In this paper, the discussion of financial crisis across Europe and the value of sports on TV have been discussed. The paper is based on the argument that the crisis in Europe will affect the value of sports on Television. Television broadcasting of sport events is a significant trend, which has provided a million of people with an access to TV viewers from different parts of the world. The emergence of new technology of information and communication has allowed Television channels to transmit events at any moment. In this paper, it has been agreed that the European financial crisis will eventually decline the value of sports in Europe.
Economic Crisis in Europe
The financial crisis hit the global economy in the summer of 2007. The size and extent of the global economic crisis are exceptional. The consequences of the crisis are in the form of soaring prices of assets, low risk premiums, and the development of real estate bubbles. The crisis has increased the vulnerability of different institutions. Currently, the governments and central banks are well aware of the need to avoid policy mistakes because these mistakes could be costly (Barnett, 1990, pp. 62). The financial crisis of Europe has influenced different sectors; one of which is sports. The impact of financial crisis on sports is in the form of declined popularity of sports on television.
Sports Broadcasting in Europe
Sport events attract finance from the media, particularly television. Television has the potential to reach large audiences. It also offers the promise of publicity. In order to broadcast a sports event on television, it is important to acquire the rights of transmission. The current networks of private networks have increased the cost required to acquire transmission rights. The value of TV rights has been increasing in Europe. The rights of transmission account for as much as 40% of the income of the Atlanta Games and 34% of Barcelona Olympics. This demonstrates the high cost of television broadcast of sports event. The deregulation of broadcasting in France resulted in a fierce bidding between football coverage networks (Ginesta & Sopena, pp. 51).
The increased cost and regulations on television broadcasting have raised several policy questions. The policy questions are associated with content issues as well as competition. The exclusivity agreements to broadcast sports events may deprive the public from the media coverage of sports. Consequently, the conditions for selling and buying media rights have been shaped by policy authorities (Goldhammer, 2006, pp. 33). The upstream broadcasting markets allow sports organizations to sell rights to media companies and broadcasters.
The sports broadcasting in Europe has adopted some of the features of the United States model (Ballinger, 1981, pp. 56). However, the major differences between Europe and the United States continue to exist. The fragmented public policies and market conditions vary across different states in Europe. The most significant different between broadcasting in Europe and the United States is of Public Service Broadcasting (PBS). In the United States, PBS channels occupy a marginal market position. These channels are not involved in sports coasting. The state-funded Public Service Broadcasting played a significant role in sports broadcasting. From 1990s onwards, there has been a shift away from the free-to-air PSBs to pay television channels. The service providers have acquired expensive domestic football rights (Harbord & Binmore, 2000, pp. 21).
In European sports broadcasting, football (i.e. soccer) is a popular sport because of higher ratings of viewers. Television sports are very popular in Europe. Sports are subjected to several regulations of the EU. As a result, the competition regulations of Europe have developed the conditions for selling and buying sports media rights. The broadcasters of sports events in Europe are faced with significant economic crisis. Therefore, it is unclear whether public broadcasters have an important role in the future of sports rights market.
According to Barnett (1990), television supports and dominates sports. Television also plays a vital role in the globalization of sports. For instance, baseball is popular in America, cycling is popular in France, and Sumo in Japan. Television has fueled the sporting fashions and introduced audience across the world. Television is considered a valuable tool used for generating interest in sports. However, the relationship between sports, television, and sponsorship is problematic (Hoehn & Lancefield, 2003, pp. 552).
Cave, Robert, and Crandall (2000) argued that the increased popularity of sports on television events in the United States and Europe had a significant impact on the broadcasting sectors and sports. The population of Europe exhibits differentiates tastes for sports participation. In the large countries of Europe, professional soccer is considered the most commercialized sports (Andreff and Szymanski, 2006, pp. 19).
Sports leagues have been organized on hierarchical basis with relegation between upper and lower divisions. The pattern of cable in Europe has imposed a strong broadcasting system, which is replicated in many European countries. The payments for sports rights by broadcasters are skewed in the favor of live soccer rights. In major European countries, televised soccer dominates sports programming. There are several differences among different European countries in terms of the sales of domestic leagues (Horne, 2006, pp. 100).
The sales of rights to sporting events in Europe are controlled through a specific form of regulation. The right holders to these kinds of events must offer free-to-air broadcasters with universal coverage. Once these requirements are satisfied, additional rights are sold to pay broadcasters. This procedure also recognizes that sports programming is characterized by inelastic demand curve, which yields greater revenues.
During the last twenty years, professional sport has grown into a business and has attracted attention from investors, lawyers, and regulators. The commercial and cultural disputes require a sophisticated economic analysis. In Europe, the rights of Champions League are sold by UEFA. These rights are sold on behalf of football clubs participating in the league. The joint selling of rights has restricted competition among football clubs. Television rights are the most important revenue source of professional sports clubs in Europe. Broadcasters need sports programming in order to drive television advertising (Szymanski, 2010, pp. 15).
The two major issues in the literature on television and sports include the monopoly of broadcast rights and the collective or individual selling of sports broadcast right. In large football leagues of Europe, the major soccer clubs have the right to sell the television rights of their television shows. In Europe, the national league games are broadcasted at a high subscription fees. The field of sports and the media is dominated by two markets include the market of television rights and the market of televised sports. The market of television sports include clubs, which are on the supply side, and broadcasters, which are on the demand side. In the market of televised sports, the broadcasters are on the supply side while spectators are on the demand side.
