Assignment

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ULMS370
The Football Business
“Uefa report showing how Competitive Balance in European
Football Leagues has changed over the past 20 years and
what can be done in response to this issue”
Student Number: 200922668
Thursday 17th
March 2016

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Contents Page
1. Introduction 3
2. Competitive Balance 3
a. League Title Dominance 4
b. Financial Differentiation 5
c. Lorenz Curve and Concentration Index 5
d. Standard Deviation 6
3. Reducing Competitive Inequality 7
4. Conclusion 8
5. Bibliography 9
6. Appendix 11

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1. Introduction
The European football market of today is recognised as a multi-billion dollar industry, where
super rapid revenue growth reaching 54% since 2006, has established the European Football
Market Value at 20 billion euros (Jones et al., Deloitte, 2015). Importantly, Domestic leagues
represent a significant percentage of European footballs total revenue, in particular the ‘big
five’ European leagues in England, Spain, France, Italy and Germany which combined
generate revenues of €11.3 billion, 57% of the European Football Markets Value (Jones et al.,
Deloitte, 2015). Therefore, the European Football Industry, which attracts 3 billion viewers
every year and occupies 3% of all the worlds trade (Szymanski, 2010) is heavily dominated by
20 teams situated across 5 leagues (Moore and Massoudi, Financial Times, 2016). With this in
mind, the report will be focusing predominately on both the EPL, which is the richest Football
League in the world with a market value of 3.3 billion euros (Bourke, Independent, 2015) and
La Liga BBVA which hosts both Barcelona and Real Madrid, the two richest football teams in
the world generating revenues above 550 million euros annually (Winter, Telegraph, 2015).
As both Football Leagues continue to grow at a rate much faster than their individual
economies the report will investigate the current level.of.competitive.balance.across both
Leagues and compare these findings with the Leagues competitive structures 20 years ago,
focusing on how the superior growth of the most successful football league teams has seen a
decline in the competitive balance across both football leagues. Also the report will then look
at the strategies used by the Football Associations to try and promote greater competitive
equality across their leagues, looking at what they could do differently to develop their
domestic football brand further.
2. Competitive Balance
In the EPL and Spanish La Liga over the last 20 years there has been a decline in competitive
balance between the teams finishing at the top of the league compared to teams at the
bottom, recognising that the top teams currently endure long-run domination which is
supported by the increasing standard deviation results of both leagues points totals, showing
that the gap between the Top 4 teams especially and those finishing below them is becoming
more widespread.

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2a. League Title Domination
According to Curran et al (2009) competitive balance across the English Premier League is in
decline, recognising that when a team achieves long-run domination, shown by Manchester
United with 13 league titles out of a possible 23 (Figure 1a.), competition to win the title
becomes less intense, resulting in the dominant team enduring a superior market share over
its competitors (Forrest and Simmons, 2002). Manchester United have won 57% of all
Premier League titles showing a superior.dominance.of.the.English game which shows a
strong correlation with the teams dominate revenue figures of 450 million euros in 2013, 100
million euros higher than the runners up Manchester City (Jones et al., Deliotte, 2015).
Dominating the league championship, has increased Manchester United’s market share in
English football by 11% since 1992, where there incomparable revenue growths have
enabled them to sustain market dominance, increasing their level of performance to heights
above the capabilities of there their competitors potential (Samuels, 2008), therefore making
the league less competitive. Likewise, Michie (2004) recognises that the competitive balance
across Spain’s top division is also one which has seen a rapid decline since 1985, where the
financial superiority of Real Madrid and Barcelona on both a domestic and European stage
has helped the team’s establish.and.sustain.their.dominance.at the pinnacle of Spanish
football. Over the last 14 years collectively, Real Madrid and Barcelona have won 12 La Liga
titles out of a possible 14 (Figure 1b) showing their superiority over the competition. What is
significant about this according to Montes et al (2014) is that when either one of the teams
wins the league, the other will be within touching distance of the title themselves. This shows
there long-run dominance over Spanish football, winning a collective 86% championships
over the last 14 years. This success is helped massively by the team’s financial success
according to Marsden (2016) who believes with both teams’ revenue figures surpassing 560
million euros and budgets 300 million euros higher than the rest of the league, Real Madrid
and Barcelona have used their financial superiority to buy the best players and therefore
using the world class talents at their disposal they have created teams far more superior than
their competitors (Groot, 2008).

