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What changes will the Premier League television deal bring?

By now everyone knows that the English Premier League has signed a blockbuster deal for broadcasting rights in the United Kingdom. The pact with Sky and BT will bring the 20 lucky clubs about £1.7 billion annually for three years starting after next season. It’s a huge sum – more than any other league earns – and an increase of more than 70 percent over the last three-year package. It’s also a windfall, since the clubs don’t have to change their operations or incur additional costs in order to get it. So where will all that money go, and how will it affect the game?

I can think of several uses for the cash, some more probable than others. Clubs could move it around to offer fans lower ticket prices. They could also invest in their infrastructure. The owners could extract the money as profits or allow it to pile up unused inside the club. Or they could share it with their employees, including the players, via wages and perks. Some of the money could also be used to pay transfer fees to other leagues, too.

Two concepts frequently cited in game theory – the arms race and multiparty bargaining – can narrow down the options. Clubs are in a perpetual arms race against each other, always trying to put better players on the field in order to win more matches and maintain their places in the Premier League and other competitions. A club that decides not to pay its players more after the new broadcasting deal starts will ultimately find itself dropping down the table. The exact amounts a club pays to its players will depend in part on bargaining power. The top players have a lot of it; there’s obviously only one Lionel Messi, yet there aren’t too many David Silvas or John Terrys available either. So these players – and the clubs that hold their contracts – are poised to grab a share of the windfall through wages and transfer fees.

For players outside of England, the prospect of coming to the Premier League will be more lucrative than ever. It’s likely that the overall quality of Premier League players will increase with the arrival of more international stars. If there were any doubt about this, consider that Sebastian Giovinco may be the highest-paid Italian player in the world. An influx of foreign talent could even stave off what may otherwise have been a damaging drop in England’s UEFA coefficient, which determines how many places its clubs have in European competitions.

Of course, the arrival of top foreign footballers will be bad news for their British counterparts. It’s fair to assume that almost all of the best British players already play in the Premier League, since so few of them ever go abroad. And there’s some anecdotal evidence that they command a premium among Premier League clubs, though the data might not always agree. Regardless, British players’ value will be lower relative to that of the incoming stars from overseas. The locals will have a harder time getting minutes, for good reason. The same thing may well happen to British managers.

If this shift encourages more British players and managers to leave the country, it may even help their national teams – all four of them – to improve. Common criticisms of British players and managers are that their tactics are outdated and they know only one way to play, leaving them at a loss when faced with different styles. Experience on the continent could enhance their flexibility.

A final change to watch for will be the effect on promotion and relegation. Clubs that leave the Premier League will receive “parachute” payments for three years to cushion the drop, but clubs that join the top division won’t receive extra money for years in advance (except for the minor “solidarity” payments agreed after the new broadcasting deal). This disjoint means that, in a few years, promoted clubs will face a much wider gap in quality than they currently do. Moreover, if a non-promoted club happens to get relegated, it will have a better chance of coming straight back up. The result will be more entrenchment and less variety of clubs in the Premier League.

Indeed, the Premier League could begin to look a bit more like the Champions League: more talent, and the same clubs appearing year after year. Wealthy English clubs may take home more European trophies, too, unless other leagues’ television packages manage to catch up. And all of this will ensure that the next blockbuster deal is bigger still.