Back in the Fall of 2012 the Premier League announced a bumper new television contract that was set to top £5bn for the first time ever. This new contract included huge revenues from domestic television rights and crazy new money from overseas television rights. My American readers, for example, will be happy to learn that the Premier League has finally outgrown the shackles of Fox Soccer Channel and will now be part of the NBC Sports family.
The reason I break both of those domestic and overseas rights out as different contracts is because they are divided among the 20 teams (minus parachute payments for relegated teams) in two different ways. The domestic rights are divided on a 50:25:25 scale with top teams taking more money and bottom teams less based on appearances while the foreign rights are divided evenly among the 20 teams. What this means in practical terms is that the winners of the Premier League will be earning £26m more from the domestic rights and the losers will only earn £13m more. But when you add in the additional £7m for foreign rights that every team gets (us bloody Yanks!) the League winners still “only” earn that same £13m more than the bottom team. That means that the worst team in the Premier League is now guaranteed an additional £20m per year. And… the relegation teams also get a kicker to their parachute payments of about £8m the first year £6m the second, and £2m the third.
From an Arsenal standpoint this means about an additional £30m per year or about £10m more than the League losers. But this fact that suddenly every team in the Premier League gets at least an additional £20m in television revenue every year had me wondering. Is that actually additional revenue or is it just inflationary? Let me put that another way. Santi Cazorla cost Arsenal £16m in transfer fees and starting next year every team in the Premier League will be able to buy their very own Santi Cazorla, but there’s only one Santi Cazorla, what happens to the price of Cazorla in that situation?
Granted, not every team will want a Cazorla. Also, not every team starts in the same financial situation. And further, some teams will not really be competitive for players like Cazorla because they can’t give him the higher profile (read: more endorsement money) that a club like Arsenal can offer. And finally, of course there is the additional £10m in TV money that Arsenal get. So, there’s still a competitive advantage for the big clubs like Man U and Arsenal.
I warned of something similar before when the Premier League introduced their foolish “25 man rule”; that such a change would only drive up the price of English players. And of course what we have seen is an explosion in prices teams are willing to pay for that all important “homegrown” passport. And I’m saying something similar now: this so-called “extra” money from television revenue is only going to drive up the prices for the types of second tier players that Arsenal shop for.
Cazorla at £16m already looks like a good deal but in two year’s time, £16m for a player like Cazorla will look like an absolutely genius buy. And Michu at £7.5m will look like some kind of mastermind.
So while Arsenal fans are all excited by our “extra” £30m, the rest of Europe is quietly stocking up on caviar and champers. Because with all of the analytics, the cash, and the exposure of the Premier League to the global market, uncovering the next Cazorla is going to be increasingly more difficult. And uncovering the next Vieira will be impossible. Well, it won’t be impossible, everyone will know exactly who he is and the big, big money clubs will be ready with the big, big money offers. Getting the next Vieira for next to nothing is what will be impossible.