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2b. Financial Differentiation
The significant of a team’s league position is developed further by Dobson and Goddard
(2011) who recognise that a top 4 finish in either the EPL or La Liga returns huge financial
gains for the successful teams, which they identify as a ‘30 million pound benefit’. With this in
mind, teams finishing in the league’s top 4 and therefore qualifying for the Champions
league, receive huge financial backing from both their Domestic and the European footballing
body, who supply them with the funds necessary to attract the top players and establish
themselves at the very pinnacle of the football market. However teams not enduring the
same amount of success have less opportunity to finance large scale club developments, with
many aspiring mid-table and promoted.clubs facing the problem of financial insolvency
struggles (Szymanski, 2010). Looking closely at this, Portsmouth’s under-achievement in the
premier league and player expenditure above their financial capabilities left them in a deficit
of £33.5million (Conn, Guardian, 2010) which has seen them plummet to the bottom of the
English Football League. This demise shows how the financial resources and revenues of the
league’s top teams have a detrimental effect on the teams situated lower in the division, who
have to take large financial risks and sacrifices which they often cannot sustain in the long-
run to increase their ability to compete both on a financial and performance level with the
League’s top Clubs.
2c. Lorenz Curve and Concentration Index
Also the Lorenz Curve (Quirk and Fort, 1992) shown in Figure 2, recognises that over the past
20 years the EPL has become less competitively balanced and competitive inequality has
risen with the top 20% of EPL teams generating 55% of the leagues revenue in 2010, 25%
higher than in 1998. The significance of this curve shows that as the Premier League has
developed and become less competitive, with the increasing revenue gap and point margins
separating the top and bottom teams, the leagues shown signs of becoming an oligopolistic
market, which has made it increasingly harder for smaller clubs to climb the league standings
and compete against the market leaders (Mizak et al., 2007). This idea is supported by the
Concentration Index (Figure 3) of the top 4 teams across the premier league era. Occupying a
strong market share and 30% share of all the points achieved in the 2015 season compared
to 26% in 2000, the top 4 teams have shown market dominance growth which has seen the
league’s top clubs develop at a much faster rate than the league’s lowest clubs, showing a

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much larger gulf in class between league standing positions (Michie and Oughton, 2005).
Comparing this to the La Liga, Bourg (2004) recognised that La Liga’s competitive balance was
declining at a much faster rate than the EPL, shown with a 33% Concentration Index for the
top 4 teams in 2015 compared to 25% in 2000. This shows strong competitive inequality
whereby 1/3 of all points won in La Liga are by the top 4 teams in the league, which
according to Goossens (2006) shows oligopolistic league domination and highlights the
Superiority of Real Madrid and Barcelona over their competitors.
2d. Standard Deviation
Also the EPL’s standard deviation figures have increased (Cain and Haddock, 2006) by 2.29
from 2000 to 2015 (Figure 4) showing that as the Premier League has developed, the
concentration of seasonal results has also widened, which shows less competition between
EPL teams. With a standard deviation of 16.35 in 2015, the spread of results show no
correlation with the league averages, therefore concluding that a range of 57 points between
the top and bottom team show an increasingly uncompetitive and diverse EPL. This is also
evident in La Liga where the standard deviation figures have more than doubled to 21.01
between 2000 and 2015. This result shows that the spread of results between Real
Madrid/Barcelona and the teams at the bottom of the league have increased significantly,
concluding that competition for the title and champions league places are now less
competitive and intense than those in the EPL. Halicioglu (2006) believes Real Madrid’s and
Barcelona’s revenue figures surpassing 560 million euros has played an important role in
reducing the leagues competitiveness, while widening the.financial.gap.and.performance
capabilities between themselves and the other 18 teams, who are weak businesses in
comparison to the market leaders (Szymanski, 2010). Therefore the current Infrastructures of
the EPL and La Liga are favourable towards the top teams, while limiting the financial returns
and development of the smaller and less successful teams (Zimbalist’s, 2002).

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3. Reduce Competitive Inequality
From the empirical data shown above, the underlining reason as to why competitive
inequality is becoming an increasingly prominent feature of European Football currently, is
the financial differences and power between team’s league positions. With this in mind,
Flanagan (2013) believes the current financial fair play infrastructures of the premier league
in particularly do not stop the top teams from spending beyond their capabilities, shown by
Manchester City with losses of £96 million in 2012 (Conn, Guardian, 2014) with unaffordable
transfer fees and European footballs biggest player wage bill of £233 million showing they
were not keeping within their financial means, instead they were looking to buy their way
unsustainably to the top of the European game. The significance of this is that with the top
teams buying the best players, surely competitive balance will decrease further until such
issues are addressed effectively. Therefore a salary wage cap, according to Samuels (2008)
will restrict the amount of luxury players the top teams can buy, also making sure clubs act
responsibly and keep within the budgets they can afford which will help to reduce the debt of
8.4 billion euros evident across Europeans Footballs top leagues, while this will lead to a
more equal distribution of players and promote a more competitive league infrastructure.
Ultimately, Daniel (2011) recognises that a salary wage cap will help promote a greater
competitive balance across all European Leagues, making matches more unpredictable and
seasonal outcomes more uncertain, therefore offering a more attractive product to the
spectators, resulting in revenue maximisation. Such a system has been successful in the NBA
increasing Competitive Balance in the top division by 9% since 2005, while also reducing
teams wage bills by an average of 6% over the 9 year period (Kendall, 2013). Uefa
implementing a wage cap would give teams more competitive equality, reducing the financial
superiority and power of the bigger teams, opening the luxury player market to mid-table
teams, therefore bridging the gap between competitive imbalances and the leagues
widespread range of team capabilities (Dietl et al, 2011). This would also help clubs to
reduce their cost levels, limiting the amount of money they can spend on players (Kesenne,
2000), making the European football market more profitable, while helping to sustain the
markets development and growth.

