New TV Distribution Rules: Everyone’s A Winner…?

On the same day that lots of people were getting giddy about Amazon buying one of the Premier League TV rights packages for 2019-22 for an ‘unspecified price’ (i.e. peanuts) the Premier League owners also sneaked through a new formula for the distribution of PL monies between clubs, in what was a textbook example of a slick PR operation choosing a good day to bury bad news for anyone outside of the Premier League.

Q: What’s the problem?

Some of the ‘Big’ clubs feel that they get a raw deal from the existing way that broadcasting monies are split in the Premier League, so want to change the rules.

Q: What’s their particular beef?

At present the Premier League divides money into five pots.

(a) Domestic broadcast money from BT/Sky of £1.7 billion a year is split into three pots

• 50% is split evenly between all 20 clubs
• 25% is split based on the number of times the clubs are shown live on TV.
• 25% is split based on the final league position.

(b) Central advertising for sponsorship of the Premier League is split evenly between all 20 clubs.

(c) Overseas broadcast money worth about £1bn a year is split evenly between all 20 clubs. It is this issue that is creating the aggravation.

Q: What’s wrong with splitting the money evenly?

Nothing, except the ‘Big Six’ (Manchester United and City, Liverpool, Arsenal, Chelsea and Spurs) claim that viewers overseas are only interested in seeing their clubs on the box and so should get more of the cash.

When the Premier League was set up in 1992 (and football was invented) the overseas TV rights were so miniscule that nobody cared about them, so the club chairmen were happy with an even split.

Q: Surely a more democratic split of monies makes the game more competitive?

Yes it does, and the Big Six were happy to go along with this, until Leicester City spoiled their little cartel and won the Premier League in 2016. This caused the owners of the big clubs to soil themselves and try to ensure it did not happen again.

Q: I thought the smaller Premier League clubs were against such a split?

They were, in October 2017 a vote for the Big Six plans to redistribute overseas money partly on a merit (league position) basis was delayed/deferred. According to inside sources at the PL this would have resulted in 65% of the overseas money being split evenly between clubs and 35% on merit.

If this had been approved the broadcast distribution between clubs would have been as follows:

The proposal would have resulted in 12 clubs being better off and 8 worse off than under the original rules. The reason why it was 12 and 8 rather than 10 and 10 is that less money would have gone to clubs relegated (who receive parachute payments) and ‘solidarity’ payments to the other clubs in the Football League Championship, League One and League Two.

This is because the Football League agreed to a deal with the Premier League such that a fixed percentage of money given on an equal basis to Premier League clubs would be allocated to parachute and solidarity payments. Reduce the amount of Premier League money split evenly and therefore the amount that filters through to the EFL clubs by about £48 million.

The reason why a vote did not take place at the Premier League chairmen meeting was that Richard Scudamore, the often maligned but actually pretty decent Premier League chairman, realised the proposal would not get the 14 votes required for a change in the rules and so managed to put off a decision being made.

Since then the Big Six have been quietly fuming at not getting their way and there has been a muttering and unfulfilled threat of quitting the Premier League and joining a European Superleague if their wishes were unfulfilled.

They clearly believe that the Premier League’s success is all due to their clubs. This is very harsh on Scudamore and his team, who have marketed the Premier League superbly, partly on the grounds of it being more competitive and unpredictable than other leagues.

In 2017/18 Burnley and Palace have beaten champions Chelsea, Swansea have beaten Liverpool, West Brom and all three promoted clubs have beaten Manchester and practically everyone has beaten Arsenal.

Scudamore has spent the last six months trying to keep all 20 club owners, if not happy, then at least not moaning too much, and he’s succeeded.

Q: Why should the Premier League give money to clubs in the Football League?

It’s an issue that clearly vexes Liverpool’s American owner John Henry. He was quoted in an interview with Associated Press as saying “it’s much more difficult to ask independent clubs to subsidise their competitors beyond a certain point”.

Henry clearly thinks that clubs in smaller towns and cities are an irrelevance and whether they survive or die is of little consequence for him. Point out the Liverpool signed the likes of Kevin Keegan from Scunthorpe, Phil Neal from Northampton Town and Ian Rush from Chester and he would probably look confused (as after all soccer began in 1992).

Q: Why were the other Premier League clubs opposed to the change?

Many of them would have ended up with less money and the Premier League would have become less competitive too.

Q: What are the agreed changes?

Under the rules which kick off in 2019/20, any INCREASE in overseas TV money will be split on a final league position. This means that the existing level of overseas cash will still be distributed evenly.

To stop the clubs at the top running streets ahead of the lower/midtable clubs, there is a cap such that the club who wins the Premier League cannot have more than 180% of the Premier League TV money than the side finishing bottom, under the present rules it works out at about 161%.

Q: Who will be the winner and losers then under the new rules and why did smaller clubs vote in favour?

Whoever came up with the new rules (and I have my suspicions who it may have been) has created a distribution method in which no one is worse off, as it is only the additional overseas money that is split on the new method. Everyone is therefore guaranteed their former income.

The teams who will lose out, as already mentioned, are those outside of the Premier League.

Under the old rules, if the Premier League generated an extra £100 million, £27 million of this would ‘leak’ out to the EFL clubs as follows:

The Premier League clubs would each therefore receive an extra £3.65 million whereas the likes of greedy clubs such as Grimsby, Barnet and Forest Green Rovers in League 2 would receive an extra…err…£32,000 each per season, enough to play the average wage of one Liverpool player for all of three days.

John Henry could claim that these lower league clubs have done nothing to deserve any extra money, and under the new rules, his wish has come true.

The Premier League will now keep £100 million out of each extra £100 million generated from overseas income. Having crunched the numbers (and this was beyond me so I was lucky to use the talents of some university boffins for assistance) shows how an extra £100 million would be distributed using both the present (2018/19) and new (from 2019/20) rules.

As can be seen from the above, 14 clubs would be better off under the new rules than using equal distribution, as no money goes to the Football League.

Funnily enough 14 votes were needed to pass the new rules and they were duly approved. If overseas money increased by a larger amount, say £750 million a season, then 15 clubs would be better off than under an equal share basis.

Q: But what about the EFL clubs, couldn’t they vote against this?

The EFL clubs were the ones who negotiated and voted for as agreed set percentage of equally distributed Premier League monies. At the time they were delighted with the result but may be regretting it now.

It’s not the first time in this country in recent years that people have voted for something that makes them economically worse off though.

Conclusion

If you are a Premier League club owner things are looking great. There’s more money coming into your club from the Premier League and in addition UEFA have announced an extra £780 million of annual prize money each season too for clubs that qualify for the Champions League and Europa League.

This money won’t go to players, as under the Premier League’s Short Term Cost Control rules wages can only increase by £7 million a season plus any money generated by the clubs themselves through commercial and matchday income.

The money won’t go to the EFL either, so who does that leave as potential beneficiaries apart from club owners themselves?