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Media revenue sharing as a coordination device in sports leagues

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  • Peeters, Thomas

Abstract

Because sports clubs jointly produce sports competitions, the quality of these competitions is determined by the talent investments of all clubs involved in them. Operating as legal cartels, sports leagues may try to coordinate talent investments in order to maximize profitability. In this paper I analyze the ways in which sharing mechanisms for collective media revenues may serve this goal when demand comes from differentiated consumers. Performance-based sharing turns out to be an inefficient sharing mechanism for the league. Such inefficient cartel behavior may be rationalized as the result of bargaining with asymmetric outside options.

Suggested Citation

  • Peeters, Thomas, 2012. "Media revenue sharing as a coordination device in sports leagues," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 153-163.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:153-163
    DOI: 10.1016/j.ijindorg.2011.07.004
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    References listed on IDEAS

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    1. Szymanski, Stefan, 2001. "Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer," Economic Journal, Royal Economic Society, vol. 111(469), pages 69-84, February.
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    3. David Forrest & Rob Simmons & Stefan Szymanski, 2004. "Broadcasting, Attendance and the Inefficiency of Cartels," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 243-265, May.
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    8. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 833-862, September.
    9. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    10. Palomino, Frederic & Sakovics, Jozsef, 2004. "Inter-league competition for talent vs. competitive balance," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 783-797, June.
    11. Donald G. Ferguson & J. C. H. Jones & Kenneth G. Stewart, 2000. "Competition Within A Cartel: League Conduct And Team Conduct In The Market For Baseball Player Services," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 422-430, August.
    12. Lawrence M. Kahn, 2007. "Markets: Cartel Behavior and Amateurism in College Sports," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 209-226, Winter.
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    Citations

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    Cited by:

    1. Oliver Guertler & Markus Lang & Tim Pawlowski, 2011. "On the Release of Players to National Teams," Working Papers 0046, University of Zurich, Center for Research in Sports Administration (CRSA).
    2. repec:bla:scotjp:v:64:y:2017:i:1:p:88-114 is not listed on IDEAS
    3. repec:bla:coecpo:v:36:y:2018:i:1:p:215-233 is not listed on IDEAS
    4. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists;North American Association of Sports Economists.
    5. Budzinski, Oliver, 2017. "Sind Wettbewerbe im Profisport Rattenrennen?," Ilmenau Economics Discussion Papers 104, Ilmenau University of Technology, Institute of Economics.
    6. Budzinski, Oliver, 2017. "Market-internal financial regulation in sports as an anticompetitive institution," Ilmenau Economics Discussion Papers 110, Ilmenau University of Technology, Institute of Economics.
    7. Yvon Rocaboy, 2017. "Competition Among National Football Leagues. Does It Exist? Should We Regulate?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(1), pages 88-114, February.
    8. Egon Franck & Markus Lang, 2014. "A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(4), pages 430-454, September.
    9. Budzinski, Oliver, 2017. "Four cases in sports competition policy: Baseball, judo, football, and motor racing," Ilmenau Economics Discussion Papers 109, Ilmenau University of Technology, Institute of Economics.
    10. Budzinski, Oliver & Müller-Kock, Anika, 2016. "Market power and media revenue allocation in professonal sports: The case of formula one," Ilmenau Economics Discussion Papers 102, Ilmenau University of Technology, Institute of Economics.
    11. Steven Salaga & Alan Ostfield & Jason Winfree, 2014. "Revenue Sharing with Heterogeneous Investments in Sports Leagues: Share Media, Not Stadiums," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 1-19, August.

    More about this item

    Keywords

    Cartel behavior; Revenue sharing; Sports leagues; Media rights;

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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