The Magic Touch: Premier League Broadcasting Revenues

An absorbing Premier League season ended this month, with Manchester City lifting the trophy after an undramatic win over Newcastle United. No miracle came for Liverpool, as millions of fans of Reds were left dissapointed. However, they should be delighted to see that in the table of broadcasting payments to clubs this season, Liverpool rank the first, gaining extraordinary £97.5m, even greater than that of Manchester City, which will substantially help them land several quality players this summer for their next season's campaign.

In contrast, at the end of last season, they just obtained £54.8m from braodcasting revenues. This significant surge does not solely happen to top rankers. Surprisingly, even Cardiff, the bottom club this season, earn more TV cash than champions Man Utd did in 2013. Why there is a dramatic increase in broadcasting revenue this season? And how is the TV income split and calculated? We’ll look for these answers soon.

First of all, revenue streams for a professional soccer club fall under three major headings: matchday income, commercial receipts, and broadcasting rights. The money a soccer club takes in on match day is the traditional source of revenue, consisting of money paid before the season by season ticket holders, ticket money from home and away fans, and hospitality packages. The commercial revenue mainly falls into three streams: sponsorship, merchandising, and some ancillary services. Compared to these two streams, broadcasting earnings have become increasingly critical to each club, especially for clubs at bottom of the table. The reason why this part has been also vital now is that Premier League signed new blockbuster contracts to sell broadcasting rights, which have brought unprecedented financial reward for clubs.

In June last year, Premier League owners announced new £3.018bn deal for domestic live rights with Sky and BT for the three seasons from 2013-14, with Sky paying £2.28 billion and BT paying £748 million. Meanwhile, Match of the Day highlights was bought by BBC for £178m. It is estimated that combined with overseas contracts, Premier League, the richest league across the globe, is about to get £5bn broadcasting fee altogether for the next three seasons, an increase from £1.773bn for the previous three-year deal. According to PREMIERLEAGUE.COM , all 20 Premier League clubs were paid around £1.56bn from broadcasting revenue this season, a 60 percent increment compared to the £972million of television revenue the previous season. So how is this large "pie" divided?

In general, £1.56bn income was firstly divided into overseas TV income, domestic TV income and central commercial revenue. As stated by official statistics, after this season, each club equally gained £26.3m for overseas TV income, with a total of £525.9m altogether, and each also equally earned £4.27m for central commercial revenue. Dividing the domestic TV income is a little bit more complicated than overseas one and central commercial earning.

In terms of this model, it takes into consideration three factors. 50% of the sum is shared equally by each club, 25%, the merit payment, is based on finishing position in the league, with £1.2m paid for every place a club finishes in the league, and the remaining 25%, the facility fee, is derived from the numbers of domestic live TV appearance, with £750 thousand paid for every appearance. For example, Manchester City, the champion of this season, got approximately £24m merit payment, as £1.2m for each place times 20 teams. Liverpool were televised 28 times in 2013-14, so they obtained £21m facility fee.

In sum, the Premier League is pursuing a more competitive manner to distribute the broadcasting income. We can tell this trend by the calculation that Liverpool’s broadcasting revenue is 1.57 times more than bottom earners Cardiff, a ratio which is the smallest in all Europe's top leagues. As a result, the gap between each club in the league, which has been funded much more evenly than before, has been much closer, with the Premier League becoming more and more exciting.