Competitive Balance Policy - Essay Example

Question Critically evaluate the approaches and policies to achieve competitive balance in North American sports and European sports through an examination of competitive balance philosophy and policy in North American and European professional sports organisations. Illustrate your argument with reference to competitive balance policy in the NFL and current developments in European Football Name of tutor ……. “I confirm that this submission is all my own work. Any quotations are properly cited using the Harvard referencing method. All errors and omission are my responsibility alone.” Name Dated Word count: 1701 words Competitive Balance Policy The tension involved in such football is termed as “competitive balance” and the entire idea behind people’s interest and tension about a game’s outcome is labeled as “uncertainty of outcome hypothesis” (Peeters 2012, 154). The whole idea behind any leagues that any team involved and the entire league have to protect the involved uncertainty of the outcome in the game. In other words, any glaring imbalance in such games would result in deteriorated quality of the game. Consequently, leagues across the globe have employed various policies and approaches towards protecting the competitive balance with these policies being remarkable in the European and North American football. However, though the European leagues are heralded as the most successful ones enjoying massive fan bases, competitive balance in Europe is much lower than in North America due to lack strict controls and equality in distribution of resources. One of the most used principles of football is "the good of the game and the interest of the fans, is enhanced when all clubs have a reasonable opportunity to compete for championships at least periodically… the game is not enhanced when controlled by a few wealthy clubs" (Ross 2003, 3). The above statement suggests that there has to be a fair ground for all clubs to compete in football, with the experience of football to the fans enhanced when there lacks a few clubs that dominate the game over others. In case the chasm between the rich and the poor clubs becomes greater, there would be a negative effect on sporting competition, which would affect the quality balance making football a preserve of a few clubs. To prevent such unfair balance, clubs in European football as well as North African have undertaken to implement a number of policies. European football leagues employ collective selling of broadcasting rights to media houses to ensure quality balance among all the clubs. Today, the value of broadcasting rights has increased tremendously in European football league. For instance, in the 2011-2012 league sessions, the European premier league received more than 1.1 billion pounds as revenues from the sale of rights to media houses to broadcast matches from the European clubs, one of the most successful collective bargain systems (Peeters, 2012). Under the collective system, all clubs have to sell the rights to broadcast home matches to the league. The league, on the other hand, pools the revenues from the sale of the rights of the media houses. Afterwards, the league and the teams have to decide on the mode of distributing revenues in a fair manner. However, countries such as Spain, Portugal and Greece still use the individual system where each team sells its rights. The main advantage of the collective system of sales is that it offers smaller clubs an equal platform with the larger ones. As a result, the collective system prevents unhealthy use of clubs wealth to buy broadcasting rights from media houses at the expense of the smaller clubs. The European commission has agreed with the collective sale of rights terming it as the best way to increase competitive balance in the European leagues, stating that it is "important for the redistribution of income and can thus be a tool for achieving greater solidarity within sports" (Peeters 2012, 155). The effect of this collective sale of rights is observed in UEFA championships. For instance, in 2011 UEFA championships, each of the 32 teams that participated in the league were awarded 754 million pounds as the prize money (Peeters, 2012). This was to give each of the qualifying team a fair advantage and recognition and equalise the winning teams with the small and well performing teams. Maintaining a free market is a method through which a competitive balance is achieved in European football. Competitive balance is a prime interest in football among the fans. FIFA’s transfer regulations allow players some transfer windows to shift from one club to another based on agreed fees between the clubs. The advantage of such transfers is that, in Europe, it is possible for small teams to improve drastically, not by developing its young players, which may take time, but by buying experienced players who offer value to the team. Development of a free labor market has played a huge impact in Europe; inferior teams need to assign experienced players than the superior ones due the thirst for better talents. A free labor market makes it possible for the players to shift from one club to another within the European region. While the aspect of club’s wealth and cost of registering such players is still disadvantageous to the inferior teams, the possibility of having such players join an inferior team with no restrictions across the market is a considerable competitive balance in European football. An example is Cirriacco Sforza, a talented player from Inter Milan who later shifted to FC Kaiserslautern, a club in the second division in Germany and propelled the club to greater heights in the first division of the Bundesliga (Rodriguez, Stefan & Garcia, 2013). Unrestrained market is, therefore, an ideal way to achieve a competitive balance across the European football clubs. In North America, the competitive balance is more sound and favorable than in the European football where fan base and club wealth are still a factor to consider in clubs. In North America, revenue sharing and payroll caps are two main ingredients used to ensure a competitive balance across all the leagues. For issuance, all the national media revenue from broadcasters has to be shared equally among the four main leagues (Rodriguez, Stefan & Garcia, 2013). This is a major factor that makes North America achieve better competitive balance than their European counterparts. In North America, local media revenues form a small percentage of the national media revenue. 