Wednesday, 12 October 2011

The real problem with Liverpool's media income

There are few things as unedifying in any aspect of life as hearing the rich demand more at the expense of the less well off, and football is no different.

Ian Ayre, Liverpool FC's Managing Director has suggested that the current (equitable) distribution of the Premier League's overseas rights income should be looked at. Ayre believes that "big" clubs (which apparently includes clubs that finish 7th and 6th respectively in the last two seasons) should get a bigger share.

Ayre is particularly worried about "competing" with Barcelona and Real Madrid and told the Guardian:
"If Real Madrid or Barcelona or other big European clubs have the opportunity to truly realise their international media value potential, where does that leave Liverpool and Manchester United? We'll just share ours because we'll all be nice to each other? The whole phenomenon of the Premier League could be threatened. If they just get bigger and bigger and they generate more and more, then all the players will start drifting that way and will the Premier League bubble burst because we are sticking to this equal-sharing model? It's a real debate that has to happen."
So how bad is the competitive gap between Liverpool and the Spanish giants?

Well at face value, the gap is big and growing. The chart below shows Liverpool and Barcelona's media income for the last five seasons (numbers for 2010/11 are derived from the PL, UEFA, FCB's account and an estimate of LFC's domestic cup income). I have converted Barcelona's income from Euros into Sterling at the average exchange rate for each season.


Having been £20m in 2006/07, the gap has expanded enormously to £75m last season. So what's going on?

Much is made of La Liga's highly inequitable TV rights deal which allows Barcelona and Real Madrid to negotiate to sell their rights individually, creaming off the majority of the total paid between the two clubs. This has indeed been a factor as the chart below showing income from the domestic league rights demonstrates:


The chart appears to show Barcelona's league income running far ahead of Liverpool's in recent years, but it masks the key impact not of the way rights are sold, but of currency. In 2006/07, one € was worth on average 67.6p, by 2010/11 the pound had devalued substantially and one € was worth 85.7p. Once this currency impact is accounted for, a different picture emerges:


The chart above, rebases domestic league media income to 100 in 2006/7 and shows Barcelona's figures in both £ and €. From this chart it is clear that in local currency, the value Liverpool receive for domestic competitions (PL, FA Cup and Carling Cup) has actually grown faster than the equivalent in Spain.

So currency plays one factor in explaining the divergence between the clubs, but there is another huge factor at play; performance on the pitch.

To get a sense of how the relative fortunes of the two clubs have diverged and how crucial this is to media income, consider the following chart showing UEFA TV distributions (all in €).



In 2006/07, Liverpool earned €9.5m (£6.4m) more from the Champions League than Barca. By 2010/11, the positions were radically reversed with Barcelona earning €44.9m (£39m) more from their winning CL campaign than Liverpool did from the Europa league. This season, Liverpool will earn precisely zero from Europe.

Rather than bleating on about how unfair the allocation to Bolton Wanderers is, Ayre needs to look at the performance of his own club. The gap in media income with Bolton over the last five years is already £159m, how much more does he want?


If Liverpool football club had made better use of the £340m in media income they have received since 2007, perhaps they would have been closer to Manchester United on the pitch. The gap last year between United and Barcelona? Not £75m but £20m.....


LUHG

38 comments:

Anonymous said...

Andy - The issue surrounds the income (which is growing) that Sky get from selling the games abroad rather than the existing deal which is based upon showing the games in the UK. Ayres wants that money, or some of that money, to be given to the clubs with more going to the "bigger name" clubs than the nominally "smaller" clubs.

Does this change things?

Mark

Anonymous said...

Everyone likes to bring up the fact that the 'big four' dont actually finish in the top four anymore. Fair enough, that's OK for separate discussions.

However, for this context the 'big four' are the afforementioned clubs. When you take into account worldwide fanbases, commercial revenue, etc. these clubs are indeed factors that define this.

Good article otherwise.

Anonymous said...

