speri.comment: the political economy blog

The ugly economy of the beautiful game: part I

The English Premier League, with the help of austerity, is destroying its own foundations

Craig Berry, Deputy Director at SPERI

Craig BerryThe recent news that Sky and BT will pay more than £5 billion to broadcast Premier League (the top division of English football) matches for three seasons – an incredible 70 per cent increase on the cost of the previous deal – has thrown a spotlight in the finances of our national sport.  There is so much wrong with the political economy of the Premier League that it’s difficult to know where to start.

This gigantic deal is a result of increased competition among broadcasters in the context of seemingly unquenchable demand for watching Premier League matches live on television.  Interestingly, both companies actually make a loss on their Premier League coverage; they use it to drive customers towards their more lucrative services, such as broadband.

It is the nature of the creation of the Premier League as a distinct commercial entity in the early 1990s, when the top clubs held a gun to the head of the Football Association (FA), which means that very little of this money will flow down into the lower leagues of English football.

The Premier League is founded on a very narrow, disembedded view of economic value.  The idea that only the private enterprises that make up the Premier League contribute to the goods for which consumers are paying ignores the social and cultural context within which elite football is located.

Football is not simply a consumer marketplace.  Premier League profits depend on the sport’s status as one of the country’s favourite pastimes.  The Premier League may be the pinnacle, but its success is founded upon the ability of millions of people to participate in and enjoy football in myriad ways. Football has, in fact, been described in Polanyian terms as a ‘fictitious commodity’ by David Kennedy and Peter Kennedy – by which they mean that supporters are consumers of football, but also its part-producers.

However, participating in football is becoming increasingly difficult.  According to The Independent, the Thatcher and Major governments’ privatisation drive led to more than 500 school playing fields being sold every year they were in office.  The sales continued under New Labour, whilst under the current coalition government a school playing field has been sold every three weeks.  More worrying is the potential long-term impact of local authority spending cuts.  80 per cent of amateur football is played on council-run pitches, yet many have fallen into disrepair, even as costs have risen dramatically.  Plummeting participation rates are the inevitable result.

We are fast approaching a situation whereby the intricate scouting networks of the big clubs are able to identify very young children, from around the world, that demonstrate considerable early footballing ability, while the rest of us are treated purely as customers.  Depressingly, the vast majority of those plucked from pre-pubescence will be discarded by the sport – and certainly the elite clubs – before signing a professional contract, albeit not before having their wider education significantly disrupted.  The Professional Footballers’ Association (PFA) does astonishingly little to help those who do not quite make it.  It parades itself as a trade union – it is even, comically, a member of the Trades Union Congress – but it is overwhelmingly funded not by footballers paying membership subscriptions, but, yes, you guessed, by a slice of the TV money!

We know that Premier League crowds have been becoming more affluent for a long time, due to sharp increases in ticket prices in the Premier League era.  Will Hutton has also warned that the increased pay-TV subscription fees that will now ensue will further alienate ‘ordinary’ fans from their local clubs.

If the top clubs continue to starve the roots of the sport of nutrition, quality (even at the elite level) will eventually decline – and so too will consumer demand.  My view is that we are already seeing evidence of this trend.  Far too many matches between top clubs are now quite tedious.  It does not help that these clubs are, increasingly, managed by a tiny stratum of elite managers, lessening the chance of new ideas being developed.  Watching football has almost become like watching a Hollywood blockbuster, where the celebrity of the leading actors, rather than the quality of the script, is the main draw.

Rescuing football from itself may depend upon disbanding the Premier League (and the Football League, for good measure), with the FA once again running the game for everybody, as a public good.  A far more modest proposal would be for a portion of the extra £2 billion the Premier League will receive from its next TV deal (half, for argument’s sake) to be placed in a FA-run fund to help to protect the sport at all levels of participation.

Yet the Premier League clearly sees itself as a global product, impervious to intervention by geographically-constituted political entities such as the FA or even the UK government.  Its chief executive, Richard Scudamore, has already answered such demands by declaring that the Premier League is ‘not a charity’, and that behaving as such would undermine the competitiveness of the league.

It should be noted that the Premier Leage clubs have agreed to ‘give away’ around £1 billion of their £5 billion windfall. However, this represents only a 40 per cent increase in the amount shared with the rest of the sport, while domestic TV revenue rises by 70 per cent. There is no suggestion that international broadcast rights, or revenue generated by participation in European competitions, will be shared. More importantly, the majority of this money will end up as ‘parachute payments’ to clubs relegated from the Premier League. Under my plan, all of this money would go to the lower leagues and the game’s grassroots. (I would advise anybody who loves football not to read this article in The Telegraph, which allows Scudamore to present the £1 billion giveaway as part of his personal mission to revitalise local and amateur football. The numbers being discussed are mere crumbs.)

Even if Scudamore’s interest in the competitiveness of the Premier League was genuine, the distinction he makes between charity and business is obviously far too crude.  The Premier League should support the sport’s grassroots precisely because they sustain the culture which makes Premier League football so attractive to domestic and international audiences, nurturing the supporters who in turn help to produce, as well as consume, the sport.  In the social economy of English football, redistribution has an impeccable business case.

Part II of this post will be published shortly.

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Categories: Economics, Inequality, SPERI Comment, Tax | Tags: , , , | Leave a comment

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