Cost of the Spectacle: How broadcasting revenues determine the competitiveness of European clubs
Football is becoming more competitive than ever and financing has become a leading factor in competitiveness
Aston Villa supporters were anxious on October 04, 2020. Their club had to play against Liverpool, the reigning champion of England. Their opponent had also qualified for two consecutive UCL finals before and had won one only a year before. It boasted the likes of van Dijk, Winjaldum, Mane, Salah and Firmino. But in hindsight, they had no reason to be worried because their team dealt Liverpool a 7-2 defeat.
These sorts of incidents are abundant in the Premier League, from Chelsea losing to Sunderland to Leicester City winning the league; match-day uncertainty is a big part of the competition. But anyone who watches football will tell you that uncertainty is ingrained in the sport itself. Still, some leagues are much more competitive than others. But this competitive intensity is not derived just from zeal and passion, but also from financial structures.
The Premier League is often said to be the most competitive league in Europe and with good reasons. Like any other league, it has its traditional favourites, Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham but their status cannot guarantee them of finishing in the top six. In the last six seasons, clubs like Leicester City, Southampton and West Ham have occupied these spots and secured their places in European competitions.
La Liga, in contrast, has a pretty monopolistic competition. No one has won the title except the three Spanish giants, Barcelona, Real Madrid and Atlético Madrid since the 2003-04 season. Other big clubs like Valencia, Villareal and Sevilla also constantly take up spots in the top six.
A similar situation is apparent in the Bundesliga. But there, the monopoly is solely owned by Bayern Munich. No other club has won the league in the last nine seasons. The monopoly has only been broken by Borussia Dortmund, the second most successful club in Germany.
Ligue 1 is not any exception either. Paris Saint-Germain has been the dominating team since the 2012-13 season. Even though their monopoly has been broken at times by Monaco and recently, Lille, they have won four out of the last six seasons of the competition. Other big French clubs like Marseille, Lyon and Monaco have regularly claimed spots in the top four.
The reasoning behind this seems simple: these clubs have more resources, enabling them to buy top players and put in a title challenge every season. But the sources of these resources are far from simple. But in today's age, most clubs predominantly earn money from broadcasting revenues. As a result, broadcasting rights determine how each club within a league splits the spoils.
The Premier League, from the beginning, has had an extremely progressive distribution. Half of the revenue from domestic broadcasting is shared equally among the clubs. A quarter of the revenue is shared on the basis of last year's position and the rest is shared as facility fees. Additionally, up until 2018, the entire international broadcasting revenue was split equally among all clubs. This aggressive distribution enables even the lowest-earning clubs in the league to afford quality players and compete with the top clubs effectively, resulting in the aforementioned upsets.
After 2018, the international broadcasting revenue distribution was changed slightly. Now, £3.3 billion is split equally and the rest is awarded based on the clubs' merit. In the 2019-20 season, the highest earner, Liverpool obtained €195 million from broadcasting while the lowest earner, Norwich City earned €112.3 million.
La Liga, on the other hand, was the polar opposite. Before 2016, clubs sold their broadcasting rights separately. As a result, the biggest clubs which had larger fan bases earned significantly more. In the 2014-15 season, Barcelona and Real Madrid took home €147.3 million whereas Almeiras only got €19 million.
As a result, the league went through a restructuring process. Since 2016, 10% of revenue was given to the Segunda B division. Half of the rest was shared equally while 25% was shared based on the results of the last five seasons. The other 25% was distributed based on viewers per match. The last two metrics also favour the big clubs as they have historical success and large fan bases.
In the 2019-20 season, the top earner of the league was Barcelona, bagging €166.7 million while their rival, Real Madrid took home €157.6 million. Understandably, those two clubs occupied the top two places that season while Mallorca, who only got €44 million and finished at 19th place.
Bundesliga also had a similar distribution method for their TV revenues. 70% of Bundesliga's domestic broadcasting profits were distributed among the 18 top-tier clubs based on their performances in the last five seasons, giving historically successful clubs like Bayern Munich, Bayer 04 Leverkusen and Borussia Dortmund an advantage. In the 2019-20 season, Bayern took home €68.6 million from this source. Meanwhile, the lowest earner Paderborn only got €26.35 million.
But due to the Covid-19 pandemic, the league has decided to restructure. During the 2021-22 and 2022-23 seasons, 53% of the revenue will be shared equally among the clubs, even though it will be reduced to 50% from the 2023-24 season. A whopping 42% of the revenue will still be shared based on performance in the last five years while 3% will be given based on youth development and 2% based on club interest. This distribution system still hugely favours the traditionally successful clubs.
According to the new formula, Bayern is expected to take €105.6 million in total broadcasting revenue while Arminia Bielefeld will only receive €34.31 million.
Ligue 1 has a bizarre structure, even compared to its less equitable peers. 50% of the revenue is distributed among all clubs equally while another 30% is purely merit-based, which sounds pretty progressive. But 20% of broadcasting revenues are distributed according to "media profile". This includes international rights revenue which will be divided among 9 clubs: PSG, Lyon, Marseille, Saint-Étienne, Monaco, Bordeaux, Rennais, Lille and Nice as they are deemed to have a leading status in European football.
As a result, in the 2018-19 season, PSG gained €61.55 million from broadcasting rights while Metz obtained a meagre €19.6 million in profit.
While the Premier League strictly maintains a 1.8:1 ratio for broadcasting rights between its highest and lowest-earning clubs, others do not follow their path. La Liga has a 4:1 ratio, Bundesliga and Ligue 1 has a ratio of 3:1. It is obvious that a club with three or four times the resources of their opponents will be able to hire better players, coaches, physios and will have the ability to create better academies and training centres to harness the potential of their players.
Some may argue that large clubs should earn more as they very often are the main attraction of their respective leagues. But the available data suggests otherwise. The Premier League is streamed in more than 220 countries around the world, making it the most viewed league in the world. This, in turn, creates incentives for potential buyers and investors as the clubs are more likely to be profitable than those on the European mainland. In the most recent UEFA coefficients, Portugal's Liga NOS has taken Ligue 1's spot and the French league is not among the top 5 leagues in Europe now.
Success certainly breeds success. But at a point where football is becoming more competitive than ever, countries need to decide whether they want to maintain the success of a few clubs while sacrificing the competitiveness of their entire leagues.
