Tuesday, 3 March 2015

Five Thoughts on Premier League Riches

So, the money keeps rolling in. Hot on the heels of the landmark domestic TV rights deal, comes news from SW6 that Chelsea have secured a new 5-year £200m sponsorship deal with Yokohama Rubber. The perception is that being in the FA Premier League is a license to print money and the good times will keep on rolling. The reality is not quite so straightforward. Here are some big talking points that need to be addressed:

What if you're not at the apex?
I wrote a couple of years ago that Manchester United's shirt will not be "sponsored". Potato, pot-ato. Chelsea have now joined the ranks of mega "sponsorship" wealth but those that can command such revenues are few and far between. Those clubs trying to be United or Chelsea-lite are barking up the wrong tree. You need to stand on your own feet and work out specifically what value you can offer sponsors. Don't lead with media value: it's a commodity you don't control and which can be undercut. It's time to put the marketing horse in front of the sales cart.

TV is only the beginning
Even until relatively recently, FAPL clubs' revenues were reasonably evenly-split between TV, matchday and commercial (sponsorship, retail) income. Now TV revenue accounts for up to 75% of some clubs' revenues. This should concern the boards of those clubs for a number of reasons: 1) where's the competitive advantage vs those clubs that are in the same position? 2) they have little control over their own long-term planning, all they can do is wait for the next TV deal & accept whatever is on the table; 3) they're building very little leverage for any future D2C broadcast model. The smart clubs are using the TV revenues to invest in creating a much more interesting value proposition for sponsors, fans and down the line, they will have more leverage against broadcasters.

Matchday revenue does still matter
There is a clamour for reduced ticket prices, or even an argument for letting fans in for free. Broadcasters won't be happy if their £5bn doesn't guarantee full stadia and therefore a strong visual product. Of course there is an argument for reducing ticket prices but this argument is a hammer to crack a walnut. "Free" can all-too-easily equate to there being no perceived value. There is a smarter middle way - which involves enhancing value for money and personalising the experience - but we don't need to throw the baby out with the bathwater. Too many metaphors in one paragraph?

What's the point, if it's all going straight out of the back door?
More money, more debt. That's been the pattern over the past twenty years as whatever revenue increases have been generated, clubs have spent it even quicker. Great that you can double the revenues from your shirt sponsor but if a) you're just going to spend that money on player wages and agents fees and b) they're not going to add value to the fans' experiences, the whole thing seems like an exercise in futility. Clubs should be taking large portions of these various windfalls to improve the lot of the fan, especially those in the younger age groups and build some institutional value in their business.

How can football make it easier for itself?
We've exempted investment in the development of the next generation of players; we've exempted investment in the development of better stadia. How about exempting investment in ensuring the next generation of fans still want to come to or watch FAPL football on TV? Time to review FFP regulations? It may even be that down the line, investment now in our customers will improve our leverage and actually drive up the value of future broadcasting deals.