LONDON—No sports organization in the world celebrates the holiday season with quite as much extravagance as the English Premier League.
As the other major European soccer leagues wind down for a winter hiatus, the Premier League is gearing up for its annual television extravaganza, a marathon of 40 matches in 13 days, broadcast in over 200 countries to an audience of billions.
But while viewers across the world are captivated by action on the pitch, simmering tensions off the field are threatening the very thing that makes the Premier League so popular: its competitive balance.
In a series of tense meetings between the league and the 20 club owners dating back to last season, the so-called “Big Six” clubs—Manchester United, Manchester City, Chelsea, Arsenal, Liverpool and Tottenham—have argued that they deserve a larger share of the money the Premier League receives for the sale of its foreign TV rights.
The dispute is rocking the league at a time when its clubs are resurgent on the European stage, qualifying a record five clubs for the Champions League round of 16. But more than that, it represents the first major challenge to the 25-year peace that has allowed the Premier League to become the richest purveyor of the world’s favorite sport.
“I think it’s just greed,” said David Sullivan, the co-owner of West Ham United. “They’re very wealthy anyway.”
The Premier League’s foreign rights deals are the envy of the rest of the sports world. The most recent agreements, which covered games from the 2016-17 season to 2018-19, sold for a total of $4.3 billion among 80 broadcasters. The league’s U.S. deal with NBC Universal, running from 2016 to 2022, is worth $1 billion on its own. For the first time in the league history, the next auction could see revenue from the sale of overseas rights exceed those from UK rights, which went for $7.8 billion in 2015.
The Premier League declined to comment.
Unlike American leagues such as the NFL, NBA and Major League Baseball, which rely on the draft, salary caps and luxury taxes to ensure parity, the Premier League doesn’t have any official mechanisms to level the playing field. And while English soccer is dominated by a small handful of clubs, the Premier League is, by some distance, the most competitive of the major European leagues.
Over the past five years, the Premier League champion has failed to win an average of 11.2 out of its 38 games, while the champion of Spain only failed to win eight times per season. In 2015-16, English soccer also produced the greatest upset in the sport’s modern history when lowly Leicester City overcame 5,000-to-1 odds and lifted the Premier League trophy.
“The Premier League works because everyone has got a bit of money to buy the big names and pay their wages if they want to. So there’s no easy games in the Premier League,” Sullivan said. “What [the Big Six] don’t want to be is under threat from the lower clubs.”
How the league developed this balance is down in part to a never-say-die culture that has existed in English soccer since people first started kicking a ball into a net. But it also came up with an economic framework for that culture to thrive in with a visionary agreement drawn up in 1992.
When the Premier League first formed, the league’s owners agreed on a revenue-sharing model that divided 50% of any money received for U.K. television rights equally among all the clubs, with a 25% share awarded based on the final standings each season, and the other 25% based on how often clubs appeared in live TV games. Any money from foreign rights, meanwhile, was split evenly.
The result was that even as the flow of money into English soccer exploded over the following 25 years, the ratio between the payments to the league’s top club and those to its 20th-placed team would always remain around 1.6. The equivalent ratio in Spain’s La Liga or Germany’s Bundesliga, meanwhile, has swelled to around 3.
The simple formula behind it was drafted on a single sheet of Ernst & Young note paper in 40 minutes at the end of a meeting that ran unexpectedly short. It became known as the Premier League “Founders’ Agreement” and, until now, has always been treated as Scripture.
But the reality is that when it was written up, no one paid much attention to the overseas income, according to Rick Parry, the league’s first chief executive and the architect of the agreement. In fact, the league was losing money overseas back then as it paid broadcasters to carry its games.
“Nobody envisaged that it would be as big as it is, so sharing those rights equally was a concession they thought wouldn’t matter,” Parry said.
Last season, however, those equal shares from overseas TV money were worth $52 million per club. For a club like Sunderland, which finished at the bottom of the standings last season, that represented the largest individual payout of the $125 million total windfall it received from the league. That is more than twice as much as Real Madrid earned from UEFA for winning the Champions League, the most prestigious trophy in Europe.
But the Big Six argue that nobody in the U.S. or Asia is tuning in to watch Sunderland. According to several people in the room at recent owners’ meetings, the league’s top clubs are adamant that they deserve a larger share of the overseas payments, because they are the ones who drive overseas viewership.
Leading the charge is Manchester City, which has been owned by the oil-rich royal family of Abu Dhabi since 2008, according to several people with knowledge of the negotiations. City and its chief executive, Ferran Soriano, feel particularly aggrieved, those people said, because the club considers itself the chief exporter of the Premier League—the City Football Group umbrella company owns stakes in five other clubs around the world from Melbourne to New York.
Manchester City declined to comment on the television rights negotiations.
Reaching an agreement will be difficult because changes to Premier League rules must be ratified by 14 clubs, or a two-thirds majority. Any proposal that funneled more money to the already dominant Big Six would be unlikely to pass.
But one idea gaining traction is creating a sliding scale that would see the top 10 clubs increase their share based on their final league positions. As many as 12 teams are believed to be in support of this compromise, according to several people familiar with the negotiations.
In the event of a stalemate, the Big Six still have a nuclear option: break away and form a new league, possibly with other European superpowers.
Appeared in the December 16, 2017, print edition as ‘Premier League Squabbles Over Spoils.’
Source : WSJ