A focus on broadcasting revenues and their impact on European clubs’ EV

We have been looking at the summary of the European top clubs' Enterprise Value as provided by KPMG. We further continue with the size and the impact of a competition’s broadcasting revenues and their distribution method are captured in their proprietary algorithm, as they play a fundamental role in the income generation potential for Europe’s elite football clubs.

KPMG Football Benchmark Aggregate EV and aggregate broadcasting revenues of top 32 clubs showed profiting from a sizeable and relatively wealthy population, broad commercial appeal, a large and mature pay TV market, especially the fierce competition between Sky and BT, boosting the English Premier League (at GBP 1.7 billion/season for 2016-2019) to comfortably top the charts, with the most valuable domestic media rights deal.

Behind the Premier League, albeit under very different scenarios, are Spanish LaLiga and Italian Serie A. Both stand to generate approximately EUR 1 billion in domestic broadcasting revenues in 2016/17.

In the case of LaLiga, says the report, this sum represents a 65% year-on-year increase over the 2015/16 season, the league’s first season selling its media rights on a collective basis. Aiming for a distribution ratio below 4:1 this season (5:1 ratio in the 2015/16 season), LaLiga’s new system equally distributes half of the available funds and assigns the rest according to a club's performance (25%) and popularity (25%).

"Therefore, while Real Madrid CF (2nd on KPMG’s EV ranking) and FC Barcelona (3rd) will still receive a larger revenue share than their peers, clubs with large fan bases, such as Atlético de Madrid (13th) or Sevilla FC (27th), are expected to profit from this system in the coming seasons."

By contrast, Serie A’s next media cycle (2018-2021) is expected soon.The league previously benefited from intense competition (Sky/Mediaset) to strike a record deal, which currently accounts for more than 80% of its total broadcasting revenues.

The report goes further to say that, in Germany, the Bundesliga’s expiring agreement, impacted by Sky’s dominant position and the country’s low penetration rate of pay TV, has historically kept the German league (at EUR 628m/season for 2013-2017) behind its European counterparts. 

The Bundesliga recently recorded an increase of 85% in the value of its domestic rights, from which member clubs will potentially derive significant profits from next season (EUR 1,160m/season for 2017-2021).

French and Turkish clubs are now even further away from the industry leaders which may lead to an even wider gap in total revenues and EV in the medium-term.

Having promoted their product and projected a consistent brand for longer than any other football league, the Premier League’s popularity on the global stage is unrivalled. 

The Premier League dominates key markets in Asia and North America and its international media rights are now more valuable than the domestic rights of any of its European counterparts.

Premier League distributes international revenues equally among its members, which helps to position English clubs among Europe’s most valuable ones.

LaLiga already spreads kick-off times and schedules major football fixtures to maximise international audiences and will soon follow the Premier League in launching a 24/7 English channel for international licensees.

The Bundesliga is currently restructuring its international operations and has intensified its efforts in foreign markets with the recently-reported five year agreement (USD 272 million for 2018-2023) with Chinese broadcaster PPTV suggesting the league is starting to reap some rewards. 

Under its motto “Football as it’s meant to be”, the league’s international revenues are expected to continue growing in the mid-term, albeit they are likely to stay behind Premier League and LaLiga.

What is your take on the figures?