Two subscription fees are better than one.

BT Sport have recently announced a deal to broadcast live Champions League football matches. According to a BBC News article

"The broadcaster has won the rights to show all 350 matches each season from 2015 after talks with European governing body Uefa. A BT spokesman said it had "shaken up the UK TV market" and would make some games, including finals, free to air. The news is a major blow to Sky and ITV, who currently share the rights."

Available at: http://www.bbc.co.uk/sport/0/football/24879138

Undoubtedly, this strengthens BT Sport's position to broadcast live top flight sporting events. An area that has been dominated by BSkyB. An increase in competition in broadcasting live sports events should be welcomed by competition authorities in light of inducing customer choice and more competitive prices. Governing bodies of elite football tournaments, such as the Premier League and the Champions League, act collectively with their member clubs to sell the rights to matches. Member clubs are not permitted to sell the broadcast rights to a match they participate in directly to a broadcaster. This is a monopoly power that potentially restricts the quantity of rights to matches and can inflate the price of them. BSkyB has been the dominant provider of Premier League rights as they could collect high subscription fees in order to out bid competing broadcasters. The combination the monopoly seller of rights and few firms that are able to provide customers with this content has a perverse affect...

As the strength of BT Sport's offering rises, so does it's appeal to subscribe to their services. Football fans now really do have a reason to subscribe to both Sky Sports and BT Sport, doubling up on subscription fees for the football they crave. Shall we just go to the pub to watch the match instead? The impact of revenue of public houses will soon be seen.

One pedal forward, two backwards: A bigger cost of cheating.

2012 saw the first British cyclist claim the Tour de France yellow jersey, and keep it, all the way to Paris. And, let us not forget the popular success of team GB! Road cycling has captured the imagination of non-enthusiasts, those that would otherwise spend a spare 2-3 hours doing something else without a second thought. Crowds at road cycling events such as the Tour of Britain rose to new heights, but it is participation that has also increased. Sales of road bikes and clothing/accessories have seen a handful of retailers flourish. Undoubtedly, a bike in 2012 or 2013 will attract an increase in price tag more than the rate of inflation compared to an equivalent model sold in 2010. This is a sport where you can train and race on the very same tarmac as your heroes, for free, does it get any better?! The phenomenon has been nicely summarised by a sound bite: “cycling is the new golf”. The majority of this increase in demand can be attributed to a legacy of the London 2012 Olympics and the huge investment in UK cycling academies over many years.

Road cycling, however, has a darker side to it, reputation of drug enhanced performances. Many steps have been taken to “clean” cycling.  In fairness, fans that have not followed the sport for a long period of time have either forgotten or not realised that many professional road cyclists have been caught and punished for doping. Doping has some obvious consequences, mainly to the cyclist’s own career and the team mates around him. However, the more important damage to the sport is much wider spread and much more expensive. The recent USADA case against former professional Lance Armstrong has brought doping back to the limelight and the attention of on-lookers. A once (almost) forgotten reputation has re-emerged. With it comes the announcement that key sponsors wish to no longer be involved with a sport that could tarnish their own brand image.

In any race it is the relative position of where you finish that determines your glory (or failure). So if all pro-cyclists happened to all use illegal performance enhancing methods then the strongest cyclist using the best methods will win. Many see this still as a fine race, because it is! The one key issue is of course that the majority of fans, non-enthusiasts, and in particular sponsors, don’t wish to be involved with unwholesome activities. If demand falls as people are put off by a negative image this damages the entire sport, grass roots (tarmac) upwards, a big pedal backwards. If demand just grows less slowly for the same reason, the consequences could be less severe and the sport coasts on…

Exceeding all expectations: A game worth £1,200 a second

Yesterday I presented the findings of a new paper at the University of Portsmouth's Research and Knowledge Transfer Conference 2012 [Link to follow]. Amongst the discussion that followed, the audience took surprise at the new Premier League (PL) auction results.

The PL increased the quantity available from 138 (of 380) to 154 matches per season to be broadcast live on television. BSkyB purchased 116, BT the remaining 38, with a total revenue received by the PL topping £1 billion a season.

There had been calls to increase quantity (including my own publications), but many expected the marginal revenue to fall from the existing £4.3 million per match (approx). The new auction exceeded all expectations, the PL new earning £6.5 million per match (approx), the equivalent of around £1,200 per second of game time.

