E.U. ruling a serious threat to the stability of the Premier League
Thursday 10 February 2011
In a week where the British transfer record was broken twice either side of last orders, the perseverance of a pub landlady could mean that the size of transfer fees spent on Andy Carroll and Fernando Torres are a thing of the past.
Karen Murphy of the Red, White and Blue pub in Portsmouth has been involved in a protracted legal battle with the Premier League after the organisation tried to prevent her from showing live league matches supplied by an overseas broadcaster.
The dispute has rumbled onto the European Courts of Justice, where legal advisors have recommended that any "territorial exclusivity agreements relating to the transmission of football matches are contrary to European Union law".
The Premier League currently sell rights to games on a territory-by-territory basis, where the fee varies from one country to the next. The current three year TV deal brings in a combined £3.5bn to the Premier League pot, £1.4bn of that coming from overseas broadcasters, the majority rest by domestic rights holders who in turn pass the costs on to subscribers and advertisers.
In essence, the Premier League forebode pubs, clubs and armchair viewers from subscribing to any other rights broadcaster other than those based domestically such as Sky, ESPN and the BBC, in a perceived effort to maintain the value of its domestic contracts.
Mrs Murphy opted against paying Sky’s £600 per month subscription charge and instead imported a Greek decoder and subscribed to their package for just £800 a year, which included an additional 200 live games.
Pubs up and down the land have similarly been beaming in overseas footage at a fraction of the cost, something the Premier League said was illegal. But the commission which advise the European Court’s has ruled against the Premier League and in favour of the consumer by declaring the current system is "tantamount to profiting from the elimination of the internal market".
An appeal is expected by the Premier League and it’s lawyers, but potentially, if that fails and new laws are introduced, the economic model of the Premier League cash cow could be seriously jeopardised.
If the commercial territorial boundaries are erased, that would mean the Premier League require broadcasters to buy the rights with equal parity regardless of location. If the rule goes through, the Premier League will face a difficult choice between upping the fee significantly to foreign broadcasters, or by lowering the tariff to domestic companies. Either way, it could signal a dramatic drop in TV revenues being filtered to the clubs with the scenario having ramifications for clubs of all size and financial standing within the league.
For the smaller clubs, especially the promoted and less wealthy, the TV money is a vital part of business and goes some way to easing the burden of lower gate receipts to cover player signings, wages and other overheads.
Even for the clubs of more apparent prosperity, the TV money again provides a solid and consistent income albeit part of a larger honeypot. This season alone, Manchester United have posted losses of £80m and just recently Chelsea almost matched that with a £70m deficit - figures lessened by the cushion of broadcasting money.
With UEFA’s financial fair play remit soon to be constituted, as well as the loss of revenue through lower TV monies, it would mean that clubs would be able to spend even less on transfers and wages. In theory, it could lessen the ever increasing gap between the have’s and the have not’s, but it would still leave the have not’s with less than they had before.
At present in a show of lateral unity, the money is dished out between all 20 Premier League clubs as prize money and split dependent on league positions, but should the overall sum be sizeably cut, would the big clubs be so communally friendly?
Under the current format, any loss in broadcasting fees would be felt proportionally by all and there is already resentment from the big boys that they are renumerated equally to the rest, for arguably doing more.
It is hard to go against the notion that games involving both Manchester clubs, Arsenal, Tottenham, Chelsea and Liverpool draw in the largest TV viewing figures. these clubs are on our screens more than the rest, draw in larger audiences both home and abroad and invariably contribute most to the commercial value of the league globally.
It is highly unlikely the chief executives and money men would agree to such disparity if their own interests were being directly and significantly affected. The current Premier League TV rights have only just been re-negotiated on a three year deal, but by the time they come to be renewed, if any sanctions from the EU need to be in place, the clubs could decide if it is in their best interests to decline to sign up to the withered intermutual windfall.
The immediate worry is that if the clubs could not amicably agree on how to be remunerated, it would leave open the possibility that individual clubs could negotiate their own individual rights packages. This happens in Italy, where the likes of Milan, Juventus and Inter all receive tenfold sums of those with a reduced fanbase and following. This is where the rich get richer and the poor become poverty stricken.
It is a potentially colossal change for the landscape of football in this country, and given the commercial success and sustainability of those clubs who can, it is highly likely they will go it alone for their own gain. Given the worldwide thirst for top Premier League action, the band of elite clubs could still demand top dollar for their product. Where there is demand for a supply, the suppliers can generally demand what they want.
What happens next is in the hands of the legal powers in Luxembourg. Rulings from the European Courts are supposed to be for the benefit of equality, in this case, it could end up doing anything but.