Competitive Balance in Team Sports and the Impact of Revenue Sharing

2006 ◽  
Vol 20 (1) ◽  
pp. 39-51 ◽  
Author(s):  
Stefan Kesenne
Keyword(s):  
Economic Theory ◽  
Relative Size ◽  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Competitive Balance ◽  
The Impact ◽  
Uncertainty Of Outcome

This article uses economic theory to examine the variables that affect the competitive balance in a professional sports league and the impact of revenue sharing. The generally accepted proposition that revenue sharing does not affect the competitive balance in a profi t-maximizing league has been challenged by many. It is shown that the competitive balance and the impact of revenue sharing not only depend on the relative size of the market of the clubs, but that they are also affected by the objectives of the club owners and the importance to spectators of absolute team quality and uncertainty of outcome. Furthermore, the clubs’ hiring strategies, including the talent supply conditions, turn out to be important elements affecting competitive balance and the impact of revenue sharing.

scholarly journals A Contest Model of a Professional Sports League with Two-Sided Markets

2012 ◽  
Vol 232 (3) ◽  
Author(s):  
Helmut Dietl ◽  
Tobias Duschl ◽  
Egon Franck ◽  
Markus Lang
Keyword(s):  
Network Effects ◽  
Network Externalities ◽  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Market Potential ◽  
Competitive Balance ◽  
Professional Team Sports ◽  
Negative Effect ◽  
Two Sided Markets

SummaryThis paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a two-stage contest model. In professional team sports, the competition of the clubs functions as a platform that enables sponsors to interact with fans. In these club-mediated interactions, positive network effects operate from the fan market to the sponsor market, while positive or negative network effects operate from the sponsor market to the fan market. We show that the size of these network effects determines the level of competitive balance within the league. If the market potential of the sponsors is small (large), competitive balance increases (decreases) with stronger combined network effects. We further deduce that clubs benefit from stronger combined network effects through higher profits and that network externalities can mitigate the negative effect of revenue sharing on competitive balance. Finally, we derive implications for improving competitive balance by taking advantage of network externalities. For example, our model suggests that an increase in the market potential of sponsors produces a more balanced league.

Economics of Antitrust

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Antitrust Law ◽  
Competitive Balance ◽  
Sports Teams ◽  
Sherman Act ◽  
Professional Team Sports ◽  
Sports Leagues ◽  
Professional Sports Leagues

This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration of power in the hands of a few producers such as Standard Oil, American Tobacco, and other large firms that consolidated their holds over industries by merging and acquiring other companies. Other industrial leaders sought to fix prices above those obtained under competition. The Sherman Antitrust Act, enacted in 1890, contains provisions addressing “contract,” “conspiracy,” and “trade and commerce.” This chapter first considers how courts applied the Sherman Act to cases involving professional team sports before discussing the characteristics of professional sports leagues, how owners of professional sports teams reported profits and losses, the issue of player salaries and exploitation, and competitive balance and revenue sharing in professional leagues. It also describes franchise relocation and expansion and how television created demand in sports.

scholarly journals Competitive balance and gate revenue sharing in team sports

2004 ◽  
Vol 52 (1) ◽  
pp. 165-177 ◽  
Author(s):  
Stefan Szymanski ◽  
Stefan Kesenne
Keyword(s):  
Team Sports ◽  
Revenue Sharing ◽  
Competitive Balance

The Impact of Free Agency on Competitive Balance in North American Professional Team Sports Leagues

2006 ◽  
Vol 20 (3) ◽  
pp. 345-365 ◽  
Author(s):  
Joel Maxcy ◽  
Michael Mondello
Keyword(s):  
National Football League ◽  
Team Sports ◽  
National Hockey League ◽  
Competitive Balance ◽  
Free Agency ◽  
Free Agent ◽  
Professional Team Sports ◽  
Dependent Variables ◽  
Sports Leagues ◽  
The Impact

