I am a bit late to this fascinating pair of articles from the Economist on how competitive parity differs in European and American big league sports. The main insight the Economist makes is that while Europe tends to be more redistributive (i.e., "socialist") than pro-market (i.e., "neoliberal") America when it comes to economic policies, the opposite holds true in sports where market forces are allowed to reign in Europe that are more constrained in the US. Measures such as revenue sharing and losers-go-first draft are not as used in Europe that are commonplace in America. Perhaps it's the old "root for the underdog" sentiment in America. Unsurprisingly, the Economist is not alarmed by a tilted competitive balance in Europe--to the victors the spoils. As European football leagues try to even things up, commentary is coming in hard and fast:It is a curious irony that Europe, which often takes a dim view of market forces, lets them rip in sport, while America, usually the world's most enthusiastic exponent of commerce and its consequences for society, has all sorts of arrangements in place to mitigate its effects on the nation's favourite pastimes. But these days, the American model is gaining adherents in Europe. Sports ministers in many countries are arguing that football needs to be exempted from competition law in order to allow governing bodies to equalise the resources of clubs without risking prosecution. The European Commission's strategy paper on sport, published on July 11th, ignored those calls; but the pressure will not go away.
Professional sport differs from other businesses in one important respect. Rival teams need each other to produce a sellable product: a match. In most businesses co-operation between rivals would attract the ire of antitrust authorities. But in sport, an element of collusion is unavoidable...
Egalitarians quibble that the bulk of the money ends up with rich well-supported clubs. The English Premier League, for instance, collectively sells its television rights and splits the proceeds between clubs. But a club's share partly depends on how many of its games are broadcast and how high it finishes in the league, so Chelsea and Manchester United get a bigger slice. The worry is that the continued dominance of national championships by a few clubs will drive away supporters.In the United States the baseball, basketball, hockey and American football leagues try to mitigate the effects of competition and inequality through revenue- and talent-sharing agreements, such as “the draft” (baseball even has a specific exemption from antitrust law). But it is not clear that this is either necessary or desirable. Measures to increase equality within a league take the edge off competition—and therefore, presumably, off the terror that drives sportsmen to excellence.
There is more to sport than watching too well-matched teams vie for supremacy. Professional basketball in America has lost some of its shine since one of Michael Jordan's many retirements ended the Chicago Bulls' dominance of the sport. The lesson from this and from golf's popularity since the emergence of Tiger Woods is that sporting prowess matters more to fans than strict competitive balance...
The Economist's bottom line is this on politicos meddling in sport:
The second article adds more "pro-market" color commentary on the issue, the main point being football (soccer) has always been unequal but popular, so why change things?Politicians like the notion of equality. Sportsmen should beware it. Politics is about majorities, averages and keeping lots of people happy. Sport is about individuals, excellence and winning and losing. The two don't go well together; so it is, by and large, better for sport if politicians resist the temptation to interfere with it.
The Independent European Sport Review, launched last year by several EU sports ministers, declared that “football should not be a contest between corporate leviathans with the outcome dictated by whoever has the deepest pockets.” It advocated greater revenue sharing, wage-bill caps and restrictions on player transfers, and suggested block exemptions as a way of reconciling these measures with EU competition law. The report was warmly endorsed by UEFA, European football's governing body.But unless policymakers can say for sure that block exemptions would help consumers, they are best to stick with a case-by-case analysis. Exemptions from antitrust laws are fine if unchecked rivalry would lead to flawed outcomes. Fewer drugs would be made if pharmaceutical companies were not allowed to license each other's patents. R&D alliances ensure that the costs of research are shared between the companies that profit from it, which supplies an incentive for innovation that might be otherwise absent. It is not clear, however, that consumers would be better off if sport had its own blanket exemption.
A lot rests on the idea that stricter competitive balance is vital to the long-term viability of professional sports. Stefan Szymanski, a professor at London's Imperial College who has written several books on the economics of football, suspects that the case for income parity is a little shaky. Professional soccer in Europe has always been unbalanced, he says, but this has not obviously diminished its popularity. The pyramid structure of leagues, with promotion and relegation, keeps interest alive for teams that have little chance of winning championships. In the top leagues of each country, a high finish qualifies a team for one of the pan-European competitions—the Champions League and the UEFA Cup—that run in parallel with national contests. Local rivalries and the chance for underdogs to embarrass their superiors provide other avenues of interest for soccer fans, who may value excellence more highly than competitive balance. Indeed games between well-matched soccer teams are often cautious, tactical affairs that make for dull viewing. In other words, war minus the shooting. And who would want that?
