A TV predicament faced by Premier League clubs

Money generated through broadcasting is arguably the most important source of income for a club. It might not be significantly more than match-day or commercial for all clubs but it is the difference between the richest clubs from Europe and those English ones just below them.

The revenue generated by broadcasting is reliant on deals from domestic competitions and European competitions. It is no surprise that the sides who earn the highest broadcasting revenues all play in the Champions League.

The table below shows the total revenue that teams earned the most through broadcasting deals in 2010.

Team Total Broadcasting Revenue (£m)
1 Barcelona 145.8
2 R.Madrid 129.9
3 AC Milan 115.5
4 Inter 112.9
5 Juventus 108.5
6 Man U 104.8
7 Arsenal 86.5
8 Chelsea 85.9
9 Liverpool 79.5
10 Bayern 68.3

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Looking at the table, you might be surprised. English teams that are considered as the ‘biggest’ in Europe languish at the bottom of the top ten, below their Spanish and Italian equivalents.

Manchester United may be one of the ‘biggest’ clubs in the world but it only generates the 6th highest broadcasting revenue, and generated £40.1m less than Barcelona in 2010 despite playing in the Champions League and coming runners-up the Premiership. This is because Spanish and Italian leagues allow clubs to organise their own private TV deals for domestic League games. The English and German leagues sell their TV rights collectively and split the money between clubs more equally.

While this arrangement exists, teams in England will never be able to compete with biggest Spanish and Italian clubs in terms of TV revenue. Juventus did not qualify for the Champions League this year, but still had a higher total revenue from broadcasting than Manchester United, Arsenal and Chelsea who have all played in the competition for the last two years.

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In 2005, the gap in revenue from broadcasting between English and Spanish clubs was not severe, but in the last 3 years it has become massive.

2005 2007 2010
1 AC Milan 93.2 1 AC Milan 103.4 1 Barcelona 148.5
2 Juventus 84 2 R. Madrid 89.1 2 R. Madrid 129.9
3 Inter 69.7 3 Inter 86.2 3 AC Milan 115.5
4 R. Madrid 59.5 4 Barcelona 71.8 4 Juventus 108.5
5 Chelsea 55.4 5 Juventus 62.6* 5 Inter 112.9
6 Barcelona 53.4 6 Man U 61.5 6 Man U 104.8
7 Man U 48.8 7 Chelsea 59.6 7 Arsenal 86.5
8 Arsenal 48.6 8 Liverpool 55.2 8 Chelsea 85.9
9 Liverpool 51 9 Arsenal 44.3 9 Liverpool 79.5
*Juventus played in Serie B in 2006/07

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Since 2005, Real Madrid have increased their revenue by £70m and Barcelona by a staggering £95m. This is because private TV negotiations see these teams benefit from an upward spiral; the more successful they are on the pitch, the richer they become and so the more successful they are likely to be the next year. This is why Barcelona and Real Madrid now find themselves so much richer than any other side in Spain. One of Barcelona’s main attractions is their brand of football, one of Real Madrid’s is their ‘galacticos’, but both of these teams rely on their huge broadcasting revenue to help fund these attractions.

The same is true of England but to a lesser extent because the rewards for success are significantly less. In the last 5 years Manchester United have only increased their broadcasting revenue by £56m and Chelsea by £30m. These are considerable amounts of money, but insignificant in comparison to what Spanish clubs generate.

Since an English side will never receive more than a capped amount of money through broadcasting, its upper limit of revenue is reduced. If clubs in England were allowed to secure private TV deals, it would be interesting to see how much money they received and which team received the most.

Italian sides have not increased their revenue by the same extent as in Spain but that is because they already all had extremely profitable TV deals in place in 2005. In 2007, Juventus had a greater revenue from broadcasting than any side in England despite being in the Serie B. With this in mind you can see the predicament of English clubs.

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But the sharing of broadcasting money is, by no means, entirely negative for English football. While there may be no English clubs in the top 5; there are 8 in the top 20. This is a higher representation than any other League. In England the television rights are sold collectively and therefore divided in a more equal fashion. This means English clubs Aston Villa, Fulham and Manchester City who have not played Champions League football in 2010, feature in the top 20 ahead of clubs who have. The 7th richest side in England, due to broadcasting revenue (Tottenham), makes more than the 3rd most in Spain (Atletico Madrid).