34% of all the gate revenues have to pooled together and shared equally among the clubs, with the NFL having 53% of the revenues shared among the teams. This makes NFL the most socialistic league, which has attained a better competitive balance than the European leagues. The significance of equal sharing of revenues is that a team does not depend on its fan base or wealth, but the equalisation of sharing income makes it possible for all teams to have a similar footing and discourages unfair income disparities that are observed in European clubs. As result, competition among clubs in NFL is much lower compared to competition in European clubs, which have to use their wealth to attract the best talents at the expense of the smaller clubs. In addition, the top ten clubs in NBA and NHL have to transfer some revenue to the bottom ten clubs to ensure the clubs afford the salary cap minimum (Rodriguez, Stefan & Garcia, 2013). Salary caps do address the plight of all players in NFL compared to European football. In European football, each club has to decide the payment of its players depending on the club’s wealth base. To make the NFL much better and ensure a competitive balance, the NFL and NHL have fixed salary caps that cannot be exceeded in the long run. The maximum payroll of the clubs is mostly at 57% of the total revenue, with the Major League Baseball (MLB) implementing a luxury tax instead of a salary cap (Rodriguez, Stefan & Garcia, 2013). Payroll caps prevent teams from exploiting their wealth at the expense of the less endowed teams and maintain sanity in sports, an ideal approach that has managed to maintain a better competitive balance in NFL than in European leagues. Instead of promoting fairness, teams in Europe have a competition based policy where better performing teams get a larger share of the revenues, a sharp contrast to the NFL. For instance, many leagues use a revenue distribution scheme that takes into consideration the team’s performance in the previous seasons and the number of appearance in live broadcasts (Peeters, 2012), a method that favors the larger teams. For instance, in the French Ligue 1, 83% of all television revenues was shared equally for solidarity. However, this was changed in 2005, when the merit revenue share was increased to 50% and the solidarity share reduced (Rodriguez, Stefan & Garcia, 2013). The Italian Seria A, after embracing the collective sharing of television rights in the 2010-2011 season, 40% of all revenue was distributed for solidarity while 30% for performance. The Spanish league that embraced individual system has the two top teams (Barcelona and real Madrid) taking 34% of all television revenues while 16 teams share 45% of the revenue excluding Atletico Madrid and Valencia(Rodriguez, Stefan & Garcia, 2013). As a result, the mode of distributing revenues in European leagues considerably decreases competitive balance in many national leagues and favors top and wealthy teams (Pawloski, Breuer & Hovemann, 2010). Performance is portrayed as an important aspect compared to representation in European leagues. For a club to have a good share of the revenues, the club has to compete aggressively with the rest of the big teams. Other limitations in European leagues that make it competitive based unlike the NFL, which recognises all teams is that European leagues do not observe salary caps and control of costs in clubs. As such, clubs do plan exorbitant costs to pay and assign players, which make some clubs more lucrative than others. This aspect erodes the gains of competitive balance in football as postulated. Attaining the right competitive balance in sports is critical in enhancing the quality of sports and fan satisfaction. There are numerous ways through which leagues ensure competitive balance is maintained. These methods include equal rights to air club game on TVs, sharing of revenues in an equitable manner, salary caps and cost controls to protect the smaller clubs from the wealthy ones and even ensuring a free market to enhance movement of players from one club to another. However, while competitive balance has been achieved considerably in North American leagues, the concept has not been adopted successfully in European leagues. As a result, European leagues employ unhealthy competition where larger and wealthier clubs have an advantage over the smaller clubs. As such, competitive balance has not been realised effectively in European colleagues compared to North American leagues. List of References Pawlowski, T, C Breuer, and A Hovemann (2010), The club’s performance and the competitive situation in European domestic football competitions, Journal of Sports Economics 11, 186-202. Peeters, T. (2012), Media revenue sharing as a coordination device in sports leagues, International Journal of Industrial Organisation 30:2, p. 153-163. Reodriguez, P., Stefan, K. & Garcia, J. (2013). The Econometrics of Sport. Northampton, MA: Edward Edgar Publishing. Ross. F. S. (2003). Restraints on Player Competition that Facilitate Competitive Balance and Player Development and their Legality in the United States and Europe. [http://law.psu.edu/_file/Sports%20Law%20Policy%20and%20Research%20Institute/Neuchatel.pdf] Read More