Football Economics: Guest Post by Prof. Stefan Szymanski

Stefan Szymanski is Professor of Economics and Director of the Sports Business Network Research Centre at the Cass Business School.


Once again football’s “specificity” has taken the field against the EU’s single market, and once again it appears to have lost. Just as with the Bosman ruling, the Advocate General’s opinion makes clear that the single market must be allowed to operate without artificial restrictions, no matter how culturally significant the activity. From an economic perspective, the opinion amounts to saying that EU law cannot be used to sustain a business model based on price discrimination across member states. This was already clear with respect to, say, pharmaceuticals and if the court follows the Advocate General’s opinion it will be equally clear for the case of digital rights.


Several commentators have observed that the direct economic consequences of this for the English Premier League (EPL) are probably small. It currently generates £1.7 billion from its three year domestic rights sales, and £1.4 billion from the sale of overseas rights, and it is said that only about £200 million of this comes from sales within the European Union. About half of the EU income comes from Scandinavia, where English football is very popular. Most member states either have their own strong domestic leagues (e.g. Germany, Spain, Italy) and so are not very interested the EPL, or are too poor to pay much for the rights (e.g. Poland, Romania, Slovakia).


The implication of the Opinion is that the rights will have to be sold at a near uniform price across the EU to prevent arbitrage, in which case the EPL would choose to sell at a relatively high price, lose some of the low income markets but retain the Scandinavian market where the willingness to pay is high. This might reduce income by about £100 million – scarcely enough to buy you a decent couple of strikers these days- a loss of about £1-2 million of revenue per club per year. Alternatively they could sell to a single pan-European broadcaster, although whether there is a broadcaster with the reach and the resources to finance this is another issue; indeed, if there were it might raise unwelcome questions about dominance.


I think the more interesting aspect of the Opinion stems from the fact that currently the EPL makes available all 380 games played in a season outside the UK, but only 138 games within the UK. Scandinavians would be less keen on the EPL if they found themselves similarly restricted, in which case UK residents might also be able to get access to whole season on TV. The reason for the restriction in the UK, it is claimed, is that there is a need to protect the live gate at football matches, both in the EPL itself and at lower league football matches. But if the restriction were applied to sales by the EPL to the rest of Europe then the Scandinavians, among others, might be less keen on the EPL. Hence the EPL might choose to make all 380 games available across the EU, including the UK in which case UK residents would also be able to get access to the whole season on TV.


The UK restriction is analogous to the blackout rule in the USA’s National Football League, which permits a team to prevent coverage on TV in its local market if the game is not a sellout. Together with US sports law professor Stephen F. Ross I have argued in the past that these restraints are unnecessary and detrimental to the interests of consumers. It was therefore pleasing to see that the advocate general took a robust view of the need for such rules. She pointed out that all Bundelsiga games can be seen live on pay TV but that this has not harmed attendance- indeed they are rising rapidly in Germany. Above she pointed out that if the defence of live gate were to be claimed as a reason for imposing restrictions then the EPL would have to produce some evidence of harm. Such evidence will be hard to produce, given that the data shows very little impact in practice.


Indeed, the court may in fact be doing the EPL a favour, just as the Commission did in 2006 when it forced it to sell rights in packages to at least two different broadcasters (prior to this they had all be bought by Sky). The EPL argued before the Commission that allowing in another broadcasting would lead to a substantial drop in income- at the time the rights were valued by Sky at £1 billion. In the event, the auction under new rules generated a 70% increase in revenues. Likewise in this case, if the EPL were driven to make all matches available in the UK then broadcasters might pay substantially more, since they will then be able to reach loyal fans currently deprived of the opportunity to see their team in action.

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Comments
One Response to “Football Economics: Guest Post by Prof. Stefan Szymanski”
  1. snatur says:

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