Premier League sides have become more and more reliant on income from broadcast revenues
This season’s UEFA Champions League campaign has already gotten off to a truly memorable start with a 3-0 victory at Young Boys in match week one and a thrilling 1-0 victory over Bayern Munich at home last time out. The Villans’ fourth-place Premier League finish last season earned them a place at the top table of European football’s elite for the first time since 1983. Bologna, an Italian team, will be visiting Villa Park tonight.However, maintaining this level of success will be crucial to Villa’s future growth possibilities, both for the potential prize money accumulation and for assisting them in beginning to lessen their dependency on broadcast revenue as a source of income during the ensuing ten years.
According to the most current financial statements for 2022–2023, Villa’s turnover was £217.7 million. Of that amount, gate receipts brought in £18.8 million, commercial activities brought in £40.6 million, and television revenue brought in an incredible £152.6 million. The remaining £5.7 million came from player loan fees.
The Premier League as a whole is heavily reliant on the money it receives from television networks. The current domestic rights, which are about to enter a new cycle, were agreed upon for 270 games per season at a cost of £6.5 billion spread over four years. The most recent price for the international rights, which are now being bid on for the upcoming cycle, was £5 billion for three years.
Through central funding, that money is gathered and dispersed among the clubs in three ways: 50% is paid evenly, 25% is determined by the number of television appearances, with a minimum amount (facility fees), and 25% is determined by the club’s league finish (merit payment).
The Premier League’s rise as a global brand has been fuelled by its broadcast revenues, which also guarantee that even teams in the bottom reaches can earn more from TV money than certain teams competing for Champions League spots in other big European leagues. Because the Premier League has access to a lot of money, the transfer market has exploded, increasing wages, transfer fees, and agents’ fees.
Although weaning a club off of the large checks coming in from the Premier League TV pot isn’t an easy task, some clubs have begun to try to reduce their dependency on it. Broadcast revenue accounts for 70% of Villa’s total revenue.
In the Premier League, teams like Manchester City, Manchester United, Liverpool, and Arsenal operate in the 40–45% range, while clubs like Nottingham Forest and Bournemouth are at the other extreme, with 80% and 87%, respectively.
Given that the larger clubs earn the most money and can make more from other sources, like business ventures, none of those numbers are really shocking.
Why should any of this matter, though? After all, there is no indication that the good times will end, and broadcast revenues appear to have been increasing at an incredible rate. Well, not exactly, really.
On the surface, the new £6.7 billion domestic agreement may appear to be a massive £1.7 billion increase over the previous cycle, but in practice, it spans four years rather than three, and the Premier League gave up more inventory—an additional 70 games every season, up from 200 to 270. In actuality, that indicates that the worth of each individual game displayed has decreased.
Broadcasters will only be able to press for payment for the goods so far, even while that might not seem like a major issue and the longer commitment might seem to indicate confidence in the market.
The concept of a direct-to-consumer service, similar to “Premflix,” where the Premier League creates the material and owns the intellectual property and all associated rights, has been discussed for a long time. Although that is valuable, setting it up would be extremely costly. Clubs would have to endure years of low revenue from television rights, and for some, the repercussions might be disastrous. While the Premier League sets up shop, few team owners would be requesting that the broadcast rights be cut at this time.
Due to other variables including the desire for a return on investment, broadcast earnings have been so heavily favoured that many clubs have been unable to withstand a substantial decrease.
Many clubs are currently attempting to lower that proportion of broadcast money versus turnover because the warning signals of possible rough seas ahead are already beginning to appear.
Sky, who hold the biggest and most valuable set of Premier League rights and have done so since the competition’s creation in 1992, posted losses of £750m. Now, that isn’t down to the football having lost them all that money, but the constant need to keep paying more against the backdrop of more and more people moving away from the traditional satellite package and on to online streaming, as well as the rise of piracy through IPTV, means that the prospects for growth to support further, heavier investment don’t look promising.
For the most recent cycle of rights for English football’s top tier, Sky paid more than £5bn to acquire four out of five available packages of Premier League games, which will see it broadcast a record number of matches – at least 215 a season – from next year.
The live sporting event, particularly football, has been seen for a long time as the best way to drive subscriptions, and that is what sees the value so high. The likes of Amazon have already dipped their toe in the water, while Netflix may try in the future. But all face challenges to grow revenues, and nobody will be able to swallow a never-ending steep incline of broadcast rights rises, something will have to give.
The challenge for NSWE at Villa will be to find ways to grow other revenue streams, such as commercial activity and matchday, as seen by the number of clubs who have made moves to redevelop their home stadiums to bring in more money. This has been mooted as an option for Villa.
They are also likely to have to explore new ways that the relationship with the global fanbase can be monetised to a greater extent by harnessing new technologies.
For now, the money keeps on flowing in from broadcast rights, especially for those clubs who can count on the lucrative sums that arrive from Champions League football. But for all Premier League clubs, Villa included, keeping the percentage of broadcast revenue to turnover on a downward trend will be absolutely vital to protect against the potential issues that are starting to gather on the horizon.
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