This thesis will provide the reader with a good understanding of the economic forces in the modern sports industry with a focus on European Football. The reader will be introduced to the most common measures of Competitive Balance and the existing literature on the topic. Equipped with this knowledge, the paper takes the reader on a recap of the European top leagues history with a focus on the Competitive Balance beginning in 1980. The final chapter then provides an econometric deep dive into the data for the Bundesliga.
The commercialization of European football strongly accelerated in the early 1990s and brought tremendous revenue increases to the industry. Rapidly, broadcasting revenues became the clubs’ main source of income. Some professional football leagues jointly sell their teams broadcasting rights as bundles and share the incomes with a certain degree of solidarity among them. This study tries to find evidence for the positive impact of such revenue sharing agreements on the competitive balance in Europe’s strongest football leagues. Therefore, a newly developed measure is applied, which contains combined information about leagues absolute level of competitive balance as well as relative changes in standings over time. The results of the study mainly speak in favor of an enhancement of solidarity among teams, because of its positive impact on competitive balance and thus on a leagues attractiveness to customers.
Table of Contents
1. Introduction
2. Related literature
2.1 Theory and relevance for today’s sports industry
2.2 Previous research on competitive balance
2.3 Why case study on the Bundesliga?
3. Measurement of competitive balance
3.1 Measures of competitive balance
3.1.1 Standard deviation of winning percentage
3.1.2 The Herfindahl-Hirschman Index
3.1.3 The Competitive Balance Ratio
3.1.4 Top k ranking
3.1.5 Requirements for comprehensive measures of competitive balance
3.2 The Surprise Index
3.3 Data
4. Development of competitive balance for European Top leagues
4.1 German Bundesliga
4.2 Other European top leagues
5. Revenue sharing in the Bundesliga
5.1 Econometrical analysis
5.1.1 1980/81 – 2017/18 regression models
5.1.2 1992/93 – 2016/17 regression models
5.2 Results
5.3 Policy recommendations
6. Conclusion
Research Objectives and Thematic Focus
This master's thesis examines the impact of revenue sharing agreements on the competitive balance within European professional football leagues. Specifically, it seeks to determine whether financial solidarity mechanisms, such as collective broadcasting rights, positively influence the league's competitive equilibrium and consequent attractiveness to fans, with a primary focus on the German Bundesliga.
- The theoretical relationship between revenue distribution and competitive balance.
- Evaluation and application of existing measures and the development of the "Surprise Index".
- Empirical case study of the German Bundesliga's competitive environment over time.
- Econometric analysis regarding the effect of broadcasting revenues and Champions League rewards.
- Strategic policy recommendations for sports league governance.
Excerpt from the Book
The Surprise Index
Inspired by the SI presented by Groot and Groot (2003), this study applies a modified version of the original. This section first explains the setup of the index used. Subsequently the reasons for the change in the setup compared to the original SI will be motivated.
A football match in which the clear favorite beats the underdog as expected in advance, is assumed to be quite unexciting for the neutral spectator (Cairns et al. 1986). If the gap between the teams within a league is high, events like this will take place in most of the games. Such a league would be characterized as being one of low CB. For the neutral spectator however, an unexpected win or a draw by the underdog against the favorite can be an exciting event. This kind of suspense is assumed to be important for a league’s attractiveness to its consumers. Therefore, the applied index in this study calculates the CB of a league based on the number of such surprising events, as well as their degree of unexpectedness.
Summary of Chapters
1. Introduction: Presents the motivation for the study, focusing on the increasing financial inequality in European football and the hypothesis that revenue sharing fosters competitive balance.
2. Related literature: Provides an overview of the uncertainty of outcome hypothesis (UOH) and evaluates existing research on revenue sharing mechanisms like individual club ownership vs. rights pooling.
3. Measurement of competitive balance: Reviews common standardized measures like the Herfindahl-Hirschman Index and introduces the "Surprise Index" as a novel tool for measuring competitive outcomes.
4. Development of competitive balance for European Top leagues: Offers a descriptive analysis of the Surprise Index for the Bundesliga, Premier League, Serie A, and La Liga from 1980/81 to 2017/18.
5. Revenue sharing in the Bundesliga: Conducts an econometric analysis using regression models to test the impact of national broadcasting revenues and Champions League rewards on the competitive balance in the German league.
6. Conclusion: Summarizes the study's findings, highlighting the positive impact of national revenue sharing on competitive balance while acknowledging data limitations.
Keywords
Competitive balance, revenue sharing, Bundesliga, Surprise Index, Uncertainty of outcome hypothesis, sports economics, broadcasting rights, European football, econometric analysis, league attractiveness, financial solidarity, Champions League rewards, rights pooling by the league, UOH, professional sports.
Frequently Asked Questions
What is the core subject of this thesis?
The thesis investigates the relationship between financial distribution models in professional football and the resulting competitive balance within these leagues.
What are the primary themes discussed?
Key themes include the uncertainty of outcome hypothesis (UOH), the economics of different broadcasting rights systems, and the empirical measurement of match outcomes via a newly applied Surprise Index.
What is the main research question of this study?
The research asks if revenue sharing agreements in European football, specifically within the German Bundesliga, contribute positively to the competitive balance of the league.
Which scientific methodology is employed?
The author uses a combination of descriptive longitudinal analysis and empirical econometric regression models, including OLS and ARIMA specifications.
What topics are covered in the main section?
The main section covers the theoretical framework, a detailed explanation of the Surprise Index, a descriptive timeline of four major European leagues, and a rigorous econometric testing phase using German domestic data.
Which keywords characterize the work?
The work is characterized by terms such as competitive balance, revenue sharing, sports economics, the Surprise Index, and football league management.
Why focusing specifically on the German Bundesliga?
The author argues that the Bundesliga is the most suitable candidate for testing these hypotheses because its unique regulatory environment (50+1 rule) and relatively transparent revenue structure provide a clearer data set than other commercialized leagues.
How is the "Surprise Index" defined in this study?
It is defined as a ratio identifying the degree of surprising match results based on historical standings, effectively measuring suspense and unpredictability in sports leagues.
What is the main finding regarding Champions League rewards?
The analysis suggests that Champions League rewards often disproportionately benefit a small group of teams, which can act as a counter-force to revenue sharing and negatively impact domestic competitive balance.
- Arbeit zitieren
- Martin Hartleib (Autor:in), 2018, Competitive balance and revenue sharing in European football. Some novel insights, München, GRIN Verlag, https://www.grin.com/document/1360581
