The Commercialization of Football - Assignment Example

 The Commercialization of Football This paper is an analysis of the commercialization of football in the United Kingdom. It identifies the major stakeholders, stating their interests, and discussing any conflicts that may arise out of their relationships. Furthermore, this paper identifies the priorities that the senior managers have, in regard to the management of these organizations, for purposes of catering for the interests of their stakeholders, and the conflicts that arise. The conclusion of this paper contains a recommendation on the best method of improving the management of these football organizations. The English Premier league is one of the most luxurious sporting leagues in the world. This league attracts football teams such as Chelsea, Manchester United, Liverpool, etc (Soderman & Dolles, 2013). Players in this league are earning millions of dollars, and this is through their weekly salaries, and endorsements that they are getting from large companies such as AIG, Nike, Samsung, etc (White 2013). Because of the huge amount of money that is used by English teams to pay off their players, most of these clubs are always in debts. An example is a club such as Manchester United, Liverpool and even Chelsea who are operating their balance sheets out of deficits. The main stakeholders to a football club are the owners, football managers, fans, the management, players, the government and the Football Association. These stakeholders partner to play a role that has a level of control on a club. The influence of each can be direct or indirect to the club. If a club changes ownership like in the case of Liverpool football club's acquisition, the debts of the club are transferred to the new owners (Chadwick 2010), and it is their responsibility to service the debt. In the ownership of the club, the government can decide to regulate the process and limit the impact of the team acquisitions on the performance of the ownership. The Football Association is also a major stakeholder in the league, and this is because it is responsible for setting up rules, and fixtures for the games. In fact, without the FA, then the English Premier League would not be there (Kennedy and Kennedy 2014). These stakeholders normally have different interests, and because of these differences they normally clash on most occasions. It is important to explain that the major source of conflict between football managers, players, and the management of the organization lies on money. Most players in the English Premier league are always attracted by the prospects of making lots of money from the league (Ramzan 2014). Failure to be awarded luxurious contracts normally makes them to leave of threaten to leave the organization. Take for example a player such as Christiano Ronaldo, who left Manchester United to Real Madrid, basically because he was offered a large amount of money, when compared to Manchester United (Ramzan 2014). Another example includes Wayne Rooney, who is kept at the Manchester United, because of the high weekly salary that he is earning at the football club (Kennedy and Kennedy 2014). Other players minting millions of pounds, at the English Football clubs, include Eden Hazard, Peter Cech, Didier Drogba, etc. Because of the high salaries that these players are able to command, they are always booed, and criticized, in circumstances where they are not able to adequately perform in the field. An example included Didier Drogba, whom Chelsea bought with a transfer fee of 24 million pounds (Chadwick 2010). He was constantly booed by Chelsea funs, during the 2004/2005 season, because of poor performance. This made him threaten to walk out of Chelsea, because of lack of appreciation from Chelsea fans. Fans and managers also have a conflict of interest. For instance, it is the desire of the fans to win games, while the managers normally want to maximize their profits (Soderman & Dolles, 2013). This is the case between Arsene Wenger, the manager of Arsenal, and the fans of Arsenal. Arsene Wenger has been accused of failing to buy players, and improve the strength of his squad. This is the major attributed to the failure of Arsenal to win major silverware in the past 10 years (Chadwick 2010). However, Arsene Wenger believes in cost minimization, in its bid to manage Arsenal, and this is the reason the manager does not engage in buying expensive players. The intention of engaging in this behavior is to protect the interests of the management, which is profit maximization. The management of these football organizations are always concerned with profit maximization because of the high percentage of capital invested in it. It is the desire of football managers to invest on young players, as opposed to already made players, for purposes of saving money, and ensuring that it meets the desires of its owners, or the management (Wachter et al, 2009). The ownership of these football clubs normally has a variety of challenges, and it also brings conflict between managers and owners of the club. This is because these people normally want instant results, and an example in Roman Abramovich of Chelsea, who is quick at sacking managers who are not able to deliver instant results. To him, the results are for Chelsea to win the champions league, and earn the millions of Euros, that this championship brings about. He also has the desire of winning the premier league, and the FA, because of the cash rewards that these trophies are able to attract. Therefore, the ownership and management of English football teams is motivated by money. This is also the major reason why these football teams, normally wish to compete in the champions league. This is because of the lucrative amount of bonuses that these teams earn by participating in the champions league. For example, appearing for the championship, the club would make approximately 8 million euro’s. By winning the championship, the club would earn approximately 37.4 million euro’s (Nafziger & Ross, 2011). This is a large amount of money that these clubs normally seek to earn. To compete efficiently at the European championship, these clubs have to have the best players in their leagues, and this means money. Ramzan (2014) explains that the premier is the most lucrative league to play in, majorly because soccer players are paid a very high wages. Apart from the impact of the owners of the club on the governance of football