Football is not purely a business, but even its economics says no to something which would have doomed it as a sport
In my first article for The Student Investor, I came to the conclusion that football is a business. As a massive fan of the game myself, you may find it odd that I reached this conclusion. I only arrived at it with respect to the fact that football clubs must be run in a sound manner as business, in order to ensure long-term financial stability, thus providing a stable foundation for being competitive in the long run. In other words, a club being well-run as a business acts as a natural springboard for success on the pitch.
How has the pandemic affected European football?
We only need look at European football across the past year, which has been hugely impacted by the COVID-19 pandemic, to understand why financial stability and business acumen is so important for football clubs. Fans being banned from stadia for much of 2020 meant that for all clubs, from juggernauts such as Bayern Munich to small, local clubs such as Solihull Moors, finances were significantly affected. At the top end, this mainly led to smaller club transfer budgets and soaring debt levels, but lower down the league pyramids in each country, the very existence of certain clubs was put under genuine and severe threat.
It is precisely that very last point which springs to my mind with regard to the European Super League (ESL). The decision of 12 of the biggest football clubs in Europe and the world (listed below) to form this breakaway league, from which they could never be relegated, and would guarantee each club a figure somewhere between £250-£300 million per year, is greedy enough at the best of times. But it is even worse when the very existence of some clubs, particularly lower down the respective European league pyramids, has been seriously threatened by a global pandemic.
Founding Clubs of the ESL
· England: Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, and Tottenham Hotspur
· Italy: AC Milan, Inter Milan, and Juventus
· Spain: Atlético Madrid, Barcelona, and Real Madrid
There were plans for a further three founding clubs, to create a total founding group of 15 clubs, with 5 more clubs being eligible to participate on a yearly basis via the completion of qualification rounds.
Why was the project announced?
It gets worse. The public statement from the 12 initial founding clubs, of which only Real Madrid, Barcelona and Juventus (as of April 22nd 2021) have yet to officially pull out of the project, uses the pandemic as a justification for their actions, arguing that it “…accelerated the instability in the existing European football economic model” and, if that was not enough, stating that it would “…benefit…the entire European football pyramid”.
European football, from an economic perspective, is certainly far from perfect, even with the ESL project now looking dead in the water. But the prospect of the 12 initial founder clubs acting as though they are above their own fans, and ruthlessly dismissing any notion of the fact that clubs go beyond being solely businesses, was too much for the vast majority of the footballing community, including players, fans, and pundits alike, to take.
The backlash to the project was likely only heightened by the economic situation much of Europe finds itself in. That is not to say there would have been no backlash at all had this project been announced at a point other than during a global pandemic, far from it. Instead, the fact that people have had to spend time on furlough, and in some cases have even lost their jobs, highlighted the disparity between the perspectives of the ownership of the 12 clubs, and those of the fans.
When I said that football is a business, I meant it as an unescapable truth, and not that it is the sole respect with regard to which clubs should be run. Arguably even more important than the business element of clubs is the community element. The pandemic has highlighted the importance of clubs to their fans, and how they can genuinely unite communities, alongside giving supporters a break from their working lives. The ESL was announced with zero regard for any of this.
As an example, consider the proposed structure of the league. Each team would play a minimum of 18 extra games per season as part of the ESL, with many of these games taking place abroad, by virtue of the international nature of the competition. In addition, clubs would have their domestic league, domestic cup and existing continental competitions commitments. It would be extremely financially and logistically challenging for fans of the clubs taking part to be flying across Europe to attend ESL matches, while also attending domestic fixtures as well as matches in current continental competitions, such as the UEFA Champions League. It is only when you take into account these considerations that you realise the true motives behind the ESL: greed and money at the expense of those who love their clubs the most.
Lack of Atmosphere
I spoke earlier about how the lack of fans inside stadiums hurt the finances of every single football club across Europe, which is no doubt a severe concern. However, the lack of fans also meant that the atmospheres at matches were non-existent, with only the shouts of players and coaches to be heard. This impact is arguably more significant than the financial one – one can only wonder what the atmosphere would have been like if the Camp Nou could have hosted a capacity crowd of 99,354 for the Champions League semi-final between Barcelona and Bayern Munich. Bayern won by a staggering 8 goals to 2, in what could be described as not only one of most iconic games in the competition’s history, but also as a fascinating display of the economics which underpins the sport of football.
What does the economics say?
Simon Rottenberg’s 1956 seminal paper on the economics of sport introduces two key principles which are necessary for the long-term sustainability of any sports league. The first is uncertainty of outcome, which, in simple terms, is fairly self-explanatory: interest in a sports league will only persist in the long run if there is a certain degree of uncertainty regarding the outcome of each match. The Barcelona-Bayern Munich clash in 2020 is one of the best examples of this.
Both clubs involved can count themselves among the biggest and most successful clubs in not only Europe, but the world. For context, Bayern Munich were considered comfortable favourites for the match, but to reach a Champions League quarter final requires a certain calibre of club and squad, so it was safe to say that no one predicted the eventual result.
It is exactly this sort of completely unpredictable result that captivates audiences from all across the globe, not just from the gigantic fanbases of each of the two clubs, but from neutrals. The ESL would concentrate an enormous amount of money amongst 15 clubs, with no chance for the money to trickle down through the various respective national football pyramids all the way down to grassroots, which is precisely how a large number of clubs at lower levels survive financially. In turn, this would theoretically concentrate all of the best players at the 15 founding clubs to an even greater extent than currently, meaning the sort of unpredictable results mentioned above simply would not be as frequent.
Moreover, in the current climate, the ESL would only exacerbate the existing financial struggles of lower-league clubs and make it borderline impossible for clubs outside of the 15 founding clubs to compete financially.
The second key principle is the invariance principle, which Rottenberg does not introduce in these precise words, but his idea has been incorporated into the more well-known Coase Theorem. In footballing terms, the invariance principle would imply that a club in an overly dominant position, in terms of success on the pitch, would allow certain players to move to other clubs to have bigger playing roles. Transfer fees would sufficiently compensate the selling club as a measure of the productivity of an individual player, which the acquiring club is willing to pay in order to gain a strong player. Essentially, talent would be redistributed more efficiently, and in turn, this would preserve uncertainty of outcome.
I touched on this above, only because invariance and uncertainty of outcome are very much interdependent principles. If such a large proportion of the money in the game is concentrated amongst 15 clubs, it essentially becomes impossible for clubs outside the founding group to purchase fringe players from those 15 clubs, who may become star players at their potential new clubs. In short, it becomes impossible to maintain the invariance principle, which may well render it impossible to maintain uncertainty of outcome. Without uncertainty of outcome, there would be no neutral interest in matches, and likely thus also no long-term future of the sport.
All in all, there is no reason, from neither a sporting nor an economic perspective, that would support the idea of a European Super League, if football is to survive. Over the past 12 to 15 months, football clubs’ financing has taken a huge hit, for reasons outside of anybody’s control. For those same reasons, fans have been unable to get behind their teams to the best extent that they can, leading to inevitable feelings of disconnect between clubs and fanbases the world over. The European Super League would only worsen these sentiments, alongside having a genuine and severe chance of ending the sport of football as we know it.