Out-Law / Your Daily Need-To-Know

Out-Law News 3 min. read

Premier League TV deal will boost club valuations, says expert

A new Premier League TV deal will drive up the value of clubs operating in England's top football division, an expert has said.

Sports law specialist Trevor Watkins of Pinsent Masons, the law firm behind Out-Law.com, said the 70% increase in value of the new broadcasting deal in itself will re-enforce the Premier League in its position as the most lucrative European club competition.

The Premier League has announced a new broadcasting partnership with Sky and BT Sport worth £5.136 billion. Sky will broadcast 126 matches and BT 42 matches each over the 2016/17, 17/18 and 18/19 seasons. The new deal will replace the existing £3bn three-season contract the Premier League has with Sky and BT for the broadcasting of matches on TV in the UK.

Watkins predicted the growth in revenues would continue to attract foreign investors into English football.

"The value of the deal reflects the increasing sophistication and globalisation of Premier League commercial rights deals," Watkins said.

"It's a flag in the ground for the Premier League in terms of the values of other commercial rights or sponsorship deals, such as digital rights packages, that clubs can achieve. The challenge is for clubs to invest off the field and take advantage of the growing international market for and interest in the Premier League and extract greater value from the individual rights deals they enter into," he said.

"The growth in the value of rights is likely to be good news for incumbent owners of Premier League or aspirant Premier League clubs. There is already healthy interest from prospective investors based across the globe, and in particular from the US and Middle East, in obtaining a controlling interest in those clubs. The increase in revenues derived from the exploitation of rights deals will lead to increased valuations for those clubs," Watkins said.

"It will be interesting to see whether this cash boost manifests itself on the pitch in the Champions League, UEFA's flagship pan-European competition, where German and Spanish clubs have been most dominant in recent seasons," Watkins said. "UEFA's Financial Fair Play (FFP) rules place restrictions on what clubs can spend, but this deal will give Premier League clubs a huge injection in revenues and perhaps enable them to attract more of the best talent to play their football in England. This may disappoint those calling for investment in home grown talent in the short term as for now the emphasis will continue to be in cherry picking overseas talent."

The way that Premier League TV rights are sold is currently being investigated by the UK's telecommunications regulator following a complaint by Virgin Media. Ofcom is assessing whether the "collective selling" of the rights adheres to competition rules. It recently refused Virgin Media's request to force the Premier League to suspend its awarding of the new TV rights contracts until after its on-going investigation had been completed.

In its complaint, Virgin took issue with the number of Premier League matches that are made available for live TV broadcasts under the existing TV rights deal. It said that 41% of Premier League games are made available for broadcast in the UK but that more matches from the top European leagues are broadcast live on TV in those countries.

Virgin has claimed that the relative lack of availability of Premier League matches compared to in other top European leagues contributes to higher prices for UK. It expressed concern that any escalation in the value of TV rights under the new deal would impact on consumer pricing.

Competition law expert Angelique Bret of Pinsent Masons said: "The clubs have been asked to provide a significant amount of information to Ofcom to assist it with the investigation, one of the key issues being whether the protection of the Saturday afternoon window is necessary and justifiable to protect attendances at the ground."

"Ofcom’s investigation does not appear to have had any significant impact on this rights sale; although an additional 16 matches per season have been made available, an additional 14 matches per season were added to the previous rights sale. However, the investigation is ongoing and Ofcom will also look at the number of packages made available and the auction process," she said.

A previous investigation by the European Commission in 2006 resulted in the Premier League having to change the way it awarded TV broadcasting rights to its matches.

"The changes meant that the rights had to be sold in packages and that no single company could acquire every one of those packages of rights. The conditions the Commission imposed, which have since expired, were designed to promote competition between broadcasters and result in an increased number of Premier League matches being broadcast in the UK," Bret said.

"Although the Premier League has continued to sell the rights in accordance with the settlement arrangements, i.e. including the restriction that no single company can will all the packages, Sky has again won the bulk of the rights and BT a couple of the packages. Ofcom could take the view that further changes need to be made to stimulate competition in the downstream pay-TV market," she said.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.