Football finances need investigation, not speculation

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An economist at the University of Portsmouth has recommended that Premier League clubs televise more games, as it would result in far greater TV revenue at the cost of only a slight decrease in match-day gate revenue.

Adam Cox, of the Portsmouth Business School, has suggested that increased televising of games for clubs across the division would "help redress the imbalance in overall earnings, and therefore in the fortunes, of clubs at the bottom of the league," arguing that currently "the Premier League is acting as a cartel to protect clubs’ gate revenue by artificially limiting the number of rights to screen games".

Cox used a statistical model to measure losses in revenue, analysing data from a number of sources including Setanta Sports, Sky Sports, National Statistics and Virgin Media, from 2004 to 2008. Following his study, Cox suggests that "all three parties – fans, broadcasters and clubs – would be better off if the number of Premiership matches shown on television was increased".

While economically this may make a certain top-line sense, the study raises a number of questions. For a start, it only takes into account gate revenue, ignoring other important matchday income streams (food, drink, merchandise).

The central thrust of the study is also very arguable. Cox's main point is that gate revenue across the 20 clubs only drops by £232,237 per broadcast, while TV reimbursement in the 2007/08 season averaged at £4.12m a game. However, this is divided between the 20 clubs, with more for those who are televised – and elementary maths tells us that £4.12m divided by 20 is £206,000 per club, even before we take into account the weighting away from those clubs not on TV (and therefore competing with the allure of sofa or pub). 

"Yay! We're making clubs rich!"

Speaking of weighting, the study says that the top four clubs – defined as Arsenal, Chelsea, Liverpool and Manchester United – would see gate takings drop by an average £50,060 per televised game (2.4%), but the bottom five clubs (here mysteriously defined as Birmingham, Middlesbrough, Sunderland, West Brom and Wigan) would lose £169,839 – a rather painful 21.47% of their takings.

In other words, televising fixtures hurts less successful clubs much more than the big boys at the top – who are already benefiting more than others from the Premier League prize-money allocations.

Furthermore, if Premier League clubs were to be televised more often, as the study suggests, it would cater only for their (to use Cox's word) "cartel" – increasing their earnings but providing nothing for the teams playing in the divisions below them.

Perhaps most importantly, Cox fails to consider the whole picture, completely ignoring the Football League. In doing so, he fails to consider the impact that increased broadcasting of the Premier League may have on the structure of the English game as a whole.

Cox believes that televising more Premier League games "would benefit the clubs with more money to buy greater playing talent, which will then attract more audiences, and would also benefit customers as they have a greater choice of where they can watch a football match".

This in itself is highly assumptive but even so, if this were to happen, surely the already widening gulf between the Premier League and the Football League would increase further and faster.

Premier League clubs would become far richer, meaning that those that are relegated each season would be at such an advantage to the other teams in the Championship that the likelihood of their immediate promotion back into the Premier League would be even greater than at present.

The broadcasting of more Premier League games would also overshadow or replace the Football League games that do get shown live at the current time, decreasing the revenue of Football League clubs and widening the gap between them and the Premier League.

Furthermore, the study assumes that Sky and ESPN would continue to pay broadcasting fees at the same rate for a larger pool of fixtures, which somewhat ignores the economic law of supply and demand – speaking of which, is Cox quite sure that viewers would continue to watch in the same volume as they do now?

That in turn raises another point. Let's say, for the sake of academic enquiry, all Premier League games are televised. Unless the fixture list is fanned out over the entire weekend to ensure no two games are on simultaneously, wouldn't fans be forced to choose between competing games – probably favouring the teams at the top rather than bottom?

It's difficult to understand why this study has been released now, with the majority of the Premier League seemingly content with the current TV revenue format. When Liverpool’s MD Ian Ayre was recently quoted as proposing dismantling the Premier League’s current collective-bargaining system for overseas TV revenue in favour of individual rights sales, few football figures supported him.

Indeed, Ayre's comments caused such widespread condemnation that he was forced into backtracking, saying he didn't want to end the collective bargaining but wished to change the way the money was distributed. As it stands, overseas revenue is split equally between all 20 teams in the league, with each club receiving £17,926,595 last season, whereas domestic rights are split – 50% distributed equally among the teams, 25% on merit by league position and 25% according to number of appearances.

Premier League: Not half bad?

Although it could distribute its money more fairly among its members (and certainly to clubs outside the division), the Premier League is already the most equitable of Europe’s top divisions, with the ratio for last season's TV revenue between the top club Manchester United and the bottom club Blackpool being 1.54:1.

By that rationale, England’s top division distributes TV revenue with far more equality than some of the other leagues in Europe. The German league – in many ways a model of fairness – distributed twice as much to the top club as the bottom, France's Ligue Un was 3.5:1, Italy's Serie A was 10:1 and Spain's La Liga was 12.5:1.

In terms of equal earnings within the top division, the current system works better than most. There are clearly huge discrepancies between the earning power of Premier League and Football League clubs, but that isn't something Cox's study touches upon at all.

Cox’s doubtlessly diligently researched evidence turns up some intriguing findings. But this study feels fundamentally flawed. While football's finances are always worthy of investigation, you would like to imagine that with the current global recession and financial mismanagement encouraging thousands to protest on the street about fiscal inequality, economists could come up with better suggestions than ways for the elite to protect and increase their income at the expense of others.