The broadcasting of sports is highly regulated. The broadcasting of sports events on television is influenced by policies of national and supranational government. The policies are also influenced by regulatory authorizes and competition. The impact of policies on television broadcasting of sports events is in terms of quality, quantity, and the price of televised sport across Europe and the United States. The interventions from the government also have an impact on the structure and management of sports. The most significant policy issues that affect the broadcast of sports events include long-term contracts, vertical integration, collective selling, and other pressures.
Europe is going through a period of financial crisis. The unemployment rate in the continent has been increasing. The financial crisis of Europe suggests that the broadcasters in Europe will not be able to afford TV rights for future matches. Sports broadcasters in different countries of Europe are struggling to broadcast sports on television (Szymanski, 2010, pp. 13).
The relationship between the popularity of sports broadcasting on television and European financial crisis can be understood through the European model of public and private sports financing.
European Model of Public and Private Sports Financing
In Europe, the structure of sports finance is same as it was in the year 1990. A major portion of financing that flows into sports broadcast comes from household income. Therefore, it can be said that household money is a direct source of sport financing. The household income is associated with sports broadcast in the form of paying-per-viewing a TV sport broadcast. Sport and household income is also related in terms of indirect finance for sports when households spend money on purchasing sport goods. It is because the producers of sport goods are great sponsors of sport on television. Television channels finance sport through different broadcasting rights. The recessionary period in Europe has largely affected the broadcast of sports on television. Recession has affected advertising budget of different enterprises. This phenomenon is likely to reduce the ability of TV channels to broadcast sport events.
It seems that TV channels will renew their broadcasting contracts in order to continue with sports broadcasting on Television. The channels including TF1 and Canal+ have already renewed their contract with UEFA to broadcast Champions League matches at a lower price i.e. €25 million per season. The financial crash in the United Kingdom, Germany, and Spain has also affected the broadcasting of sports on television.
The financial crisis in Europe has significantly influenced European football. In the late 1990s, European football entered a financial crisis. Football clubs in Europe are in a ferocious circle between different broadcasting rights with TV channels. The broadcasting rights require negotiation for higher TV rights, which result in club deficits. The too much dependence on television has increased the intensity of financial crisis in Europe. The value of broadcasting rights for sports event in Europe is estimated to be more than 60 billion.
The market for television broadcasting of sporting events is global. The big sport events are broadcasted in 170 to 200 countries. The sport broadcasting market, in Europe, is divided into different forms including monopoly and oligopoly. Monopoly is one in which the organizer supplies the sport events to competing Television channels. In the monopoly market, prices are relatively high. The broadcasting rights are expensive and revenues are big. Another type of market is oligopolistic market. In the oligopolistic monopoly, event organizers come across very few potential buyers, which also include TV channels. The price of broadcasting rights is quite in this market form because of the current situation where the TV channel monopolizes the demand side of the domestic market.
All over Europe, a decline in the popularity of sports has been observed. There are only a few games that are still attracting a large target audience. The cost of television broadcasting has been increasing which has forced major television channels to extend the length of a sports event. A 90-minute match usually takes a large portion of broadcast time including a number of advertisements, which allow TV channels to cover the huge cost of television broadcast.
Although sports event are broadcasted by many sports channels, only a few of these channels broadcast events of high quality. The declining quality of sports is reaching a point where the viewers of television have started to lose interest. There has been an increase in the number of Television channels that are competing with each other in order to gain broadcast rights. The Television channels are competing with each other’s for the broadcasting rights of sporting events such as football games.
A large number of television channels are now on the verge of reaching the economical ‘pain barrier.’ This barrier has already been reached by many commercial channels. One of the consequences of the high cost of sports transmission is that major Television channels are focusing on the most important events such as Football’s Champions League. The financial crisis of Europe and the increasing cost of Television broadcast have made it difficult for Television channels to broadcast the less popular sports events. The lack of exposure to different sports event will further decline the popularity of sports events on Television. The public EV channels in Europe have secured the rights to cover sporting events in the future (Iosifidis, Steemers & Wheeler, 2005).
Sports Broadcasting Analysis of Major European Countries
The major European countries where sports events are organized include Spain, England, and Germany. Spain has the most comprehensive and expansive television coverage of sports. The country has the highest cost per pay-TV viewer i.e. 180 Euro. The best earning clubs in Europe include Read Madrid and FC Barcelona. The coverage of sports events in England is poor. The television broadcasting of sport events is early and late. In England, households provide financing to the top five leagues. England has the highest TV pay revenue in Europe. The television coverage of sports events is free in Germany. The financing to sports events in Germany is provided by 30% of households (Evens and Lefever, 2011, pp. 33).
Briefly, it can be agreed that the financial crisis in Europe will reduce the popularity of sports on Television. The sports broadcasting in Europe is already subjected to a number of regulations. The current crisis has increased the pressure on broadcasters and limited their ability for high quality broadcasting events. As a result of increasing pressures, television channels are only broadcasting a number of popular sports. The popularity of sports on television has been decreasing because of a reduction in the broadcast of different sports events. Since only a few sports events are broadcasted on television, their popularity has been decreasing constantly.
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