National Dominance in European Football Leagues
AbstractProfessional team sports generate indivisible joint-products. Neale (1964, p.2) captures this interrelatedness in the following sentence: ‘pure monopoly is disaster’. Or in short: teams need each other to produce games. Rottenberg (1956, p. 242) mentions that “The nature of the industry is such that competitors must be of approximate equal ‘size’ if any are to be successful”. The notion of competitive balance is founded upon this idea: for an attractive championship teams should not excel excessively in playing strength. In the media and the professional sports sector this idea of competitive balance receives significant attention and underlies many sports policy decisions. In Sports Economics as well competitive balance is at least relevant. Over the last four decades several events occurred that can be considered to have had an impact on competitive balance. More specifically they affect the dominance of ‘large market’ teams. We define such teams as those located in a large city combined with a large fan base. Such imbalance is what Kesenne (2004) calls a ‘bad’ imbalance. We theoretically research the impact of some major changes that caused important shifts in the revenue functions. We construct a two league –four teams model and include the market, local and national, as major determinants of the revenue functions of teams. We determine the choice of talent under both the win maximizing as the profit maximizing objective. The difference in win percentages is used to measure the competitive imbalance. We calculate the total demand function for talent and intersect it with an elastic supply formalized into a simple linear supply function. The resulting equilibrium wage is discussed where possible. We discuss three scenarios based on three successive periods in European football leagues. All periods are introduced by important changes generally discussed to influence dominance. We start from a benchmark scenario with a closed labour market in which ticket sales, based on the local market are considered to constitute the main income source. The sale of broadcast rights combined with shirt sponsoring introduces the second period. In most countries this new era began at the end of the 70ies and early 80ies. Both increased revenues substantially and are highly interrelated. Live matches persuaded sponsors to invest in the teams as well as in commercial blocks on tv. Sports fans were now able to enjoy live games of teams located in another part of the country so that the market of supporters increased with a part of the national market. The third period is marked by a combination of three events. Jean-Marc Bosman, a professional Belgian football player, changed the labour market in professional team sports at the end of the nineties. He went to court to oppose against the transfer ruling. The European Court of Justice ruled that the transfer system concerning the European international football players violated the free movement of workers constituted in Article 48 of the ECC treaty. Following the verdict of 15 december 1995, the European Commission abandoned the policy of transfer restrictions and abolished the rule to limit the number of foreign players fielded as well, giving rise to a new chapter in the European football history: a more open and competitive labour market. The abolishment was in the middle of the season and the real impact on the acquirement of talent can be assumed to begin at the earliest in season 1996-1997. In 1997 the Champions League (CL) changed its selection criteria and its revenue distribution. The ‘market pool’ came into use, designating the revenue that is divided based on the national tv-market. Teams from countries with a larger market receive a larger share. This makes it possible that a CL champion receives a lower income than teams that ended lower in the ranking. Porto for example received in 2003-2004 € 19 million while runners-up AS Monaco FC received € 26.4 million. (Uefa.com, 8 June 2004) Even though the CL, named the Champions Cup before 1992, has an extensive history of adaptations, we consider this change as the most important one to substantially influence the dominance of teams in the national competition. With the deregulation of the television market, the competition for broadcast rights intensified. Among other things, this boosted the broadcast revenues considerably. The introduction of digital television at the end of the nineties can be assumed to be the start of a continuing boom of broadcast rights and so influences the third period as well. We provide a first empirical verification by constructing a measure that incorporates the identity of teams to focus on large market teams. Two European football leagues, England and Belgium are briefly discussed. In our conclusion we provide an overview table and discuss some future research topics.
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Bibliographic InfoPaper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2006028.
Length: 34 pages
Date of creation: Nov 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-20 (All new papers)
- NEP-EEC-2007-10-20 (European Economics)
- NEP-SPO-2007-10-20 (Sports & Economics)
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- Stefan Kesenne, 2007. "The Peculiar International Economics Of Professional Football In Europe," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(3), pages 388-399, 07.
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