“Sin el futbol, mi vida no vale nada (Without football, my life is worthless).” Cristiano Ronaldo
It turns out that you do not have to be a two-time FIFA Ballon D’Or winner to take the view that football is the be-all and end-all of life. There are millions upon millions of people with a fanatical devotion to football and/or its clubs and billions more who take at least a passing interest in the game we love.
This, according to a very compelling piece by Matthew Syed in The Times this week, is down to the “emotional incumbency” that sport in all its forms has in culture. Syed rightly identifies how sport is “enmeshed in the forces of capitalism” and football, as the most economically developed of all global sports, is very much a driver. With Syed having identified why sport has such a hold on us, I will explore here what all this emotional incumbency means for the football industry.
In short, it means yet more economic growth. The days where the physical event was its greatest economic driver are now gone – at the top end at least. The decline in the value of matchday receipts relative to the overall revenue base of the 20 richest clubs in Europe over the past seven completed seasons has been marked. Over the period, club turnover altogether has risen 61.2%, with gate receipts and associated revenues climbing only 42.5%.
The decline has been consistent, despite the fact that the identities of the clubs who make up the 20 richest in Europe have frequently changed over the period. This tells us that clubs’ reliance on what their local populations bring to them is sharply diminishing. And when the new Premier League broadcast arrangements percolate through to the figures from the 2016-17 season, matchday’s effect on turnovers will shrink still more rapidly.
How matchday revenues contribute to Europe’s richest clubs
Data source: Deloitte Football Money Leagues, 2009-2015
The reason for this is of course that clubs are externalising beyond their immediate communities into national and global markets. This transfer has been achieved through increased commercial and broadcast revenues, which increasingly go hand in hand. And as new technologies develop, the opportunity open to rightsholders and brands to push those segments together and further will grow exponentially.
In his Budget last month, the UK’s Chancellor of the Exchequer, George Osborne, announced that his government has set aside funds for almost every UK household to receive access to ultrafast broadband networks by 2019. That dovetails neatly with the expiry of the most recently agreed rights arrangement between the Premier League, Sky Sports and BT Sport. It is a technological trend that will be followed around the world in the next decade and a half.
With that digital infrastructure in place, three major new features will develop in sports broadcasting. First it will be possible to simulcast football across the internet, with no need for expensive satellite networks for distribution. Second, alongside the core content (live matches and highlights), will be an entire ecosystem of supporting, on-demand media content.
This means that the digital revolution will follow the pattern it has in other areas, giving the consumer control over what he or she watches via the aggregation of specialist content at the click of a link. Both of these issues make the presentation of content by rights licensees substantially cheaper than under the old pay-TV model. There will be no need for the football audience among the subscriber base to subsidise the cost of broadcasters’ purchases of, for instance, Formula One or rugby rights. There will be no need for the rights licensees to carry multiple channels and hours of proprietary programming merely to fill the 24 hours in the day in which someone, somewhere might perhaps turn on the TV. For the most part, that activity reaches only a niche audience but third-party specialists will be producing that content for free. Should any of the tech giants seek to make that content their own, they have only to acquire the companies that produce it.
It is in recognition of this fact that the sports-rights agency Pitch International entered into a long-term strategic commercial and investment partnership with the multichannel digital network Copa90. The latter (which to declare an interest is a consultancy client of mine) has built the largest digital network of football fans, with a reach of 7.5 million through all its platforms. The network’s chief executive, Tom Thirlwall, told Sportcal magazine upon the announcement of his company’s deal with Pitch last month: “I don’t think the likes of the tech giants will sit on the sidelines for long. Infrastructure-wise they aren’t too far away and companies like us are going to be very interesting for them in the future. There is no barrier to bringing highlights or live games to these platforms.
“That the tech giants won’t bid for rights won’t remain the case. As a broadcaster, I’d be thinking that. They won’t be on the bench for long.”
Amazon, through its acquisition of Lovefilm, and the standalone digital-movie deliverer Netflix have both demonstrated film’s ability to bring older consumers to digital content. But nothing is so much of a globally widespread must-have content offering as football is, and the ability for Google, Facebook, Amazon, Apple, Microsoft, Netflix or Yahoo! to use it to entice an older generation to their platforms will before long cause them to bid for football rights.
The attraction of football to the tech giants is all the greater because they can make substantial economies that those operating under the old “build it and they will come” model cannot. It will make it much more profitable for digital-rights licensees to deliver content to consumers than pay-TV licencees. And, as with all rents, the greatest part of those profits will revert to the rightsholder who auctions the licences. It will, over the course of the next 15 years, cause an explosion in rights values for football.
As Javier Tebas, the Spanish league president at the LFP, said at the Sportel America conference last month in comments quoted by News Tank Football: “La Liga needs to have a 360-degree presence, in every environment and across every format. A hundred-and-eighty degrees of our work relates to broadcasting the live match and the remaining 180 is dedicated to reaching fans on digital platforms. Aside from traditional television, we have to develop applications in order to offer our fans from across globe with different experiences.”
Tebas is quite right. Rightsholders must themselves become content producers (as has the Premier League through its Premier League Productions) because there is another effect that digital will have on the values rightsholders can achieve from their football properties: the development of specialist communities. Commercially this will be a goldmine for clubs, as the ability to understand whom you are talking to and what they want to hear taps in precisely to what brands are seeking. If that means a club has tens of thousands of identifiable individuals in, say, Singapore congregating online around its matches, with similar numbers in Malaysia, Indonesia and the Philippines, it will have huge value to the consumer brands who are already football’s sponsors. This in turn translates into large profits for the technology-platform owners and, through the rents they charge their licensees, the rightsholders.
Knowing whom you are speaking to and what it is they want is of course the essence of what has allowed Apple, Google and Microsoft to have a combined $180 billion in cash just sitting around in the bank. (Which is almost twice as much as the US, the UK and German nation states together hold in combined cash reserves, according to the Bank of America subsidiary US Trust.) And with that much sitting around, a big punt on unlocking the value intrinsic to football rights is surely not far away. Then, through football, Cristiano Ronaldo’s livelihood is going to be worth yet more still.
Journalist and broadcaster Matt Scott wrote the Digger column for The Guardian newspaper for five years and is now a columnist for Insideworldfootball. Contact him at firstname.lastname@example.org.