Out-Law News 4 min. read
27 Mar 2015, 2:59 pm
The funds will also be channelled into sporting and educational development for young people, improving fan engagement and the matchday experience and supporting disadvantaged groups, it said.
The move follows the Premier League's announcement of a new broadcasting partnership with Sky and BT Sport earlier this year worth £5.136 billion over three seasons beginning from 2016/17. The new deal will replace the existing £3bn three-season contract the Premier League has with Sky and BT for the broadcasting of matches on TV in the UK.
Premier League chief executive Richard Scudamore said the investment commitments earmarked by the Premier League are "dependent on the outcome of our international live rights and the ongoing Ofcom investigation" and that the detail for its re-distribution plans "won’t be known until later this year or in early 2016".
Sports law specialist Trevor Watkins of Pinsent Masons, the law firm behind Out-Law.com, said: "The Premier League is effectively a commercial body accountable only to its 20 members clubs. This announcement, however, makes clear that it recognises its role goes well beyond that. It will help to maintain competition within the Football League by providing monies to clubs not benefiting from relegation 'parachute' payments. Taken as a whole, the stated aims of the distribution, including the growth of participation in grassroots football, improved fan engagement and experience, are all in any event in the long term commercial interest of the Premier League."
"From the 2016/17 season the Premier League will be under a contractual obligation to share a proportion of its TV revenues with Football League clubs rather than simply doing so out of goodwill. With those payments linked to future increases in television revenues, it re-establishes a link between the Premier League and the Football League that has been formally absent since it separated off 20 years ago," he said.
"Whilst the Premier League has become the world’s most popular and valuable domestic football competition, the beauty of English football’s structure is such that the likes of AFC Bournemouth, currently top of the Championship, have the opportunity to earn a seat at the Premier League on merit. Re-distribution of Premier League revenues – directly and indirectly – helps to close the financial gap between Premier League clubs and clubs like AFC Bournemouth, ensuring aspirational lower league clubs can realistically hope to compete for promotion with recently relegated Premier League teams. The new 'solidarity agreement' has been put in place at a time when the value of other commercial rights deals being agreed independently by Premier League clubs is increasing substantially," Watkins said.
Expert in broadcasting rights Julian Moore of Pinsent Masons said that the growing international interest in the Premier League is likely to manifest itself in improved TV rights deals in overseas markets.
"Football is seen as killer content by broadcasters and new media platforms in an increasingly competitive communications market," Moore said. "The Premier League has been able to benefit from this because of the fact it is seen as a glamorous league with many of the world's best players, because its TV rights are sold collectively unlike some competing European leagues, because of the slick production values applied to coverage and the fact kick-off times are convenient for several markets and because generally it’s been marketed and packaged brilliantly by Richard Scudamore and his team."
"The Premier League is already a strong product in some areas of the world, from the US to the Middle East and parts of Asia. In some parts of the world it is attracting more interest than the local leagues. There are still opportunities to grow interest in the Premier League in huge markets such as China, India and Indonesia and with the new domestic TV rights deal likely to attract even more of the best players to England we can expect interest levels to continue to rise and the value of the overseas broadcasting rights to do likewise," he said.
Moore said this could prompt a debate about whether the arrangement for the re-distribution of money from the Premier League into lower league football in England should take account of the overseas broadcasting rights deals.
Sports finance and investment expert James Earl of Pinsent Masons said the Premier League's re-distribution model can help lower league clubs attract new finance and investment, including from overseas.
"In any investment context, prospective investors want to know if the business they would be investing in is operating on the basis of a sustainable model," Earl said. "Not only are Football League clubs now going to see an increase in money passed down from the Premier League, but they have that funding on a contractual basis, which itself has a real value in terms of providing certainty and secured revenue which clubs can then rely upon in their plans going forwards. This is good news for owners of Championship clubs in particular as the value of their clubs will increase, and also gives greater certainty to investors over future income streams."
"The solidarity agreement is right for the success of the Premier League in the long-term too. In the same way that the largest FTSE companies benefit from having strong SMEs in the local supply chain, the Premier League stands to gain from strengthening the sustainability of clubs in the lower leagues. It also chimes with the FA’s increasing focus on nurturing home-grown talent and giving those players access to the best platform to perform," he said.
Competition law expert Angelique Bret of Pinsent Masons said Ofcom's ongoing investigation into the way the Premier League sells the rights to broadcast games from the league in the UK has the potential to influence the value of those rights in future and any associated re-distribution of income.
"Ofcom will consult with the Premier League, broadcasters and fans groups as it assesses whether Virgin Media's claims that the way the UK TV rights are sold by the Premier League stifles competition and drives up prices for consumers," Bret said. "The regulator announced recently that it was studying consumer research conducted by Virgin Media and would carry out is own research into the importance fans place on being able to watch Premier League football on TV."
"It is possible that a settlement will be reached in this case which sees more games designated for TV coverage and even a possible re-arrangement of the broadcast packages that are sold. This could theoretically drive down the value of the rights but it is not clear to what extent this is likely given the appetite for premium sports content and its role in winning audiences, and subscribers, to broadcast services," she said.