The English Premier League And The Risks Ahead

Last week’s appointment of Susanna Dinnage to the post of chief executive of the English Premier League marked a watershed moment in the history of Europe’s most valuable sports league. For a start, history has been made with the blunt recognition that Dinnage is the first female chief executive in the organisation’s 26-year history. Secondly, the appointment follows the stepping down of Richard Scudamore, who, since his 1999 appointment oversaw a 7.6-fold increase in the value of the broadcast rights sold by the EPL both domestically and internationally. While recognising the undoubted commercial acumen of Scudamore to realise these escalating rights valuations, there are question marks as to how much of the EPL’s success over the previous two decades can be attributed to adroit brand-building, and how much was simply down to the macro trend underpinning pay-TV over the same period.

Rights valuations do not only go in only one direction

In February 2018, the EPL’s domestic rights auction experienced a 13.2% decline in the value of the winning bids for only the second time in its history. It was the first decline in a decade that has seen the value of the domestic broadcast rights for EPL increase by 401.6%. As MIDiA Research correctly called in its January 2018 report on the sports right bubble, domestic sports rights valuations in the UK and the US have been undergoing a process of dislocation from the underlying value of the assets, to the sports rights market participants.  This has been exacerbated by the consumer shift away from long-form sport viewing on TV.

As the above chart demonstrates, sports TV consumption is predominately an activity for older age groups: 49% of TV sports viewers (across US, Canada, UK and Australia) are aged 45-plus, and only 11% are in the 16–24-year-old demographic. Effectively, premium sports rights are being funded by older consumers, while younger consumers are disconnected with the viewing experience. The key consideration is that valuations cannot continue to escalate on a dwindling user-base.

Younger age groups have been brought up in an on-demand short-form digital content landscape, where the perceived intuitive USPs of premium sports are not explicit. For 16–19 year olds, of whom only 19% of the demographic in Q1 2018 regularly watched sports on TV, sports is one of many differing entertainment options, of which the majority are now digitally available. From a content perspective the 90 minutes plus 15-minute interval for a standard football match compares unfavourably to a 15-minute social talent YouTube video, or a 60 second Instagram social video clip.

The EPL alongside the NFL, and other leading sports franchises needs to plan for how they will remain relevant for digital-first younger audiences. Not only do they need to stay ahead of evolving consumer demands, they have to plan for the deflationary impact of the next major round of rights deals, which will begin in 2021 led by the NFL. In 2021, the pay-TV operators will have undergone an additional three years of cord-cutting and will feel even greater pressures on their margins than was the case in February 2018.

The EPL going into 2019 therefore, has everything to play for.