An article in Thursday's Independent suggests that another great shift in the economics of football will take place over the next couple of years (I've pasted the article at the bottom of my post).
Italian and Spanish clubs negotiate individual TV deals, which contrasts with the Premiership's collective agreement. This means that the top Spanish and Italian clubs keep all attributable revenues, whereas the Premiership's big clubs cross-subsidise smaller teams.
To date, the effect of the Premiership cross subsidy on England's top teams has been significant, but not excessive. It looks like that will change. Real Madrid and Barcelona each look set to reap an additional £40 million per year from new TV deals over the next couple of years (N.B. I'm inferring the figure for Barcelona from Madrid's increase - it seems reasonable to assume their increases would be roughly commensurate).
The Madrid and Barca increases come on the back of a similar but slightly smaller increase for Milan announced last season (which takes full effect from next season, from memory).
By implication, whereas our club presently struggles to afford the purchase price for world class players, it will become nigh on impossible in the near future. Our future purchases will almost exclusively come from the second and third tier.
The supply of world class players will remain more or less fixed, at least over the short to medium term. However, it is debatable how deep the supply of world class talent runs. I would argue that if you genuinely discerning, there are probably no more than 3-4 world class players at each position, or 6-8 among centrebacks and strikers, where there are two positions to be filled. Even that may be a little excessive. Give or take, there may be something like 30-40 top line players in total, at most.
At present, the number of world class players changing hands each summer is relatively stable. I'd say in the average summer, around a half dozen top level names shift clubs. It rises to maximum of maybe a dozen or so in a World Cup or European Championship year.
Purchase prices for top players usually range from £12-25 million, depending on position and the purchasing needs of the wealthiest clubs. On current revenues, Arsenal, Liverpool and United can probably sustainably afford to buy one top class player a summer with a price of around 10-15M (it is arguably a little more than 15M for United, and maybe a little less than that for us and Arsenal).
The figures from the new TV deals signed in Spain and Italy suggest Barca and Real can afford additional expenditure equivalent to 2-3 extra world class signings per summer at current prices, while Milan can afford 2 perhaps extra players.
The shift in the supply-demand balance suggests that:
i) the price for top class players will go up in coming years, perhaps significantly;
ii) the average number of transfers of top players per year can be expected to increase slightly over time, with top players moving from second tier leagues and clubs more rapidly - the likes of Torres, Riquelme and Joaquin playing for lesser clubs for extended periods will become more of a rarity;
iii) the effects of i) and ii) will mitigate one another to a certain extent;
iii) when world class players come on the market, Premiership clubs other than Chelsea won't be able to compete, and will likely have to settle for leftovers that Barca, Real and Milan don't want.
There are a number of implications, good and bad, for Liverpool to heed from these changes:
* "growing our own", developing second and third tier players, and savvy transfer market dealings will become increasingly important to our club's success;
* there will be a premium on exploiting the non-financial advantages that English football holds (e.g. cultural links Scotland, Wales and Ireland, northern European countries, the United States and other English speaking countries);
* emphasis should shift to building a great team, rather than a team of great players;
* the significance of Chelsea's financial dominance may increase, as they will soon be the only English team able to afford world class players;
* the significance of Manchester United's financial advantage over Liverpool is likely to fall. After 10 years of having to watch United purchase the likes of Veron, Horse and Ferdinand, it is conceivable that Rooney may be the last player that United ever buy off the top shelf unless current financial arrangements change;
* Liverpool, Arsenal and United could slip further in the pecking order for top players if Inter and Juventus are able to negotiate similar deals;
* there may be significant benefits from maintaining good relations with the likes of Barca and Madrid, as these teams are likely to stockpile players in the way that Chelsea have, and will likely need to offload them relatively cheaply at times; and
* the only way for Liverpool, United and Arsenal to be able to compete in the market for top shelf talent will be to: successfully lobby for individual TV rights, so the cross-subsidy to lesser Premiership clubs is ceased; or get an owner like Abramovich who is not concerned with recovering the club's costs.
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Real swell coffers for team rebuilding with £543m television deal
The Independent
By Nick Harris
Published: 16 November 2006
Real Madrid are on the verge of signing a £543m television deal that will be "the most important contract in the history of world sport", according to the club's president, Ramon Calderon. "The deal guarantees us €800m over seven seasons and will be signed in the next few days," a club spokesman said.
The contract, for domestic games, will not be worth as much per year as Barcelona's next TV deal - a five-year package due to start in 2008 worth £81.4m a year - but Real's contract will be the most valuable overall.
Spanish clubs are allowed to negotiate individual deals with broadcasters, hence Real and Barcelona's ability to secure huge sums. That is not the case in England, where clubs negotiate collectively. The biggest earners in the Premiership last season from domestic TV alone were Manchester United (£30.65m), followed by Chelsea, Liverpool and Arsenal. Earnings vary depending on finishing position and the number of times each club's games are screened live.
However, the collective deal in the Premiership means that the income differential from television is relatively small between the top and bottom clubs, with the champions earning perhaps twice as much as the bottom side. In countries where clubs do individual deals, notably Italy and now Spain, the domestic TV earnings of the biggest clubs can outstrip the smallest in their division by 25 to one.
Real have not yet disclosed the name of company buying their rights, or when the new deal will start. Their rights are currently owned by the pay-TV firm Sogecable, which also holds the rights for most of La Liga. Sogecable currently pays Real £37.3m a year.
However, the publicly owned television station Telemadrid said earlier this month that it was going to bid for Real's rights and reports in Spain yesterday suggested that Telemadrid, backed by Madrid's regional government and the Caja Madrid bank, were on the brink of doing the deal. Telemadrid is free to air and would need to recoup its outlay via advertising.
* The Real Madrid president, Ramon Calderon, remains hopeful David Beckham will stay at the club. "We have offered a contract extension to Beckham... He represents the claw, the spirit of the club. I would like him to continue here."
The world's best TV deals
Barcelona £81.4m
Real Madrid £77.54m
Milan £67.82m
Man Utd £30.65m
Chelsea £30.41m
Liverpool £28.83m
Arsenal £28.72m
All earnings are from domestic TV rights only.
