Post by QPR Report on Dec 17, 2008 8:11:30 GMT
Independent/Nick Harris
Premier League planning TV channel to beat the recession
Exclusive: Clubs plot bold contingency plan should bids plummet in value for next TV deal
The Premier League will "recession proof" its most important income stream – television money – by launching its own TV channel from the summer of 2010 if the value of bids for live rights plummets when the auction for 2010-13 opens in the next few weeks.
A survey of major broadcasters and industry insiders by The Independent suggests that will not be necessary. Contrary to the financial turmoil in most sectors of business, the League's overall TV income – £2.7bn over three years last time, £1.7bn of that for live United Kingdom rights alone – seems likely to remain high.
"I cannot see the rights value doing a nose dive," said a broadcasting executive whose company will be involved in the auction. "There is no evidence of a decline in interest in Premier League football. The opposite in fact."
Another insider with a different company said: "The channels with football already are not going to want to lose it. Those who don't have it want it more than ever. Football remains totally important to the business model. There is a fear factor among the broadcasters that will maintain a healthy rights income for the Premier League."
Sky and Setanta, who currently have two-thirds and a third of the live League games respectively, will certainly be in the thick of the bidding again. There is also a real possibility that the American Disney-owned giant, ESPN, will enter the fray, perhaps in tandem with Setanta as rumours persist of takeover by the bigger company.
The Premier League is also privately confident that it will register growth in overseas rights income which hit £650m last time for the years 2007-10. In the long term, it hopes that total income from foreign markets will outstrip what it earns from domestic rights.
Yet despite mounting evidence that the Premier League will buck the trend of economic doom and gloom to maintain its position as the world's richest football competition, it is sufficiently concerned about a slump that its own TV channel has become an "absolutely feasible, if not perfect" fall- back option.
The concept of Premier League TV has been mooted before. The League would sell subscriptions to live games direct to the public, on multiple platforms, as well as via established broadcasters in carriage deals.
Market evidence suggests there are now more than five million potential subscribers willing to pay upwards of £200 each per year for Premier League football. That equates to £16.50 per month, which is cheaper than most fans pay now, and might give the League a crude "baseline" income of £1bn. That compares well to the £566m earned currently each year from deals with Sky and Setanta. The major hurdle has always been that starting a channel from scratch would be costly and risky, with no sales or income absolutely guaranteed. However, the League is increasingly involved in broadcasting its international rights, producing previews, magazine shows, highlights and live feeds for foreign markets through Premier League Productions, a joint venture with TWI, a leading sports marketing firm.
If a sharp and sudden decline in bidding prices happens, threatening the financial dominance of the Premiership's 20 clubs, PLTV will only become more attractive. Even after bidding has started early in the new year, the League is under no obligation to accept any specific offer, no matter how high. If the deals on the table are not lucrative enough, the League will have more than a year to get PLTV up and running
"PLTV would be a big step and it is not the first-choice option," said one source. "But it is absolutely feasible, if not perfect. If that is the route the League and its clubs need to take to secure these important revenues going forward, it will happen. You could say it's been on the shelf for a while, and it's getting a dusting down."
On Monday the League sent out its "Invitation to Tender" documents for 2010-13 inclusive. It is expected that six packages of live domestic rights will be offered, as last time, with a pack of 23 of the best games on Sunday afternoons at 4pm the pick of the bunch. Sky won the rights to four of six packages last time, or 92 games per season for three years, paying £1.314bn. Setanta won two packages, or 46 games per season, paying £392m.
One broadcaster said: "PLTV is a possibility, but I'm sure the clubs would rather have their money guaranteed and the product in the hands of established channels as long as they're not facing a massive reduction in income."
92
The number of games per season Sky paid £1.314bn to broadcast between 2007-10.
www.independent.co.uk/sport/football/premier-league/premier-league-planning-tv-channel-to-beat-the-recession-1192636.html
Independent - The Premier League: TV gold, even in a recession
While the economic crisis bites, the Premier League appears immune from the turmoil and its next rights deal is likely to be even more lucrative. Nick Harris reports
Wednesday, 17 December 2008
Premier League football is the hottest property in British television and even the worst economic downturn in decades is unlikely to change that when the next tranche of rights, for 2010-13, go under the hammer shortly.
The deal is vitally important for the league's 20 clubs because it is this cash that currently allocates TV income of £50m per season for the Premier League winners from central funds alone, and £30m even to the club finishing bottom. This finance underpins the clubs' ability to buy good players, pay high wages and maintain the English game's dominance in European club competitions.
The last TV deals, for 2007-10, brought in £1.7bn for domestic live rights, and £2.7bn for all broadcasting rights, £650m of which was from overseas. Even if the domestic value contracts – and that is not certain – expanding value elsewhere can keep overall income high.
Despite the global economic downturn, industry insiders and experts contacted by The Independent – most of whom will be involved in some capacity in the bidding process – believe the Premier League will not suffer a dramatic fall in TV income.
This confidence is based on several factors. Football remains immensely important to pay-TV operators as a means of keeping customers and attracting new ones. It has demonstrated that it pays its way. Simply put, for each pound (or million) spent on rights, Premier League football brings in more via subscriptions, and from large pub and club fees.
There are big areas for international growth, across Asia and Africa but in North America too, where football's popularity continues to expand. Significantly, the rights up for offer cover a three-season period that will not dawn until late summer 2010, a time when even the most pessimistic analysts believe the worst of the recession should be over.
In other words, if broadcasters believe the Premier League will remain a fundamentally strong product – and most do – then there should be no significantly greater risk to bidding for 2010-13 rights now because most of the money will not be due for years.
