Football giants aim for the net

With the big clubs facing huge debts, the economics of live internet football are compelling, writes RICHARD GILLIS

NOT LONG ago, travelling England football fans were heard to chant “We hate Setanta”, in protest at the lack of access to international matches on British terrestrial television. This weekend the same fans are left to vent their spleen at a new enemy: “We hate the internet”, perhaps?

On Saturday, England play a World Cup qualifier against Ukraine that will be available to watch live only on a pay-per-view basis via newspaper and other websites. Viewers will be charged between £4.99 and £11.99 each, depending on when they sign up, while subscribers to Bet365 will be offered the game for free. The organisers say the number of subscribers will be limited to one million to ensure the UK’s broadband capacity is able to cope. But, according to analysts, this figure is wildly ambitious, with the highest ever viewing on the internet thought to be 50,000 for a Serie A game.

The England-Ukraine game was originally bought by Setanta Sports for £5 million (€5.4 million), but the rights then reverted to the Kentaro agency acting on behalf of the Ukraine Football Association, which, as the home team, owns the rights for the game.

With Setanta now gone and England having already qualified for the World Cup in 2010, the BBC bid £1.5 million, which fell below Kentaro’s stated minimum of £2 million and was thus rejected. In the absence of any other contenders, the agency chose the web option. “This is the future of premium sports content”, said Kentaro’s chief executive Philipp Groeth this week, a sentiment shared by a number of people in the sports business.

Until recently, major sports rights holders such as the IOC, Fifa, Uefa and the Premier League have tended to bundle their internet rights into the broadcast packages, conscious of cannibalising its core TV revenues. Similarly, broadcasters such as Sky and ITV saw web streaming as a leak to the exclusivity arrangements, for which they had paid top dollar. “ITV had Champions League broadband rights for years but have not done anything with them,” says Iolo Jones, whose company Rights Tracker packages sport content for the web.

He says the growth in the market for internet sports tends to come from international, or “out of territory”, rights. In the last round of negotiations, the Premier League received just over £74 million from the sale of mobile and internet clips, with the majority coming from overseas. Malaysia is the largest overseas contributor, paying about £5 million.

This new market has been created by changes in viewing habits. A survey carried out by Mindshare Performance, part of Sir Martin Sorrell’s WPP Group, found that while British and Irish fans prefer to watch sport on TV at home or in the pub, most Chinese watch it on their computers and the majority of Indians prefer to use their mobile phones.

Lay that insight across the popularity of European football and the fortunes currently earned by the big clubs seem modest by comparison. When Everton and Manchester City both fielded Chinese players (City’s Sun Jihai and Everton’s Li Tie) in a game in January 2003, it was shown live on state television in China, billed as a “Chinese Derby”, and watched by an estimated audience of 350 million people.

But since its inception, the Premier League has sold its TV rights collectively, then shared the money between all 20 clubs. This is done first in the domestic market, then repeated overseas and it is this TV money that has fuelled the football boom and currently represents half of total income for most English clubs, up from a quarter in 2005. In the 1991-92 season, the one before the Premier League was formed, TV money provided just 9 per cent of turnover (figures from Deloitte).

With the big clubs racking up huge debts, the economics of live internet football appear compelling, according to Phil Carling, head of football at sports agency Octagon. “If Manchester United played in front of 70 million people on a global level, and each of them paid £1, that’s £70 million a game. It changes the business model at that moment.”

But while internet sport may yet be the future, the present is more mundane. Tomorrow's game kicks off at 5.15pm and so encroaches into the fiercely competitive environment of Saturday night television. For the commercial stations, such as ITV, the issue came down to who could be relied on to sell more advertising: John Terry's England team versus Harry Hill's TV Burp? No contest.