TV deal puts footy on the spot

Fears of the football bubble bursting are unfounded, but Football League clubs will continue to fight for their survival while the Premiership clubs flourish

The UK’s football industry has experienced turbulent times recently. The collapse of ITV Digital last April, the high debts the clubs are struggling with and the exorbitantly high level of footballers’ wages are all causes for concern and need to be addressed if clubs are to run as viable businesses.

However, reports of the football bubble bursting are wide of the mark according to Mintel, which forecasts that the income of professional football clubs in England will rise by 39 per cent in current terms in the 2005/06 season.

During the 2000/01 season, the football market experienced an across-the-board increase in income of an estimated &£192m. But the inequalities between the Premier League clubs and those in the Nationwide Football League are increasingly pronounced.

Premiership clubs’ revenue, boosted by advances from a new BSkyB contract, grew by 21 per cent while the revenue of the Nationwide Football League grew by nine per cent (this was before the lucrative deal with ITV Digital). Almost 74 per cent of football revenue is generated by the 20 Premier League clubs.

There has been a marked change in the relevant importance of the sources for football revenue over the five seasons leading up to 2000/01. Matchday revenue declined from 42 per cent in 1996/1997, to just 31 per cent, while broadcast revenue grew from 21 per cent to 39 per cent.

It is therefore no surprise that the collapse of ITV Digital sent shockwaves throughout the industry. ITV Digital had agreed to pay &£315m to broadcast Football League matches during 2001 to 2004. After the collapse of this deal the Nationwide Football League was neither able to renegotiate the deal nor to later sue the parent companies, Carlton and Granada. Finally, despite signing a new deal with BSkyB and accepting &£2m from Carlton and Granada, the total shortfall for the league stood at some &£119m. This has been catastrophic for the 72 Football League clubs and a number of them have been forced into administration as a result.

Although the collapse of this deal did not affect the Premiership directly, it has had serious repercussions on the top 20 teams. With ITV Digital out of the bidding, and cable company NTL and the terrestrial channels more interested in highlights’ packages (and unwilling to compete for live deals), BSkyB will be able to drive a hard bargain.

In terms of profitability, the Premier League is in the healthiest position, with operating profits up more than 50 per cent for the 1999/2000 season and pre-tax losses sharply reduced. The situation is far less rosy for the Football League, as operating losses increased 24 per cent and pre-tax losses grew 43 per cent. This gap between the Premiership and the Football League is set to widen in coming years.

The biggest threat to operating profits are salaries, especially for the Nationwide clubs. From 1996/97 to 2000/01 the Premier League experienced an increase in the percentage of turnover spent on salaries from 44.6 per cent to 59 per cent. This, however, compares favourably with the lower English divisions. For instance, during the 2000/01 season Division One clubs spent 101 per cent of turnover on salaries, up from 76 per cent in 1996/97.

In the 2000/01 season, utilisation at Premiership grounds stood at 93 per cent and Premiership match attendance increased by 4.7 per cent in the season. Attendance is also set to continue to rise by nine per cent to a little over 30.6 million by the 2005/06 season.

This suggests that a new round of stadium building, fuelled by commercial ambition, is imminent. Indeed, clubs such as Arsenal, Everton, Liverpool and Manchester City, are already looking to move to larger stadia and others are expanding present grounds. It is clear, however, that Premiership clubs invest far greater amounts into such projects. In the ten years to the 2000/01 season, the top 20 clubs were responsible for 71 per cent of capital investment.

Consumer research by Mintel in September 2002 shows that commercialism and security in football are fans’ greatest concerns. Cynicism towards rising commercialism is shown to be prevalent: 50 per cent of all adults feel that football clothing was too expensive. And, despite a concerted effort to tackle football hooliganism and a subsequent reduction in the number of arrests at football grounds by a third over the past ten years, 39 per cent of adults believe that hooliganism is still football’s worst problem, an increase of 12 per cent since 1998.

Opinions towards the actual game paint a more positive picture as football is still the UK’s most popular spectator sport with 36 per cent of adults expressing some interest in the game – more than ten percentage points ahead of the next most popular sport, snooker. Similarly, those claiming that they have never had any interest in the sport was down eight per cent between 1998 and 2002, to 13 per cent. The proportion who avoid football has reduced by seven per cent over the same period.

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here