On the flip side, no business can say with confidence how deep the recession will bite in 2009. And while there are plenty of people who argue that TV subscriptions should remain steady, because cash-strapped families will look to more home-based entertainment, a typical outlay of close to £500 per year on pay-TV could become an expense too many for some.
The Premier League sent out its "Invitation to Tender" documents on Monday and one variable that will determine whether the rights values remain high is whether the serious bidders expand beyond Sky and Setanta, who currently hold two-thirds and a third respectively of the British live rights.
The most likely newcomer in this category is the American Disney-owned broadcasting giant ESPN. A year ago, the company's president, George Bodenheimer, said that Premier League rights were "fabulous property ... we are absolutely interested in it".
ESPN studied the tender document carefully last time, and while an unsuccessful bid remains unconfirmed, the company has been involved in the recent bidding for Bundesliga rights in Germany, although it did not win.
As recently as September, Robert Iger, the chief executive of Disney, said: "I know ESPN will look at the Premier League rights again, both individually and in partnership with others." This has fuelled gossip that ESPN is considering buying Setanta, or at least strengthening a commercial partnership that already exists via Setanta's carriage of ESPN content.
A spokesman for ESPN declined to comment on a takeover but told The Independent yesterday: "We're a serious global sports company that wants to be relevant in local markets too, and we're always interested in rights as long as they fit our business."
Whether now is the right time for ESPN to venture into Premier League football is debatable but it is a major player in the global sports market. It screens iconic NFL Monday Night Football in America, and also broadcasts baseball and basketball. Its interest in football is deepening, with Euro 2008 games a big hit in the United States this summer and rights to the World Cup already sewn up until 2010. ESPN is likely to be a challenger at the very least to win Premier League rights in North America from rivals Fox this time.
Whether ESPN is ready to mount a serious challenge to Sky remains to be seen. But it has two channels available in Britain already: ESPN Classic shows old sport, a lot of it football and not all that old, while the North American Sports Channel, carried on Setanta, shows ice hockey, baseball and basketball among other things. This channel will be rebranded in Britain as ESPN America from 1 February.
In addition to TV stations, ESPN continues to expand its other "digital properties" in sports it knows are popular in Britain. It bought the football website Soccernet and the cricket site Cricinfo in July 2007, the rugby site Scrum a month later and the motorsport site, racinglive.com in August this year.
Internet portals have proved notoriously hard vehicles through which to make money so far, for media firms at least, but if ESPN is snapping them up, prevailing wisdom suggests they could be doing so for a time in the not-too-distant future when they might host live sports content.
The swift pick-up rates for internet-based TV, as evidenced by the BBC's iPlayer and the recent decision by the BBC to make all its television output available live on the web, shows how quickly delivery and consumption habits are changing. It will not be too long before watching TV, including live sport, on laptops, mobile phones and other portable devices is as normal as sitting in front of the box.
The worst-case scenario for the Premier League is that the British rights attract just the same two big bidders as last time, Sky and Setanta. But that pair could not be 100 per cent sure of being the only ones in serious contention, so it would be risky for either bid to be too low. Losing rights that remain central to Sky and Setanta's success would be painful for those companies. The league also retains the option of selling direct to the public – an avenue that will be considered if income threatens to crash.
The best-case scenario for the League is that ESPN decide to take on Sky, perhaps in partnership with Setanta, and that the BBC, ITV or even BT enter the fray too, although that seems unlikely.
In the current climate, the BBC would not want to elicit the inevitable brickbats for spending hundreds of millions of pounds of licence-payers' cash on football. ITV simply may not be able to countenance the expenditure at a time of slumping advertising revenues. BT, or for that matter Virgin Media, would also probably look to a more benign economic climate to put a toe in the water for such high-profile rights in a market that is new to them.
James Pickles, the editor of TV Sports Markets and a close observer of the industry, believes the rights values will actually go up. "Six months ago or so, there seemed to a consensus among analysts that they could rise by as much as 30 per cent. The economic situation will clearly have an impact, but the broadcasters still want and need the rights and if I had to bet on it, I'd think the domestic live rights will still increase around 10 per cent."
That will be music to the ears of club chairmen up and down the country. If it transpires, the league will have negotiated a remarkable path through a potential crisis.
Premier rights: What happened last time
For three seasons, 2007-2010
* Sky paid £1.314bn for four of the six packages. Each package (A, B, E, F) comprised 23 games, with the most expensive a prime choice package of 4pm Sunday games, and the rest a mixture of midweek evenings, bank holidays and Saturdays.
* Setanta paid £392m for two packages, C and D. Each package included 23 games per season, both with "mixture" packages spanning games between Saturday early evening and Monday night.
* The BBC paid £171.6m for highlights for Match of the Day. This was part of £350m total revenue from the highlights/near live/broadband and mobile rights sold in Britain.
* Overseas rights earned £650m.
* Total income: £2.7bn for three years.
The battle for 2010
Who's who in the fight for live rights next time:
BSkyB
The dominant player in the market to date. Won four of six packages of rights last time and will certainly bid competitively again.
Setanta
The Irish upstart that took a third of the rights last time to stake its claim as a contender. Will bid again, perhaps in joint deal with ESPN.
ESPN
Disney-owned American giant has gone on record as saying Premier League rights are of interest. A threat to Sky if it actually takes the plunge.
BBC
Would dearly love to become the first terrestrial channel to have live Premier League rights but in all probability cannot afford to buy them.
ITV
Would also like to buy the rights, as football becomes a major focus for the channel, but economic downturn makes a bid now less likely.
And?
Virgin Media have been touted as bidders in the past but no evidence they will enter this market. About as likely as a rumoured bid from an unnamed Abu Dhabi speculator.