What was the European Super League?
The rapid unravelling of the proposed European Super League (ESL) was something to behold. In case you missed it, on Sunday it was announced that some of Europe’s biggest soccer teams were setting up the new ESL. Six English Premiership teams (Liverpool, the two Manchester teams and Arsenal, Chelsea and Tottenham all London based) along with three teams each from Spain and Italy teams announced their intention to take part in the new league instead of UEFA’s Champions League. The English clubs did a quick pirouette in the face of hostile public reaction. That would seem to be that.
The Economics of Professional Sports.
While the participating clubs were widely denounced for being greedy by all and sundry, the proposal serves to illustrate that professional sports ultimately is a business. It is different to most businesses in many respects. Teams cannot produce a match on their own. While they might compete with one another on the pitch, teams must cooperate closely in order to produce a league championship competition. They must agree the competition rules, draw up a match schedule and so on. Most businesses benefit if one of their rivals goes out of business because their sales are likely to increase. It is not in sports teams’ interests for their rivals to go out of business because they need someone to play against. Two seasons after the launch of Premiership Rugby in England, two of its 14 teams went into administration. The league promptly introduced revenue sharing and a salary cap realising that, unless they ensured the financial viability of the remaining teams, there would be no league. A benefit of these rules is that the Premiership is a more evenly balanced league than the French Top14 which has a much higher salary cap. One problem with salary caps is that teams will try and get round them. In November 2019, reigning English and European champions, Saracens, were deducted 105 points for breaching the Premiership salary cap which resulted in them being relegated at the end of the season.
What We Do
Apply state of the art economics in the analysis of competition law mergers and regulation.
Competition Law and Sports.
Like other businesses, professional sports teams and leagues are subject to competition law. One view of leagues and their member teams is that they are a kind of cartel. They sell the broadcast rights to matches collectively and share out the money between them. Such arrangements would generally be in breach of EU competition law. The EU Commission has permitted such arrangements for various European sports league and for the Champions League. The main justification advanced by the Commission for permitting such arrangements is that
(a) they ensure competitive balance which is necessary to maintain fans interest – nobody once to see the same team always win (well apart from their own fans); and
(b) they maintain solidarity within sport because some of the money goes to teams at lower levels.
The evidence for both these propositions was unconvincing to say the least. Nevertheless, an obvious question is whether collective selling of broadcast rights would be permitted in the case of a breakaway league with no promotion and relegation, given that this has generally been regarded as a key element in the European sports model. The flip side of course is whether a threat by UEFA and national leagues to exclude ESL teams might be considered as a blatant attempt to prevent the establishment of a rival tournament.
Why can’t I watch all the matches on one channel?
The European Commission also decided, when allowing the English Premier League to sell its broadcast rights collectively, that one broadcaster could not buy the rights to all the matches to be broadcast live. This put an end to Sky’s monopoly on live matches which had lasted for 15 years up to 2007. Splitting matches between broadcasters should have been good for the customer, right? It has not worked out that way. Not only do consumers need to subscribe to multiple pay-tv channels if they want to watch all the live matches, UK subscribers have ended up having to pay a lot more for the privilege (Unfortunately accurate information on prices in Ireland is hard to come by).
Professional sports are subject to the competition rules like any business, although, as is often the case, some refereeing decisions are hard to fathom. 21st April 2021.