Andy - So Ayre is not for getting a bigger share of the UK Sky cash, he wants that to remain equally shared amongst the PL, he wants a bigger amount of the cash which Sky gets for selling overseas rights.

In other words, instead of Sky pocketing the cash, he wants the bigger clubs in the PL to get a bigger share.

Mark.

andersred said...

Hi Mark,

No that's not quite right. At the moment the money overseas TV companies pay the PL (total £358m) gets split evenly between all 20 clubs (£17.9m each). Ayre wants that £358m split in a way that favours "bigger" clubs.

anders

Anonymous said...

@mark.
Where did this idea that sky sell the overseas rights come from?
It is nothing to do with sky ... they bought the uk rights only.
The premier league sells the overseas rights of which liverpool is but one member.
It needs 14 clubs to agree to a change so its not gonna happen.

Anonymous said...

Andy - Thanks for that, I completely understand it now and 100% back your opinion. I have a quick question for you which is not relevant to this discussion. I hope you can answer it for me. United made a profit of £30 million last year and bought back £64 million worth of bonds, if we never bought back £64 million worth of bonds, does that mean we would have made a profit of around £94 million? More or less?

Anonymous said...

And in this new generous game is that how Liverpool justify not letting Luton survive when asked to give them the FA Cup money ( £110,000) which would have taken them out of administration the reply was " We are not a charity"
What happened to the working class ideals of Liverpool????

Tom D said...

Possibly 'interesting' from a United fans perspective due to your tone alone, but a pointless exercise if you’re really trying to answer the blog title. I find it quite amusing that you bring things into the equation that Ayre isn't arguing about i.e. it's obviously true that performance on the pitch when playing in europe (i.e. getting european football and getting relatively far into the competition) increases total media revenue, but Ayre isn't talking about UEFA media income, he is specifically talking about the media rights to PL games.

I also can't understand where you’re trying to go with the fluctuations in currency (i.e. devalued pound) argument, frankly it's more bizarre than interesting. We have no control over how strong the pound is against the euro, and no way of knowing if it will ever 'level back off' to what it was before. To suggest it's a temporary thing and to re-weight the income based on the old rate to give us a 'true' picture is pure fantasy.

None of this is 'the real problem with Liverpool’s media income', we don't really have a problem with our media income we just want more of it. However you look at it, Barca earn more money than any of the PL teams from domestic (La Liga) media income (regardless of on the pitch performance) due solely to the fact that they have been able to negotiate their own tv deals, that's the point. That gives them an advantage over other european teams.

We (yes that’s right I support LFC if you hadn’t guessed) may not be competing with the likes of Barca at the moment, but that in itself has little impact on what Ayre is trying to do or the point he is trying to make.

I'm not saying I agree with us pursuing this kind of deal at all btw, just think that piece of writing was poor in my honest opinion.

I await several intelligent replies.....

Anonymous said...

liverpool want more media money to stop the likes of Bolton challenging them for 6th/7th.
I would love to see liverpool lead a breakaway if the other 19 teams voted against them (after all everyone only wants to watch them).
They might win a league title if they do.

andersred said...

Read the quote from Ayre. He believes that English clubs (well he said Liverpool and United) are at a structural disadvantage and that therefore the TV distribution should be skewed.

"If they [RM and FCB] just get bigger and bigger and they generate more and more, then all the players will start drifting that way and will the Premier League bubble burst because we are sticking to this equal-sharing model?"

I'm pointing out that last season United only earned £20m less, Chelsea will have earned around £35m less than Barca (and the gap to RM is even closer). There IS a gap between clubs doing well in Spain and those doing well in England but so what..? The currency has an impact on competitiveness like it does in any industry and this has been a key factor in the creation of this gap.

The point is that Liverpool are miles behind the Spanish two largely through the club's own inept management.

To argue special pleading for LFC and MUFC to deal with this "threat" from Spain at the cost of screwing up the league is just self serving nonsense. Football is about more than what suits your club (or mine).

