In recent years one of England's greatest success stories in terms of exports is the English Premier League. The EPL has proven itself to be a very marketable commodity not least to international viewers who have become fascinated by the high-paced, frenetic and sometimes dramatic nature of soccer in England. For many years the value of the product has been on an upward curve and the EPL has been able to charge increasingly higher amounts for selling on TV rights internationally. Covid however is threatening to put this trend into reverse. In the UK TV packages have had to be renegotiated given that clubs were in lockdown for several months and could not therefore put on the matches that they were contracted to deliver. Whilst lockdown was lifted in June – though no spectators were allowed in – significant revenue was lost as a result. In total it is estimated that the cost of Covid as far as the EPL was concerned was £850 million (about $1.1 billion). The EPL negotiated rebates worth about £350 million with broadcasters.
Now a major problem has emerged with regard to international TV revenues. There are some very lucrative contracts in place, such as that with the US broadcaster NBC which is worth $1 billion over six years and that with beIN Sports in Qatar which has been broadcasting EPL matches in the Middle East since 2015 for £1.3 billion. However, a deal with the Chinese broadcaster PPTV is now in trouble. It was due to expire in 2022 but it has now been terminated by the EPL. It seems that the two parties were unable to agree on a renegotiated deal with PPTV seeking reductions in the contract value which the EPL would not sign up to. Insiders suggest that PPTV would still like to retain the rights but not at the price on offer. Whether or not this is the EPL playing hardball, and whether if they are the tactic will be successful, remains to be seen.
The spat is a blip on what in the past has seemed to be an unstoppable upwards trajectory for the EPL. In 2019 they announced that they would net £4.2 billion from the sale of rights up until the 2022 season, up by about £1 billion from the previous deal. The problem for EPL clubs is that, despite the large sums involved and attempts to regulate them better through the Financial Fair Play scheme, many still live a hand to mouth existence as far as their finances are concerned. High transfer fees and inflated wages leave little margin for error. It will be interesting to see how this manifests itself going forward but it is notable that the soccer transfer window, which was opened a little while back, has not yet seen much activity. Perhaps this is a sign of wind of financial reality blowing in at last, to be followed by some belated financial realignment in the industry.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.