Who is paying for the Premier League's bumper TV deal? Your local pub
Sky and BT hiked up prices by around 10% last summer to cover the cost of their £8.3bn deal with the Premier League. Not every pub can afford to pay
The recent Premier League season was the first in the latest three-year broadcasting deal, which gives the Premier League £8.3bn in TV rights, with £5.14bn of that coming from two domestic broadcasters, Sky and BT. The 71% increase on the previous deal was welcome news for clubs, players and many supporters. Clubs have larger sums to spend on players, who are earning bigger wages, and the beginning of a levelling-off effect is being seen within the league, as the extra income helps smaller clubs attract and keep a broader range of talent. Clubs are less reliant on matchday income and fans hope this will lead to cheaper tickets; seats for away fans have already been capped at £30.
But, where there is commercial progress there is a cost to bear and that cost usually finds its way to the consumer – or, as we call them in football, the “supporter”. The cost of home subscriptions have gone up a little but broadcasters have found another way of increasing their revenues: by charging pubs more.
On average, pubs pay around £20,000 per year for both Sky and BT, with the broadcasters basing their fees on the rateable value of each individual pub. The costs are determined by the size of the venue, the wealth of the area and the various services they offer. So large venues in central London will be significantly greater sums than small, rural pubs. Sky and BT responded to the new TV deal by increasing their prices substantially: Sky upped their prices by 10% last summer and BT followed suit with an 8.9% rise.
Greg Mulholland, the Liberal Democrat MP who set up the All-Party Parliamentary Save the Pub Group in 2009, warned that a “fairer deal” was needed for publicans and fans. “Sporting events place huge pressure on pubs, particularly smaller operators, as many cannot afford to pay the subscription rates that BT and Sky charge, and then lose out on custom because they aren’t showing the sport. BT’s planned price hike only worsens this problem, with many publicans already unable to afford the steep prices.”
According to a report by MatchPint and CGA pubs that show Premier League football increase their wet sales by £30,000 per year, but the margins are often tight and many are struggling to pay the high costs. For example, the Old Red Lion Theatre Pub, a medium-sized venue in central London, is charged £26,114 per year to show Sky and BT Sport. With 168 games available to show throughout the season, the cost breaks down at £148 per game on Sky and £178.50 per game on BT.
If an average pint costs £4.50, you might think that selling 35 pints means the pub breaks even, but the net profit on drinks is significantly lower. The Old Red Lion calculates that they must sell 88 pints per game to break even. This could happen during the bigger clashes, but a standard Saturday lunchtime game is unlikely to bring enough custom. Additionally, pubs with ties to a pub company (such as Punch Taverns) are obliged to buy their beer through that company, often at a higher cost than the market value, shrinking the net profit on a pint and further squeezing the landlord.
The recent price hikes took off in 2013, when BT first entered the scene. In 2012, the Old Red Lion was paying £1,595 per month for Sky. The following year, when BT took 38 games a year from Sky, the pub’s Sky bill dropped by just £50 per month but they had to pay an additional £600 per month to BT, just to show games they were already showing the previous year. Not every pub can sustain these rises.
Chris Roach, landlord of the White Lion Inn in Solihull – a small, rural pub – pays £12,036 per year. Chris says the viewing area in his pub has a capacity of 30 people but, because the pub is in an affluent area, his rates and fees are high. “A big pub within five miles has 18 screens and holds 400 people. Guess what? They pay the same rates.”
The Woodman Inn in Witney – a similarly small pub in a rural area – pays around £10,000 per year, with 38 seats in the viewing area. The landlord, Mark Fiddler, cancelled his contracts last summer in the hope of renegotiating a better deal but the broadcasters were unmoved. “They don’t care about the small, rural, village pub,” says Mark. “I am lucky if we take £2,500 a week in this pub and, with Punch Taverns taking their share, there is nothing left to keep the pub open.”
With their focus on broadband, phone and TV packages, Sky might not be interested in reducing the cost to pubs. Where is the benefit in giving supporters the option of crowding together to watch football, when each individual might command a home package, complete with internet and a landline? In 1996, Rupert Murdoch admitted that “live sport is the battering ram to get pay-for-TV into people’s homes.” He didn’t mention pubs.
Pubs can save up to 33% on their total fee by stocking Molson Coors products, although the discount only applies if they hit a sales quota. A publican might then find themselves in a position where the only way they can afford Sky is by selling products they didn’t want in the first place. Chris Roach of the White Lion Inn is one such publican: “I receive a discount of £3,611 plus VAT, as I have sold my soul to Molson Coors via Carling to guarantee a certain barrage of their products.” If Sky decide to shift distributors for a better deal in a year’s time, publicans must follow them in making the switch, abandoning the drinks they have spent a year encouraging their customers to buy.
If the present is dim, the future is darker; broadcasters are currently dealing with a sizeable decline in viewing figures. Sky’s ratings dropped by 14% last season and BT’s Champions League figures went down by as much as 40% on certain days. The picture is similar in the US, where ESPN recorded their largest ever subscriber loss in October 2016, with 621,000 customers cancelling their subscriptions. With the broadcasters bringing in less money on subscriptions, they may yet look to pubs to pick up the slack.
Sky are paying a hefty £11m to broadcast each Premier League match – compared to £7.6m for BT – but they will not want to lose their rights. When Premier League rights shifted from one broadcaster to another in Hong Kong last year, customers followed the football and the share prices of the broadcaster that lost the rights plummeted. In fear of a similar fate, Sky could continue to bid high, pushing the increasing costs on to the consumer, and in particular, pubs.
The Premier League is shown in 212 territories, in 643 million homes, with a potential audience of 4.7 billion people. Manchester United recently became the first British club to record annual revenue of over £500m, money that helped them sign Paul Pogba for a world record fee of £93m last summer and add Romelu Lukaku for £75m this month. Your local pub might be struggling with the cost of all that.