If Ayres is worried about competing with Barca he needs to sort out his own back yard not screw up the whole league.

anders

Tom D said...

So united ‘only’ earned £20m less than Barcelona last season, which equates to 17% of their total media income and around £40m the season before (around 34% of total media income). That demonstrates his point sufficiently for me, how much debt are United in again?

Liverpool are absolutely behind RM and FCB due to inept management at board level for years, but that has little to do with the theory behind this argument so you are in fact missing the point. Even if Liverpool suddenly become the best team in Europe over night again, the point would still stand.

I’m not necessarily advocating a breakaway tv deal and/or a shift in balance of overseas revenue to benefit either of our clubs more than the others in the league but the debate he is trying to start is valid in my opinion. The top English clubs (decide who they are for yourself) earn less from TV rights than the big two in Spain, and no amount of weighting of currencies is going to change that – the gap is growing and will potentially start having more of an impact as time goes on.

andersred said...

How much debt? £459m gross, £358m net (after adjusting for summer transfers).

An obscene and pointless amount of debt that has cost £495m in interest, repayments and fees since 2006.

Anyway but to the point, yes there's a £20m gap between United and FCB but it really is down currency moves.

Barca earned €112m from La Liga/Copa Real rights, that's £95m. United earned £74m from non-CL domestic rights. At 2007 exchange rates the Barca number in sterling would be £76m.

Hey presto, gap between Champions of Spain and England (and CL finalists) gone (or down to £2m).

Now do we screw up an already unequal league just to compensate the poor old English "elite" for a 21% devaluation in sterling over five years?

Do we hell.

anders

Tom D said...

I suppose we'll have to wait and see what the next overseas contract is worth to each club. Given the economic situation across most territories I wonder if it may even decrease for the first time (no idea at all), if it did then all of the clubs would be up sh*t creek.

On your last sentance, the answer to that is invariably not, but what you brush off as a small devaluation in sterling may become an even bigger factor if the country gets deeper into recession.

andersred said...

I wasn't trying to predict the currency Tom!

The flipside of a week sterling is higher £ revenue from the CL of course...

anders

Anonymous said...

Andy - Sorry to keep on, but want to understand a couple thing unrelated to this discussion. I know no one else who would know the answer to my questions, if you could answer it I would appreciate it.

United made a £30 mil profit, they paid £51 mil towards interest and £64 mil towards buying back bonds. If we never had the bonds and dividends aside, does that mean in theory United would make a profit of £145 mil? (51 + 30 + 64 = 145) or am I barking up the wrong tree here?

Mark.

Steven said...

The flipside is also higher operating costs and wages e.g Reals' operating costs are £100m which if you applied the exchange rate pre sterling collapse (1.50) would equate to £67m which is the same as United's so in fact the gap isn't as big as it first looks.

Kevin said...

I think that it is fair as it is. The problem he is talking about does not lie at the UK end but the Spanish end as I see it.

The rest of La Liga need to get together and make changes for there own sake.
Imagine if teams like Liverpool or Arsenal or Chelsea etc were forced to sell there star players to Man United to survive the season. That happens every year in Spain. Big Clubs (I'm thinking Valencia in particular) should be regular challengers for the title, but they can't get close. Then they have to sell David Villa to Barca for the same price as Andy Carroll.

I think only about 4 teams in La Liga have shirt sponsers this year and most of the lower half of the league will struggle to survive when they get relegated.

Barca and Real also seem to get other "special" help from the banks and the government which does not seem to be available to the rest.

andersred said...

Hi Mark,

You're mixing up a variety of numbers. The £30m is pre-tax profit (after interest). The £64m is cash paid to repay bonds (the club had £150m in cash at the start of the year).

The cash flow before bond buybacks was a £55m inflow stated after £52m of cash interest. Operating cash flow was £125m.

anders

Anonymous said...

Andy - Thanks mate, so what would have we made 'profit wise' if we had no bond debt? "roughly" discarding dividends too. Thanks.