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4. Conclusion
With competitive imbalances increasing across both the EPL and La Liga in the last 20 years as
well as the European football industry as a whole, the highest achieving teams are becoming
more dominate market leaders making the gap between themselves and the leagues smaller
teams more widespread than ever. Therefore, the growth in the financial capabilities and
team superiority of the top performing teams is much superior to that of the teams situated
lower in the league (Szymanski and Zimbalist, 2005) meaning football associations as well as
the UEFA body itself need to introduce strategies, such as the wage cap, which will bring the
polar-opposites of the league table closer together and therefore European Football will
become a more competitive industry.
Word Count=1999

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5. Bibliography
Bourg, J.F. (2004) Professional team sports in Europe: which economic model?
Citied in: Fort, R. and Fizel, J. (eds) International sports economics comparisons. London:
Praeger
Bourke, J. (2015). Premier League clubs’ revenue boom to £3.3bn as Spurs record highest ever pre-
tax profits. [online] The Independent. Available at:
http://www.independent.co.uk/sport/football/premier-league/premier-league-clubs-revenue-
boom-to-33billion-eclipses-rest-of-europe-10295701.html [Accessed 10 Mar. 2016].
Cain, L. P. and Haddock, D. D. (2006). Measuring parity: Tying into the idealized standard deviation.
Journal of Sports Economics, Vol. 7, No. 3, pp. 330–338.
Conn, D. (2010). What's gone wrong at Portsmouth? Ten reasons for the demise of a club. [online]
the Guardian. Available at: http://www.theguardian.com/football/2010/feb/05/portsmouth-balram-
chainrai-sacha-gaydamak [Accessed 13 Mar. 2016].
Conn, D. (2014). Manchester City reveal £52m loss for year to May 2013, down from £98m. [online]
the Guardian. Available at: http://www.theguardian.com/football/2014/jan/29/manchester-city-
loss-wage-bill-income [Accessed 15 Mar. 2016].
Curran, J., Jennings, I. and Sedgwick, J. (2009). ‘Competitive Balance’ in the Top Level of English
Football, 1948–2008: An Absent Principle and a Forgotten Ideal. The International Journal of the
History of Sport, Vol. 26, No.11, pp.1735-1747.
Daniel, G. (2011), “The UEFA Financial Fair Play Rules: a difficult balancing act” in: Warwick
University Entertainment and Sports Law Journal, Vol.9 No.1.
Dietl, H., Franck, E., Lang, M. and Rathke, A. (2011). Salary Cap Regulation in Professional Team
Sports. Contemporary Economic Policy, Vol. 30, No. 3, pp.307-319.
Dobson, S. and Goddard, J. (2011). The economics of football. 2nd Ed. New York: Cambridge
University Press, pp.42-79.
DW on Sport: Competitive Balance in the Premier League (2016). [online] Sportdw.com. Available at:
http://www.sportdw.com/2014/06/competitive-balance-premier-league.html [Accessed 12 Mar.
2016].
Flanagan, C. (2013). A tricky European fixture: an assessment of UEFA’s Financial Fair Play
regulations and their compatibility with EU law. The International Sports Law Journal, Vol.13, No.1-2,
pp.148-167.
Forrest, D. and Simmons, R. (2002). Outcome uncertainty and attendance demand in sport: the case
of English soccer. Journal of the Royal Statistical Society: Series D (The Statistician), Vol. 51, No.2,
pp.229-241.
Goossens, K. (2006). Competitive Balance In European Football: Comparison By Adapting Measures:
National Measures Of Seasonal Imbalance And Top 3. Journal of Diritto ed Economia dello Sport, Vol.
2, No. 2, pp.77-122.
Groot, L. (2008). Economics, uncertainty and European football. Cheltenham: Edward Elgar

