective model -- you could easily have envisioned a situation where Manchester United made twice as much in media revenue alone as the likes of Arsenal or Liverpool and 10 times more than clubs like Bolton or Crystal Palace.
Given that media rights represented the lion's share of revenue back then, it would have given them an insurmountable advantage. Equally, it would have scared off investors, because playing catch-up and building a brand when you're spotting the competition that much is like running a 100-yard dash and giving your rival a 50-yard head start.
But when it came to overseas rights, they were puny, so nobody cared and everyone agreed on an equal split between every club. That was all fine and dandy when they amounted to less than $5 million over three years. But now we're approaching $5 billion in a three-year cycle, and some suggest that foreign rights might soon be more valuable than domestic ones.
That's why a group of clubs -- reportedly the big(ger) six: Manchester United, Tottenham Hotspur, Chelsea, Manchester City, Liverpool and Arsenal -- urged Scudamore to take another look at the distribution of money. One option, for example, would be for overseas revenue to shift from an even split to the 50:25:25 formula over time.
Not surprisingly, the majority of clubs are opposed -- they would lose out financially as a result -- which is why the decision was postponed: Scudamore doesn't like to submit proposals and see them voted down, which is understandable.
The issue here is that there's a bit of a "free rider" problem. Domestically, English clubs have relatively diffuse fan bases, and broadcast ratings reflect that. Yes, Manchester United dwarf Huddersfield, but -- in part because 3 p.m. kickoffs aren't televised -- ratings for a Brighton vs. Bournemouth (small club vs. small club) match aren't that much lower than, say, Liverpool vs. Southampton (giant v mid-sized). Folks tend to watch what's on, especially when there are no competing Premier League games.
Abroad, however, it's a different story: Big clubs dominate, and it's not hard to see why. If you're a Premier League fan from Beijing or Batumi or Brownsville, odds are you won't have a particular connection with, say, Burnley. There's a greater chance you'll support one of the big clubs with the stars that you've seen regularly compete at the highest level over the years. Especially when those big clubs regularly market themselves to your part of the world and sometimes visit on tour as well.
The argument goes a little like this: Manchester City, say, invest money in producing a website in 13 different languages. They spend huge amounts of cash to attract and retain top players. They actively advertise their product -- and, by default, the Premier League -- in every corner of the globe.
That's why folks tune in and that's why, when they do, they watch City rather than, say, Crystal Palace, who spend a fraction in the same areas. So why should Palace (or any other smaller club) get an equal share to City?
The stock argument against is probably along the lines of why the 50:25:25 formula was desirable to a purely merit-based one: It makes the league more competitive, attracts more investors, etc. It's fair until you consider that 60 percent of Premier League clubs made a profit in 2015-16, the most recent year for which we have figures. And those are just headline numbers; some costs that show up in the accounts of some clubs are really just owners taking money back out.
I'm OK with big clubs subsidising smaller ones in the name of competitive balance, but in some cases the subsidy isn't going to the smaller club, it's going to its owner, who is likely to be a billionaire anyway. And that's less OK.
It's easy, especially with the game so polarized, to point to big clubs and see this as another expression of their greed. But in this case, it's less clear-cut.
Gabriele Marcotti is a Senior Writer for ESPN FC. Follow him on Twitter @Marcotti.