Mark.

Anonymous said...

Andy - Again I am being told that it is not the money the PL receive that is in question. It is the money that is being generated by the likes of Sky selling to numerous nations and ESPN selling to Fox, etc etc etc. Apparently none of the PL clubs are getting any of this money.

It's not the £358m that Liverpool want a bigger stake in. I thought you should know this before you talk about it on a radio programme or whatever. Cheerz mate.

Mark.

andersred said...

Mark,

Can I point you to the PL's own report on TV money?

It's here:

http://cde.cerosmedia.com/1J4e26cfd9df8c1624.cde

Page 60.

anders

Anonymous said...

@mark
What clown college did you go to?
Sky cannot sell rights oversees ... only the PL can ... a simple clause in the sky contract will dictate this.
The liverpool md is clearly talking about the £358m and wanting more than a 5% share.

Anonymous said...

Andy - Just passing on what I have been told bud, apparently the whole world has got the wrong end of the stick. I was told that the £1.4bn shared over three years for the overseas rights is not the issue here. The £1.4bn PL cut is not the cash in question. Sky are selling separate rights to foreign companies, ESPN are selling rights to FOX etc and none of this money is going to PL clubs. This is the money Ayre wants a piece of. The £1.4bn PL cut is a separate issue so I am told.

Andy - Can you give me a rough estimate to what we would make in profits, based on last years results, if we had no bond debt, Thanks

Mark.

Anonymous said...

'No name'

I am a United fan so I am not trying to defend Ayre, I am only writing what I have been told. The football world today have got the wrong end of the stick. Sky have been selling separate rights abroad and ESPN are selling rights to FOX etc etc.

This will all come to light in a few days and you will be wishing you had my source.

Mark.

andersred said...

Mark,

That isn't right mate I promise.

Before transfers United would make around £100m profit each year without any debt at all.

A

andersred said...

Mark,

That isn't right mate I promise.

Before transfers United would make around £100m profit each year without any debt at all.

A

Anonymous said...

Andy - Only passing it on bud, I thought you should know before everyone else. Thanks for the answer, I did think it was around £100m. I just hope the Glazers use the floated cash to settle all of the bond debt. They will never be liked because of the £470m of ours they have wasted, but this would put them a step closer. I know £50m or so will go on dividends, but at least we would have around £50m a year for net transfers "theoretically". It's nice to dream.

Mark.

Anonymous said...

@Mark
You are completely out of your element son.

If, as you claim, Sky have been selling on TV rights without the Premier League's permission, then this will go to the courts.

Sky won't have a leg to stand on.

It would not be in Sky's interest to bite the hand that feeds, so the only conclusion is that they are not selling on such rights.

They "might" sell on their pictures to TV companies who have paid the PL for oversees rights but that would be tiny in comparison to the £358m and something the clubs wouldn't be concerned about.

Anonymous said...

I know Mio TV (Singapore), Rogers (Canada) & FOX (USA) pay ESPN to view games, the way around it is they are paying a fee to show the channel, rather than rebroadcasting the games.

Sky are doing exactly the same thing and this 'apparently' is the money Ayre wants a piece of. Please don't shoot the messenger mate.

Mark.

Anonymous said...

@Mark
Mio/SingTel, Rogers/Sportsnet and Fox Sports have ALL paid the premier league rights to broadcast.

How they get their pictures is not the concern of the clubs ... it is cheaper for the broadcasters to pay Sky for pictures than send multi-cameras to games.

This will all be be within the rules of the contracts.

There is NO extra cash to get and you're more deluded than Ayre if you think there is.

Anonymous said...

The Telegraph, with their info coming from Deloitte, have a fairly significantly difference in figures.