Free agency was reintroduced to professional team sport leagues in the 1970s. Sport enthusiasts expressed concern that competitive balance would diminish as star players congregated to large market cities. However, the economic invariance principle rejects this notion, indicating that balance should remain unchanged. This article empirically examines the effects of changes in free agent rules on competitive balance over time in the National Basketball Association (NBA), National Football League (NFL), and National Hockey League (NHL). Regression analysis using within-season and between-season measures of competitive balance as dependent variables provides mixed results. The NFL and NHL provide evidence that an aspect of competitive balance has improved, but results from the NBA indicate that balance has worsened since the introduction of free agency. We conclude that the ambiguous results suggest that the effects are not independent, but instead depend on the interaction of free agent rights with other labor market and league rules.

scholarly journals PROFESIONALNI SPORT U REPUBLICI HRVATSKOJ ZA VRIJEME COVID-19 KRIZE: FROM A THREAT TO AN OPPORTUNITY FOR A BETTER STATUS OF PROFESSIONAL ATHLETES

2021 ◽  
Vol 37 (2) ◽  
pp. 137-166
Author(s):  
Vanja Smokvina ◽  
Patricia Ribarić Smokvina
Keyword(s):  
Team Sports ◽  
Professional Sports ◽  
Legal Framework ◽  
Professional Status ◽  
Sports Clubs ◽  
Starting Position ◽  
Better Regulation ◽  
The Republic ◽  
The Government ◽  
The Impact

The paper aims at analysing Croatian professional sport and the impact of the COVID-19 crisis on it. Football was taken as a model for other team sports because of the share of professional sports clubs in the Republic of Croatia in football. In addition, the legal framework set in football may apply to other sports for successfully developing a similar pattern. The analyses are conducted into the revenues (sponsorships, ticketing and TV rights), and expenses (expenses on behalf of players remuneration) of the football clubs in the First Croatian Football League, providing an overview of the professional status of sports clubs, athletes and coaches. It also encompasses an analysis into measures taken by the Government of the Republic of Croatia to support Croatian sport during the COVID-19 crisis. The COVID-19 crisis has been taken as a possible starting position for better regulation of sports in future, especially as regards the professional sports in the Republic of Croatia contributing significantly to the promotion of the Republic of Croatia worldwide.

Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball

2008 ◽  
Vol 45 (5) ◽  
pp. 535-549 ◽  
Author(s):  
Michael Lewis
Keyword(s):  
Programming Model ◽  
Major League Baseball ◽  
Revenue Sharing ◽  
Local Market ◽  
Competitive Balance ◽  
Structural Dynamic ◽  
Local Revenue ◽  
Major League ◽  
Sports Leagues ◽  
The Impact

Major League Baseball and other professional sports leagues have long been concerned with competitive imbalances caused by differences in local revenues. The fear is that in the absence of salary caps or other regulatory mechanisms, smaller-market teams will be unable to remain competitive. This research uses a structural dynamic programming model to analyze ownership's payroll investment decisions. This model estimates the relationship between optimal payrolls and local-market populations and the influence of long-term customer equity dynamics on payroll investments. In addition, the author analyzes the impact of a recent policy intervention that implemented revenue transfers from high-local-revenue markets to low-local-revenue markets. The statistical results indicate that market population has a significant impact on the value of a team's payroll investments. For example, optimal payrolls double as the population increases from 2.5 million to 7.5 million. Furthermore, rather than improving competitive balance, the adoption of revenue sharing has decreased the incentives for small-market teams to remain competitive. The author uses the estimation results to evaluate alternative approaches to managing competitive balance. Specifically, the results suggest that basing revenue-sharing payments on local-market population and (higher) attendance rates reduces payroll dispersion.

Player Mobility and Competitive Balance Regulation in Professional Sports Leagues

2021 ◽  
pp. 152700252110595
Author(s):  
Marco Runkel
Keyword(s):  
North American ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Competitive Balance ◽  
Extended Version ◽  
Sports Leagues ◽  
The Difference ◽  
Salary Caps ◽  
Professional Sports Leagues

Competitive balance regulation is more widespread in North American than in Europan sports leagues. The present paper addresses the question whether this observation can be explained with the help of differences in the degree of player mobility. Using an extended version of the workhorse contest model of sports leagues, the paper shows that the answer depends on the kind of competitive balance regulation. While player mobility may help to explain the difference with respect to salary regulation (e.g., salary caps), the choice of revenue sharing schemes turns out to be independent of player mobility.

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