clubs, the fans are an important contributor to the governance of the club. The fans are important sponsors to the clubs of interest. The fans pay to attend the games and their contribution at the gate is an important source of financing to the clubs operations (Dobson & Goddard, 2006). For purposes of stability, the fans of the team even book beforehand the chance to watch their teams play. Among the ways that the fans contribute to the finances of the team include the purchase of teams merchandise and the visits to the teams. The direct contribution of the fans in terms of ticket sales and the purchase of merchandise of teams is supplemented by the ability of the fans to own a part of the club. In England, the fans of football clubs are allowed to organize themselves into groups referred to as supporter trusts (Senaux, 2008). The supporter trusts give voice to the groups in the annual meetings that are held for the shareholders of teams. As such it is possible to have an influence of the fans on the management of the institutions. As shareholders, the interest of such fans can change from the need to have success in investment or the desire to achieve success on the pitch. Hamil (2001), notes that there is an intricate balance between the need to have an on-pitch success, the financial viability in management and the personal desire of fans. In the modern economic times, the financial issues could take centre stage and the desire to achieve a return on the investment can be the dominant factor. In this case, the drive to hire or fire new management is imminent in the wake of the poor performance of the team's finances. To fans who are not shareholders, the game changes in that it is not possible to have the central drive as the team's financial performance. Senaux (2008), identifies the fact that the fans of a club are an image of the team. In this case, their reactions towards the team point to the direction that they are comfortable. In most cases, passion drives the need to invest in a club by its fans since there could be little or no dividends paid to the fans who are also shareholders. The perfect case example is the Liverpool F. C chairman who was driven by a passion for investing in the club it is on record that no dividends is paid to the investment (Mitchie 2002). For fans who are also engaged in the management or running of the daily business of the team. the struggle to stay financially sound and the drive to gain fame and glory on the pitch is a key issue (Mintel, 2002). This is because the desires to have better players that can deliver results come at a cost that could sink the team into further debt and make the institution non-economically viable. Agents of the players are also an important part of the management within the premier league. Initially, the agents did not have to be present to sign a player. Most of the low tier teams preferred to deal directly with the players and get their signature directly (Senaux, 2008). The intention of this elimination of the agents from the negotiation process was to cut the cost of signing up a player and possibly reduce the cost of retaining the same player. However, this method has since changed over time. The reason behind the change of method is mostly driven by the desire of the players (Soderman & Dolles 2013). Most players identify the potential of engaging professional negotiators in making their deals and are benefiting by the fact that the agents can negotiate better deals than they can (Archers 1995). To the clubs, the payment that they have to take is increased by the presence of a middleman in the deal. Agents' fees add substantially to the overall cost of a player, and this is all transferred to the club. The engagement between the clubs and the agents of the players in the Premier League is professional. This mainly occurs throughout the season and peaks during the main transfer window in January and summer. This engagement is kept confidential and discrete to avoid any football governance related issues that could be in contravention of the rules of football (Nafziger & Ross 2011). According to the football association (2015), the third party ownership rule forbids the agents from behaving like they own and control the players. The rule states that it is not acceptable to have economic rights on a player or a group of players operating in the league. It only gives the clubs that are concerned the right to have economic rights over the players for the purpose of eliminating conflict of interest by the agents (Gibson, 2010). The possibility of match fixing is the key driver that informs this regulation intervention. In the event that a player is bought from a league that permits such arrangements the football association does not prohibit the deal. Upon its conclusion, the team is then required to institute measures to facilitate the buying back of the rights held by the third party (Wachter, Lynch, Johnson, Grebby & Tsoumpanou 2009). There is no direct contact between the government and the football clubs. Much of the contact to the teams in terms of regulation is channeled through the association that manages the national leagues system. In 2010, the government proposed changes that would lead to a change of management at the clubs (Gibson 2010). The government proposed that in order to give the fans some level of power at decisions taken in the boardroom, it is essential to reserve an amount of shares to this group. From this preceding discussion, it would be conclusive to say that all the stakeholders have a level of influence on the governance of the football clubs. Bibliography CHADWICK, S. (2010). Managing Football. Routledge. DOBSON, S., & GODDARD, J. (2006). The economics of football. Cambridge [u.a.], Cambridge University Press. GIBSON, O. (2010). Government's plan to fix football: give clubs back to fans. The guardian. HAMIL, S. (ED.). (2001). The changing face of the football business: Supporters direct (No. 26). Psychology Press. KENNEDY, P., & KENNEDY, D. (2012). Football supporters and the commercialisation of football: comparative responses across Europe. Soccer & Society, 13(3), 327-340. MICHIE, J. (2001), `Whose Game is it Anyway? Stakeholders, Mutuals and Trusts',Leicester University Press MINTEL, (2002), `The Football Business', Mintel International Group Limited NAFZIGER, J. A. R., & ROSS, S. F. (2011). Handbook on international sports law. 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