Sky, BT, fewer watching TV and disenfranchisement

The most significant factor in how competitive or otherwise Celtic, or any other aspiring club in Europe is, is the value of TV rights for the Premier League in England and Wales. Next week, bids will be submitted for domestic rights packages from summer 2019 until 2022.

Things really got out of hand when the current deal was agreed three years ago. Sky increased their bid by 83%, they now pay £11m for every one of the 126 games broadcast each season. BT applied a more modest 18% increase, taking their cost per game to £7.6m. The League also banks international rights, as well as highlights and online packages.

What has changed in the last three years which will impact on the rights values?

On a corporate level, both Sky and BT have plenty to concern themselves with. BT’s consumer broadband and TV business is no longer growing in value, and it is shrinking in headcount. Annual revenue for this division is £1.26bn. The fee they pay to the Premier League each year is £320m.

Even more interesting is Rupert Murdoch’s decision to sell Sky TV along with his other entertainment divisions. Murdoch has had enough, Disney wait in the wings, pending regulatory permission for the deal to proceed.

I don’t think Murdoch is standing alone at the back of his yacht at night, contemplating the wisdom of a former newspaper rival. He is not in trouble, instead he wants out of the business.

Perhaps the most significant ingredient in the mix is the recent agreement for Sky and TV to sell both their Premier League sports channels to customers as a single package. Currently, Sky customers have to pay BT a premium to access BT Sports, and vice versa. If each broadcaster can access the others football package, the competitive frontier moves away from football, to areas like broadband provision.

With the January transfer window just closed, Premier League clubs are clearly not anticipating financial trouble from their paymasters, but the product as lost some of its early shine. TV audiences are on the wane, not just for English football, and not just for football either. This is a phenomenon for live sports in the US too. People just don’t watch as much television as they did five years ago.

So what does all this mean for us? During the Martin O’Neill era, Celtic were regularly in the Deloitte money list of the world’s highest earning 20 football clubs, and only five clubs in England paid more in wages. Since then, we have been disenfranchised from acquiring or retaining top talent.

English football could not afford to survive on the TV deal it had as recently as May 2016 (a 71% difference from the current deal). It would plunge into carnage and, perhaps, structural change. This could be a decade away, or it could happen next week.  But it will happen.