"The league will maximize revenues when teams from large, rich, and fan intensive cities win more often" Zimbalist (2002).
European football clubs have historically not had a great competitive balance. According to one study done in 2006, of the previous 10 seasons, the champion and runner-up from the premier leagues from Greece, Italy, Spain, Germany, France and England were the same top two clubs in those countries two-thirds of the time. The typical European premier league has 20 teams. Thus, 10% of the league accounts for 66% of the final match appearances, while 90% of the league account for the remaining 34%. Thus historically, European football does not enjoy much competitive balance at all.
One recent trend has been for extremely wealthy owners to buy clubs and immediately transform a clubs fortunes. One great example of this is the ownership of Manchester City, now in the hands of Abu Dhabi United Group, which purchased the club from the former prime minister of Thailand for over EUR 220 million. Manchester City instantly joined the fray of teams who could afford to and were willing to spend big-time money on big-time players. While, this has allowed a few additional teams to become instantly competitive, it still does not create or foster a competitive balance, rather it simply shifts the balance of haves and have-nots by one additional club.
This has led to significant problems for clubs who have tried to compete with the more wealthy clubs and are unable to. In Spain's premier league, La Liga, the top two teams are clearly Barcelona and Real Madrid. Other teams, like Valencia and Villarreal who have tried to compete, end up in financial trouble with tremendous debt and sometimes unable to make payroll.
This is the essence of a lack of a competitive balance, where to try to compete casues financial ruin.
Foreign Players and Domestic Economy in European Football
The European leagues have blossomed in the last 15-20 years. Revenue has increased exponentially as broadcasting rights have afforded the leagues greater revenue and exposures. This has created a free market for the best players in the world within the European leagues. The larger teams, such as Arsenal, Manchester United and Chelsea from England's premier league have dominated the league in two inter-connected aspects in recent memory: League success and foreign-born players. Often times, the premier foreign players are non-whites from Africa, South America and Asia.
The league trends are obvious and concrete, larger and richer teams can more readily sign foreign-born talent because they have more money. This influx of superior talent keeps these teams near at the top of the standings. The team success creates additional revenue by way of merchandise, ticket sales and television money. The teams with more money can afford the best players…Therefore, a repeating cycle and self-perpetuating cycle is created which works against the notion of competitive balance. Currently, there is a wide gulf in the value of the most and least valuable teams.
Putting it all Together- Economic Impact of Racism on Football
Football's Current Economy- European Champions League
It is clear that big-time football is a big money sport. In the most recently completed UEFA Champions League season (2008/09), the 32 participating teams divided up a total purse of over EUR 580 Million, with each team receiving at least EUR 6.8 million, but most receiving well over twice that. An additional EUR 28 million was provided to the national associations of the European countries who have clubs participating in the UEFA competitions. Another EUR 33 million combined was paid out to the teams participating in the 2008/2009 UEFA Cup completion.
The high payouts stems from lucrative TV contracts and UEFA's recently devised centralized marketing scheme which divides the TV money among the teams that reach the quarterfinals of the Cup competition, based on the value of each teams TV market. This system has been in place and has proven to be an enormous success for the UEFA and all of the clubs that participate in its Cup competition. UEFA has announced plans to introduce the centralized marketing revenue plan into the Champions League effective with the 2009/10 season.
The overall economic picture is even brighter in many cases. Research commissioned by the league's official sponsor, MasterCard, reveals that clubs with the largest fan bases, such as Manchester United FC and FC Barcelona, the figure rises to EUR 46.14million, with the league champion earning...
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