Sunday, July 15, 2007

Foreign markets "are essential" to EPL economics

Of the 20 clubs in the English Premier League only three - Newcastle, West Ham and Wigan - are preparing for their new season solely at home. Manchester United is, of course, in Asia, non-competing with the AFC Asian Cup, along with Liverpool Portsmouth and Fulham in Hong Kong for the Barclays Asia Trophy and Bolton and Reading in South Korea for the Peace Cup. Tottenham in South Africa, Chelsea, Everton and Aston Villa are in North America and the rest are around Europe.

"Foreign markets are essential to the economics of the English game," explained Jonathan Northcroft in the The Sunday Times. "The current transfer spending is underpinned by a new television deal worth £2.7 billion over three years to the Premier League, up from £1.024 billion in 2004. The ending of Sky’s monopoly and entry of Setanta as rights holders in the domestic market is one reason for the rise. Another is the huge rise in what foreign broadcasters pay to screen games. In 2004 the league signed a contract with foreign rights holders worth £320 million over three years. Analysts, who predicted such a large deal could not be repeated, were astonished when the Premier League announced a new one worth £625 million over three seasons starting in 2007-08."

Overseas broadcast revenue is divided equally between clubs and so is worth £10.5 million per season equally to every Premier League chairman. For the poorest clubs, that pays for the transfer budget.

"The biggest rise in foreign money, in percentage terms, involved Africa and the Middle East, but that pales beside what Asia is willing to spend to watch the Premier League. It is no coincidence that the Barclays Asia Trophy is being held in Hong Kong, which has a population of just seven million but spent the most on Premier League rights - $200 million over three years from 2007, a 150% increase on the 2004 deal," Northcroft observed.

“In Hong Kong they pay around $10 for every person there to watch the Premier League. Basically, in terms of amount per head of population, it is the most expensive sports rights contract ever - in any sport, in any territory,” said James Pickles, the editor of TV Sports Markets magazine. "The market was fuelled by a bidding war between an incumbent traditional (Hong Kong Cable) broadcaster and a new broadband service (Now TV). A similar thing happened in Singapore, where Premier League rights fetched $160 million. “Premier League football is so popular that owning the right to show it guarantees a channel’s survival. The companies who won the bidding in Hong Kong and Singapore paid so much they can’t hope to make a profit, but knew missing out could lead to their businesses folding."

After Asia, Scandinavia is the most lucrative region for the Premier League to sell its TV rights. Africa and the Middle East have shown the biggest percentage increases, though the amounts involved are minor compared to the Asia and European markets.

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