How much more will consumers pay to watch footie on the box?

Watching football on TV is growing painfully expensive and surely an indication of a market that is not working, writes Raymond Snoddy.

Football fans everywhere are winding themselves up for the start of the new Premier League season – and already money is sloshing around like there is no tomorrow.

To take just one example Manchester City has just spent £49 million on the 20-year-old England international Raheem Sterling – a record signing for City and for an English player anywhere. There will be a little trickle-down effect from the five-year deal to the Championship.

QPR, Sterling’s first boyhood club, will get £9 million because of a 20 per cent sell-on clause in his Liverpool contract.

The reason that Manchester City can spend such a sum on such a young player, apart from having rich owners, is of course television rights money.

City is probably so free with the cash because they are already dreaming of their share of this year’s £5.14 billion Premier League auction which takes effect from the beginning of the 2016/17 season.

The club, and all their rivals who will follow suit before the end of next month will be able to increase their transfer budgets because of the coming 71 per cent rise in the value of TV rights over three years.

You can be sure who will benefit from all this money, because as Sir Alan Sugar famously said, such deals are like prune juice and slip effortlessly through the system and into the coffers of the players.

It is equally certain who will pay – viewers and consumers – and some who may not be the slightest bit interested in football will almost certainly end up contributing too.

In June Sky put up its sports channel package by £1 a month taking it to £47 a month bringing forward its normal September rise, but its main family bundle which includes drama channel Sky Atlantic went up by £3 to £36 a month leading to suspicions that family bundle subscribers were helping to pay for the Premier League deal.

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You can be certain that Sky will take another bite at the cherry with more rises in June or September 2016. In the past BT has increased its home line rental and broadband charges well above the rate of inflation in what was seen as “a football” tax by some consumer specialists. More increases are likely with BT also taking on the cost of Champions League rights in Europe.

Cable group Virgin Media, which last year lodged a formal complaint against the Premier League auction process with communications regulator Ofcom, said that as a wholesaler of both Sky and BT football coverage it had to increase the cost of its Sky sports package by £2 a month lifting the cost to £29.25 a month.

Is there a better way of doing all of this and does Virgin Media’s claim that the Premier League’s behaviour is anti-competitive and damages the interests of consumers have any chance of success, either retrospectively, or at the very least in the next bidding round?

The financial facts do not appear to be in dispute. British viewers pay more than double those in Germany, Spain or France to watch football and see just over 40 per cent as many matches. In those countries all the top league’s games are broadcast compared with 168 out of a total of 380 games in the UK.

The main argument against is the effect on attendances – but this fear seems overblown. Premiership stadia are full even when games are being broadcast live and for the top teams tickets are always hard to come by.

But would more broadcast games hit attendances for the lower leagues? If you are a Fulham or QPR fan those are the teams you want to watch and Aston Villa v Southampton is pretty irrelevant.

The solution could be easy. Increase the number of Premiership games season-by-season across the deal and monitor the effect and stop the process when there is actual evidence of damage.

Virgin’s other main ask is that at least some games should lose broadcast exclusivity – as happens in the rest of Europe – and would be shown on both Sky and BT.

It seems a nice idea in theory, though it is the desire for complete exclusivity that is the main driver of rights inflation for good or ill. The money helps create one of the most exciting leagues in the world while at the same time pricing an increasing number of fans out of being able to watch the game either live or live on television.

Further interference with the television rights of the Premier League by regulators will cause howls of protest and threats of legal action but what is clear is that the present situation seems unsustainable in the longer term. Can a 70 per cent price inflation every three years as Sky and BT battle it out to the death really continue into the future without ultimately damaging both the game and the rights?

It is difficult to think of any service that has seen such price inflation in recent years, surely an indication of a market that is not working and is merely handing on monopoly prices to the consumer.

Can Ofcom do anything to alter the behaviour of such powerful entrenched interests? Well yes, it can, and is showing it is at least being prepared to do so should the facts warrant action.

Ofcom took on the complaint for further investigation and while it decided to turn down the Virgin request to postpone the auction, the main reason given was that as there was still 17 months before the start of the new deal there was still plenty of time to take action if it was judged necessary.

Ofcom could also take retrospective steps to vary the terms of the auction even though it seems very unlikely that the whole process could be re-run.

Ofcom is carrying out its own consumer research to canvass the views of fans who attend matches and those you pay to watch live games on television, as well as talking to clubs and broadcasters.

It is unlikely that it will throw up much that is different from existing research – such as that by Kantar Media that showed that the main reason viewers had cancelled sports subscriptions in the past five years had been cost and that among interested fans 83 per cent said the price was preventing them from subscribing.

Against such a background it would be verging on the bizarre if Ofcom decided that everything was just fine and that no further action was to be taken.

Regulators are strange beasts. They agree to look at an issue and then appear, apart from an occasional spartan update note, to go into hibernation until one day they suddenly pop up with a ruling.

This one should at least increase the number of live games on offer now and look at ways of changing the brutal structure of the auction process next time around so that consumers do not continue to suffer such disadvantage as a result.

The league could also voluntarily take action to ensure that at least a number of games a season are available on free-to-air television to keep its “product” before the general population.

A serious issue is coming to the boil here and the clubs would be well advised not to spend all the £5.14 billion in advance.