Portsmouth Business School
Televising premiership matches a win-win
Wed, Nov 9, 2011
Screening live premier league matches would not result in significant financial loss for clubs at the turnstiles – rather it would help redress the imbalance in overall earnings, and therefore in the fortunes, of clubs at the bottom of the league, says Adam Cox, of the Portsmouth Business School. His research will be published in the International Journal of the Economics of Business.
Mr Cox said: “The arguments put forward by the Premier League for the way it currently collectively sells limited rights are to protect the financial interests of the member clubs, however, the evidence suggests all three parties – fans, broadcasters and clubs – would be better off if the number of premiership matches shown on television was increased.
“The Premier League is acting as a cartel to protect clubs’ gate revenue by artificially limiting the number of rights to screen games but this behaviour is limiting profit for them and the clubs.
“New data shows broadcasting live football matches does have an effect on the number of people through the gate to watch matches, but this effect is outweighed by the earnings clubs make from selling the television rights.”
Mr Cox studied data on numbers through the gates at premiership matches from 2004-2008 and found the effect on match day gate takings is less than expected and not the same for every club.
He said the effect of limiting screenings to protect attendances at club games hurts consumers, broadcasters and the clubs themselves. The Premier League controls the sales on behalf of all 20 clubs in the premiership and it limits the number of games sold to broadcasters to 138 out of a possible 380 matches per season (about a third). The deal is worth £594m a year.
“We estimate that, when taking into account all 20 clubs, gate revenue is reduced by an average of 19.7 per cent (£232,237) when the match is broadcast live. But payments for screening games in the 2007-08 season were, on average, £4.12m per game, which is split between the clubs and includes a merit payment for final league position, and a facility fee for hosting a match.”
The ‘top four’ clubs (Arsenal, Chelsea, Liverpool and Manchester United) would see gate takings drop by an average £50,060 (2.4 per cent) when a match is broadcast live. The ‘bottom five’ clubs (Birmingham, Middlesbrough West Bromwich Albion, Wigan, Sunderland) would see gate takings drop by an average £169,839 (21.47 per cent). But both top and bottom clubs would gain an average of £4.12m per game.
Mr Cox said: “The bottom line is the loss of gate revenue for broadcasting a live match is heavily outweighed by the financial benefit of selling the broadcast rights. If the Premier League was more confident about the size of the loss being small then perhaps they would sell more games for broadcast. This would benefit the clubs with more money to buy greater playing talent, which will then attract more audiences, and would also benefit customers as they have a greater choice of where they can watch a football match.
“The risk is that the Premier League is acting as a cartel, restricting output and depriving consumers of watching football matches in the way they choose. This is contrary to government competition guidelines on monopolies but these restrictive practices have been allowed to continue because they’ve argued that restricting the number of live broadcasts limits the effect of lower attendance at the stadium, although it is not clear that the Premier League know the size of this.”
Mr Cox used a statistical model to analyse data from a variety of sources, such as UK National Statistics, Setanta Sports, Sky Sports and Virgin Media, in order to measure losses in revenue.
His study also included the following findings (all amounts are average):
- Match day gate takings drop £568 for every additional pound in average male weekly earnings of residents surrounding the home stadium (suggesting the wealthier the fan, the more likely they will stay away from the stadium and instead watch matches on television);
- The density of a home team’s population pushes up gate takings for every additional person per square kilometre living near the stadium by £83.50 when a match is televised live.
- Matches between local rival teams increases match day gate takings by £67,539.
- A match involving one or more of the ‘top four’ clubs increases gate takings by £18,554.
- Every one per cent rise in players’ wages pushes up the gate takings by £108;
- The greater the uncertainty of the outcome of a match, the greater the gate takings – the home club will earn an extra £4,467 for each additional position in the league tables separating the two teams;
- Gate takings rise by £5,246 for every additional pound it cost to watch a televised match live at home, showing consumers are sensitive to price subscriptions;
- When a team is newly promoted gate takings go up by £100,009 if playing at home, and by £14,736 if they are playing away;
- Weekday matches reduce gate takings by £27,144 compared to matches played on Saturdays;
- End of season matches see gate takings rise by £57,159 compared to start of season matches.