⚽️ Why the £6.7bn Deal is so important

Last week was a fascinating week for sports contracts.

Jon Rahm is 29 years old and has already won $51.5m in his career so far.

Shohei Ohtani is the same age and has already earned $42m in his career thus far.

Both those chaps secured deals last week which put them in the highest earning athletes ever conversation.

Ever, in history of any sport.

Later on in this newsletter I explore both of those deals but before then, we cannot overlook the breaking news last week about the Premier League TV deal renewal and what this means for the future of our league.

Before I do, don't forget you can follow me on Instagram.

There are 380 Premier League matches every season. From the beginning of next season, 270 of them will be available to watch on television.

That is because last week the deal for the broadcasting rights in the Premier League was announced and simultaneously sent my brain into overdrive. As a result this newsletter will be split into three sections:

1. An important recent history of the Premier League TV Deal

2. What happens to all the money given to the Premier League by broadcasters

3. My take on the economic impact of this new contract

An important place to start is where we are today.

Right now Sky Sports, TNT Sport and Amazon collectively pay £5bn to show 200 Premier League games each season from 2022 to 2025. It is a healthy deal which currently sits as the third most lucrative broadcasting deal on a per game basis in world sports behind the NFL and the IPL.

The interesting name there is Amazon. In recent times, the entered the fray and bought some rights to Premier League games too.

Simply put, they deemed that buying Premier League packages would help them drive signups to their Amazon Prime service.

They were 100% right!

Many thought that with the Premier League continuing to attract the worlds best talent. And with the economic buying power of streaming services like Amazon and DAZN the next TV deal would be a monumental step up.

It wasn’t. Infact, the step up was marginal.

Amazon stepped back from proceedings completely and DAZN were not interested. Instead, Sky and TNT Sport will share the spoils paying £6.7bn collectively for 270 games each season for the next four seasons — a 4% increase on the current amount.

What happens to all the money given to the Premier League

The breakdown is an interesting one. The domestic TV revenue is split into three sections:

• 50% is divided equally amongst clubs

• 25% is awarded on where your team finishes in the League

• 25% is awarded dependent on the # of times your team is shown on TV (facilities fees)

To give you an understanding, the below tweet is an excellent one from Swiss Ramble showing the breakdown of the revenue distributed to clubs in the 2021/2022 season:

As you can see. Norwich City who were bottom of the Premier League that season and only on TV 12 times were still paid £100.6m for their efforts!

Outside of the NBA and the NFL there is no other sports league in the world where you will be paid that much for coming dead last.

You can see why the Premier League is so coveted amongst football teams. A team in the Championship for example can be bought for under £300m and with a bit of timing, good management and a little investment could find themselves a Premier League team within 2 seasons. If that was the case and you managed to stay in the Premier League your business is now guaranteed £100m per year before astute transfer business, corporate sponsors and increased gate receipts.

That is a direct reason as to why the Premier League is so attractive for outside investment.

Brentford have done this successfully. So too have Nottingham Forest. Bournemouth did it and have been a Premier League club for 8 seasons. Their economic fortunes have been absolutely transformed from their run to the Premier League.

It’s a direct channel to economic success, big community impact and soaring asset valutions.

Despite this, I am not sure this will continue forever.

My two takes on the Economic Impact

The greatest thing happened in 2012. Sergio Aguero scored a nailbiting last-second goal to win Manchester City the league just as the tender for the rights were up for renewal. The increase in demand for that round of negotiations was monumental and it resulted in a massive spike in value for the Premier League.

That increase gave clubs alot more money. Then Pep came. Klopp came. Kevin de Bruyne came. Virgil Van Dijk came and the Premier League got even better.

As a result, the increases in value were crazy:

1. 2010-2013: £1.95 billion

2. 2013-2016: £3.2 billion (+64%)

3. 2016-2019: £5.34 billion (+66%)

4. 2019-2022: £5.01bn (-6%)

5. 2022-2025: £5.0bn (0%)

6. 2025-2029: £6.7bn (+4%) — Deal is over four years, not three!

Take 1:

My biggest take is the Premier League will continue to be the strongest league in the world but we have seen the slowdown in +50% increases in value for the Premier League rights.

Take 2:

The four year deal here allows the Premier League ample time to begin moving towards their own Streaming Service. That does not mean the removal of the broadcasters completely. But we have seen models in F1 and the UFC where fans can pay directly for all F1 content via F1TV and can also get content via Sky Sports too.

Can you imagine an app where every game in history can be watched and every current game can be watched live. Goal compilations, highlights, documentaries can all be accessed from one central place forever?

I’ll pay £29.99pm for that easily. It’s likely that the 20m other people who are currently paying Sky Sports 2x that amount for their coverage would do too.

Some back of the envelope maths suggest that setup would bring the Premier League £6bn in revenue per annum 😮‍💨 A 4x increase on what they receive today.

Food for thought I must say.

I leave you with an interesting tweet about Ohtani’s new deal:

California taxes 😮‍💨

See you next week.