Revenue (€m)
1 FC Barcelona 178.1
2 Real Madrid 158.7
3 AC Milan 141.1
4 Internazionale 137.9
5 Juventus 132.5
6 Manchester United 128

http://www.telegraph.co.uk/sport/football/teams/liverpool/8822989/Liverpool-TV-revenue-demands-how-European-leagues-compare.html

I'm aware your list is in £ and there's is in € which explains the difference in figures, but they have United at 128M € and you have them at that in £, so according to The Telegraph the difference is more like 50M a year than the 20M in the article.

andersred said...

High anonymous at 13.26,

The Deloitte figures are for 2009/10, the Barca and MUFC figures above are for 2010/11. The results from both clubs only came out in the last few weeks.

You can see United's at: http://www.mufplc.com/pdf/Q4%202011%20Report.pdf

If you look at page 13 you can media income of £119.4m.

Barca's (in Spanish): http://www.fcbarcelona.com/web/links/_externs/premsa/memories/memoria-castellano.html

The segmental breakdown for Barca is on page 162. It shows media income of €163m (£139.6m).

Therefore a £20m difference. The PL has improved relative to La Liga with the new overseas rights deal, not that you would know that from the moaning of LFC (and United).

Hope that clears that up.

A

TomDuke said...

Ayre raises a good point. If the foreign TV revenue were split up like the merit portion of domestic TV revenue (where Liverpool got 7.14% instead of 5%--the equal portion), Liverpool would have made an extra 7.6M pounds.

If they can do 50/25/25 with the domestic rights, why can't they do a better-for-the-big-clubs split with the foreign money? It's not a matter of "how much more of a gap do they need?" It's "when do we get to keep the money that we've earned?"

Anonymous said...

I disagree, Ayre has not raised any good points.

The 50/25/25 split commonly referred to is the split of how money is separated into pots before distribution. As clubs are guaranteed 10 live match payments (regardless of how many times they appear on TV), the distribution is much more equal than the ratio would suggest.

In 2010/11 Liverpool received 6.0% of domestic broadcast distributions. If they received that same percentage of overseas distributions they would have received around £5.2m in additional revenue. Compare that to the €25m differential in Champions League and Europa League media distributions between Liverpool and Tottenham (not to mention the matchday and commercial revenue shortfall) last season.

He has started a fight that he can’t win over £5m quid (less than the matchday take at United for two home matches). He needs to spend less time focussing on the uncontrollable. If he wants to increase his revenues, Liverpool need to finish in the top four. Result – revenues will instantly increase by at least £20m. Quite a lot more than the £5m he is fighting for. Very bizarre behaviour.

TomDuke said...

" If he wants to increase his revenues, Liverpool need to finish in the top four. Result – revenues will instantly increase by at least £20m. Quite a lot more than the £5m he is fighting for."

What is Ayre going to do in early October that will help Liverpool finish higher?

He gives one interview and plants the seed. If it flowers, then great...Liverpool gets new money. If it doesn't, no big deal.

Let's not pretend that £5m (in your example) is not worth fighting for. Even a highly-paid executive would have to work a lot of hours for that much scratch.

Anonymous said...

But the Premier League teams are still very competitive with the Top4. In La Liga Barca and Real are all over the rest, i don`t watch it anymore despite it`s free to watch here in germany. PL is Pay-TV and i can`t afford it at the moment, but it`s the only league i would pay for, because it has a high level (the highest level) of competion. after the PL comes the Bundesliga, which has equal sharing as well. The Bundesliga has overtaken Italy( clubs sell their rights individually like in spain) in the UEFA rankings and is already attacking spain, because the other clubs behind Barca and Real have less moeny and thuis the competition in spain is going down. France (central marketing) is also attacking Italy and may attack Spain in the future.

More money for bigger clubs is bad for the league in the lng run.

Reeceloui said...

Gap between the large and growing. The following chart shows the media Liverpool and Barcelona over the past five seasons, it has been less than the revenue income from the domestic league right shows a factor graph.

Debt

walia said...

that Sky get from selling the games abroad rather than the existing deal which is based upon showing the games in the UK. Ayres wants that money, or some of that money............SSB coaching in Delhi