For the year 2010, both the 08/09 league position and 09/10 have a contribution on broadcasting revenue as they dictate whether a side played European football in 2010. For example, a side like Bordeaux may have finished 6th last year, but it also played in the Champions League because of its success in 2008/09 domestic season.

Team 2010 Total Broadcasting Revenue (£m) Position  in domestic League 09/10 Position  in domestic League 08/09
1 Barcelona 145.8 1 1 8 Premier League
2 Real Madrid 129.9 2 2 5 Serie A
3 AC Milan 115.5 3 3 3 La Liga
4 Inter 112.9 1 1 3 Ligue 1
5 Juventus 108.5 7 2 1 Bundesliga
6 Man U 104.8 2 1
7 Arsenal 86.5 3 4
8 Chelsea 85.9 1 3
9 Liverpool 79.5 7 2
10 Bayern 68.3 1 2
11 Lyon 64.2 2 3
12 Marseille 58.0 1 2
13 Fiorentina 57.1 11 4
14 Man City 54.0 5 10
15 Roma 53.7 2 6
16 Bordeaux 53.5 6 1
17 Aston Villa 52.1 6 6
18 Tottenham 51.5 4 8
19 Atletico 50.9 9 4
20 Fulham 50.9 12 7

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Interestingly enough, the German league also organise their television rights collectively. However they negotiate significantly less lucrative deals than in England, Italy or Spain. Deloitte’s indicate that this is because of the ‘lack of an established Pay-TV market in Germany’, rather than because of the way they distribute the money.

The Premier League on the other hand generates more money than any other League in Europe. The League is more marketable largely due to the competitive nature of the Premier League which results from strength in depth. The non-elite teams in England generate more income than their Italian and Spanish equivalents and therefore can spend more money on players and wages and produce better teams.

Last year in La Liga, Barcelona and Real Madrid collected 99 and 96 points respectively. They lost just 5 games between them. Valencia, who finished third, won only 71 points. There was a gap of 25 points between 2nd and 3rd, and 33 points between 4th placed Sevilla and 2nd.

In comparison, in the Premier League the champions (Chelsea) and runners-up (Manchester United) lost 13 games between them. A 24 point gap separated Manchester United and Everton, who finished 8th, while a 33 point gap existed between 2nd and 13th (Sunderland). This shows the difference in the two leagues. The non-elite teams in England are able to compete more closely with the top sides. Therefore the overall standard Premier League is higher.

This strength in depth in England may initially begin due to the non-elite clubs receiving more TV money, but it also affects match-day revenue and this is reflected in the average attendances.

Below are the average attendances, per League game, of the European domestic leagues, excluding the three sides with the highest average attendance. In England this is Manchester United, Arsenal and Newcastle, In Spain; Barcelona, R. Madrid and Atletico Madrid, In Italy; AC Milan, Inter, Napoli, and in Germany; Borussia Dortmund, Bayern Munich, Schalke.

Competition Average Attendance (excluding big 3)
Bundesliga 24,513
Premiership 20,494
Serie A 12,251
La Liga 11,928

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On average, a Premier League game sees almost double the amount of supporters than in Spain. So while the elite clubs in Spain and Italy prosper from individual broadcasting deals, the smaller clubs dwindle. The smaller clubs receive such minor broadcasting revenue that they cannot field sides that compete with the best and as a result people don’t want to go and watch them play, this is obviousl not the case in England or Germany.

The inequality of TV deals is not the only reason for a less competitive domestic League in Spain, but it has a major effect. Not only do the smaller clubs receive less money through TV deals, but they also generate a comparatively insignificant amount of money through match-day revenue as their average attendances are so low.

If the money made from broadcasting was divided more equally, as it is in England and Germany, the strength and depth of La Liga would be higher and the smaller clubs would be better sides. One affect would be that the smaller clubs would increase their average attendances. The Spanish League would be more competitive and the chances are that as a League they could generate more money.

It is because of broadcasting revenue that English clubs are not among the richest in Europe. Even so, an English side has appeared in 4 of the last 5 Champions League Finals.

Article title: A TV predicament faced by Premier League clubs

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