Upon reflection of this auction, attempting to pinpoint the cause of the unexpected rise in marginal revenue is not easy to pinpoint. The European Commission has attempted to remove the exclusivity of BSkyB by bundling rights into seven packages of average equal quality and not allowing BSkyB acquire all the bundles. This creates competition amongst BSkyB and other broadcasters at auction which would likely bid up prices. Fans may now have more choice but will it cost more for subscriptions? Competition is usually a good thing but this may raise more questions about the continuing collective selling practices by the PL.

Champion’s (financial) hangover: The most exciting (and expensive) end to a Premier League season to date

By winning the 2011/12 Premier League, Manchester City adds to the small group of 4 (now 5) teams to top the league since its creation in 1992. The top positions of the league have been dominated by few teams, with Manchester United wining 12 times out of 20 seasons. Finishing at the top of the league table appears to have a cumulative effect, making access to finance easier, increasing fan base, and ability to attract top talent. By a casual measure of revenue dispersion, the gap between revenue earned by the top and bottom clubs in the league is widening.

It is argued that spectator demand increases the more uncertain the match outcome. Therefore, the more equal the teams in the league are, the more exciting the contest is. As mentioned by media and pundits, the season finale was the most exciting in memory. City’s first league win (on just goal difference) puts on hold United’s 13^th win. Undoubtedly then, City’s performance has increased the appeal of the competition but at what cost?

Manchester City’s pre tax profit shows a £92.6 million and a £121.3 million loss for 2009 and 2010 respectively. Manchester United on the other hand achieved a £21.6 million profit and a £108.9 million loss over the same periods. The immediate benefit is relatively small, first place was granted with 15.14 million second place 14.38 million for the 2010/11 season.

With 2011 and 2012 figures yet to be added, the cost of City lifting the trophy is sizeable compared to the short term benefit. Leaving the suggestion that for those in charge at City, beating the neighbours was benefit enough!

FA Cup: An important win but the REAL WIN is yet to come

As winners of the FA Cup, Chelsea FC have grabbed one of the three places in next seasons UEFA Europa League. In previous seasons (2010/11) Manchester City and Liverpool have both received 6.4 million Euros (approx £5.18 million) for moderate success in the same Europa League.

As it currently stands in the Premier League, 6th place Chelsea are set to earn a merit bonus of around £11.4 million (based on 2010/11 figures). Not a lot less than the £12.4 million merit bonus arch rivals Tottenham Hotspur (Spurs) will receive for a finishing 4th.

Two places higher up the Premier League table, however, gives Spurs a slight advantage. Sitting in a UEFA Champions League qualifying position could be worth around 33 million Euros (approx £26.7 million) (as it was to Spurs in 2010/11).

There are also positive side effects (externalities) for clubs competing in the Champions League over the Europa League: The best playing talent want to play in the best competitions. If Chelsea cannot offer Champions League football to it's players, the club may struggle to attract key talent as they look to replace some of the older squad members (there are a few).

The match in Munich on the 19th May for the Champions League final becomes one of the most important matches in Chelsea's history. Poor domestic league performance puts the club out of Champions League football next season. Loose this match and arch rivals will start to pull away financially over the coming seasons. A win here will secure revenues and confidence (and likely to tip Chelsea as Premier League title contenders once again).

Premier League announces more matches to be broadcast

In recent research (2012) "Live broadcasting, gate revenue, and football club performance: some evidence" I made a case for the Premier League to allow more games to be broadcast live on television. See link for article and findings. The research received some media interest (and debate) that started with an article in The Daily Mail before others.

Today the Premier League announces a 40% uplift of games to be broadcast live for the coming auction, shown on the BBC amongst others. Instantly there is talk of increased competition from broadcasters to purchase these rights and more money for clubs. The resulting impact on fans (customers), the clubs and broadcasters will be observed. An intriguing story is starting to unfold...

Kick-Off

This blog is the creation of a friendly conversation that turned my thoughts on blogging upside down. The mid conversation question from a visiting academic "Do you blog?" halted my trail of thought.

For several days after I searched for strong reasons not to blog. I can't seem to find them, so whilst I continue to search here it is and credit to Yoram Bauman (The Stand-Up Economist).