Out-Law / Your Daily Need-To-Know

European football broadcasting deal a 'game changer', says expert

Out-Law News | 12 Nov 2013 | 10:22 am | 3 min. read

BT's contract to exclusively broadcast football matches from both major UEFA-run club competitions is a major shake up the UK sports rights, digital media and telecoms markets and may help attract increasing numbers of wealthy foreign investors to the game, a sports law expert has said.

James Earl of Pinsent Masons, the law firm behind Out-Law.com, said that BT had landed the "crown jewels" of football by winning the exclusive rights to broadcast UEFA Champions League and Europa League matches in the UK for three seasons from 2015/16. The deal, reported to be worth more than double the existing deal signed with Sky and ITV, highlights BT's challenge to Sky's business model, he added.

BT, which has said it will show some of the 350 matches it has bought the rights for free via its BT Sport service, is reported to have paid £897 million for the contract

BT Sport launched in the summer after the company bought the rights to broadcast some top-flight football matches in England and Scotland, rights to show other games in European leagues and to other sports, including Aviva Premiership Rugby. Sky retains rights to broadcast the majority of football matches from the English Premier League and Scottish Premiership, and holds the rights to broadcast a range of other sports too.

"This is the first time a single UK broadcaster has won the exclusive live rights to all matches from both tournaments," BT said in a statement. "The hundreds of additional top tier matches will boost BT Sport and make it the natural home for football fans who wish to see the very best European sides pitted against each other."

Earl said that, on the face of it, the new deal was fantastic for the top clubs, UEFA and consumers alike, but said that it posed a major threat to Sky's position as market leader in the broadcasting of sport within the UK.

"Football clubs participating in the Champions League or Europa League stand to gain vast increases in revenue, in theory at least double from what they earn currently in match fees and other earnings if you apply that same uplift to what has been achieved with the BT deal. UEFA can claim to have significantly boosted investment in football, and consumers have been promised cheaper access to games than what they currently pay and the chance to watch some of the matches free, including the finals of the competitions," Earl said.

"BT is now threatening Sky's entire business by eating into its sports portfolio, Sky’s traditional heartland and source of revenue, by offering a mix of paid-for and free content and bundling its sports channels with internet and landline services," Earl added. "Sky has built its landline and internet services business on the back of its successful pay-TV service where access to sport, and football in particular, has been pivotal in attracting customers. BT has sought to build its sports audience by selling its coverage with the provision of landline and internet services - the company's traditional strengths."

The expert warned, though, that the size of the deal will give rise to questions about how BT will make profits from it.

The deal also raises the question of whether such fierce competition, and prices, will be maintained in the long run, since Sky has publicly stated it simply could not justify the payments made by BT under the UEFA deal and will now need to shift its focus to other areas, potentially non-sports related, Earl said. He warned that there could be potential major financial implications for clubs if BT decided not to renew after the end of the 2015-2018 broadcast cycle.

"Clubs have to ensure that their spending is in line with their revenues in order to comply with UEFA's Financial Fair Play rules, whilst the top clubs in England also face financial controls under the Premier League regime," Earl said. "Revenue increases are great in helping to balance these regulatory requirements – revenue drops are quite the reverse."

"The failure of a major financial backer could cause significant problems for the clubs if they were to spend money on their squad or on new facilities in expectation of receiving money that never arrives, or to scale their squad based on predicted revenues which failed to continue if, say, BT were to pull out of the market in the future without a similar replacement being available to prop up the same values clubs had then become used to," he said

However, Earl said that the explosion in value of broadcasting rights help make the top clubs in Europe an attractive proposition for overseas investors.

"For anyone looking to buy or invest in a major club in Europe, the proposition just got that bit more attractive as a result of this deal," Earl said. "The value of clubs, like any company, can on a basic level be assessed by a multiple of their revenues. With revenues continuing to grow as broadcasting rights shoot up in value, investors will be attracted by the possible returns on offer for eligible clubs."