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Halicioglu, F. (2006). The impacts of football point systems on the competitive balance: evidence
from some European football leagues. Rivista di Diritto Economia Dello Sport, Vol.2, No.2, pp.67-76.
Jones, D., Houlihan, A. and Bridge, T. (2015). Deloitte Football Money League | Deloitte UK. [online]
Deloitte United Kingdom. Available at: http://www2.deloitte.com/uk/en/pages/sports-business-
group/articles/deloitte-football-money-league.html [Accessed 10 Mar. 2016].
Kendall, C. (2013). Circumventing the NBA’s Salary Cap: The “Summer of Dwight”. University of
Denver Sports and Entertainment Law Journal, pp.74-82.
Kesenne, S. (2000). Revenue sharing and competitive balance in professional team sports. Journal of
Sports Economics, Vol. 1, No.1, 56-65
Marsden, S. (2016). How Can Liga Be More Balanced?. [online] Bleacher Report. Available at:
http://bleacherreport.com/articles/1796657-la-liga-how-can-spanish-league-become-more-
balanced [Accessed 14 Mar. 2016].
Michie, J. (2004). Competitive Balance in Football: Trends and Effects. London: The Sports Nexus.
Michie, J. and Oughton, C (2005) The corporate governance of professional football clubs in England.
Corporate Governance: An International Review, Vol.13, No.4, pp. 517-531.
Mizak, D., Neral, J. and Stair, A. (2007). The adjusted churn: an index of competitive balance for
sports leagues based on changes in team standings over time. Economics Bulletin 26, 1–7.
Montes, F., Sala-Garrido, R. and Usai, A. (2014). The lack of balance in the Spanish First Division
football league. European Sport Management Quarterly, Vol. 14, No.3, pp.282-298.
Moore, M. and Massoudi, A. (2016). Matchmakers pitch for bigger slice of the game - FT.com.
[online] Financial Times. Available at: http://www.ft.com/cms/s/0/18a108ca-6e73-11e5-8171-
ba1968cf791a.html#axzz42Vvs24uF [Accessed 10 Mar. 2016].
Naghshbandi S, Yousefi B, Etemad Z, Moradi M. The comparison of competitive balance in football
Premier Leagues of England, Germany, Spain, France, Italy and Iran: A case study from 2009-2010
Season. J. Hum. Sport Exerc. Vol. 6, No. 4, pp. 673-681, 2011.
Quirk, J. and Fort, R. D. (1992). Pay Dirt, The Business of Professional Team Sports. Princeton, New
Jersey: Princeton University Press, pp. 145-179
Samuels, J. (2008). THE BEAUTIFUL GAME IS OVER: The Globalisation of Football. 2nd Ed. pp.59-87.
Szymanski, S. (2010). Football economics and policy. New York: Palgrave Macmillan. pp.182-202
Szymanski, S. and Zimbalist, A. (2005). National pastime. Washington, D.C.: Brookings Institution
Press.
Winter, H. (2015). Spanish top money league. [online] Telegraph.co.uk. Available at:
http://www.telegraph.co.uk/sport/football/european/2307405/Spanish-top-money-league.html
[Accessed 10 Mar. 2016].
Zimbalist, A.S (2002) Competitive Balance in Sports Leagues: An Introduction. Journal of Sports
Economics. Vol. 3, No. 2, pp. 111-121

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6. Appendix
Figure 1a. English Premier League Titles won from 1992-2015
Team Premier League Titles
Manchester United 13
Arsenal 4
Chelsea 3
Manchester City 2
Blackburn Rovers 1
Figure 1b. Spanish La Liga BBVA Titles won from 2000-2015
Team La Liga Titles
Barcelona 7
Real Madrid 5
Valencia 1
Athletico Madrid 1
Figure 2. Adapted version of Quirk and Fort’s (1992) Lorenz Curve showing how a team’s position
affect the revenue and wealth distribution of The English Premier League Clubs
Lorenz Curve- Wealth Distribution for Premier League Clubs
Cumulative£%
Cumulative Team %

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Figure 3. Concentration Index of the top 4 teams, showing the percentage of the leagues total points
that were won by the Top 4 teams
Year League Concentration Index
2015 EPL 30%
2015 La Liga 33%
2000 EPL 26%
2000 La Liga 25%
Figure 4. Adapted version of Cain and Haddocks (2006) standard deviations showing the range of
points achieved compared to the mean average for the 1999/2000 and 2014/2015, EPL and Spanish
La Liga seasons
Year League Standard Deviation
2015 EPL 16.34907
2015 La Liga 21.01447
2000 EPL 14.06369
2000 La Liga 10.1328

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