Commercialization of Sport - Essay Example

? Sport Commercialization Sports is a language that everyone understands, you do not need to understand the language of the other to share a game of soccer, scrabble, basketball among other different games. Over the years, sports have been known because of this universality factor and the effect it has on participants. However, in contemporary times there has been an eminent shift from the social aspect to the business aspect of sports. Sports have emerged as one of the most lucrative ventures not only for participants but for people who own the different teams. This has drawn a lot of interest across the globe and from all quarters. From the local levels, individuals are competitively seeking to attain professional status to gain from the lucrative industry, whereas others are striving to build competitive teams to benefit from the lucrative sport industry as well. The gains attained, or profits generated are dependent on the situation of the team, the better teams are relatively poised to benefit most from lucrative deals (Howe, 2004: 49). This is based on the assumption that these better teams attract bigger audiences as opposed to dismally performing teams. This accords the team’s sponsors a bigger market to appeal to and helps in creating a global image which is not easy to achieve in the ever competitive corporate world. Besides, the teams themselves have slowly revolutionalised their settings as they also want to be seen as global brands. Sports commercialization has paved way for multiple challenges, mostly legal challenges as these new trends have to ascribe to set rules and regulations. This is explained by the multiple legal cases bordering on sports that have found their way to courts especially the European Court of Justice. This study implores on the process of sports commercialization, it also examines and represents the role government play in the sport business. Role and Development of Sports Historically, sports had been viewed as a social activity whose ownership mainly lay under private companies or mutual associations (NEBRASKA, BAHLS, & PETERSON, 1978). The ownerships would oversee progress and participate in awarding competitive athletes for their role in delivering a sporting”product”. In doing so, they participated in creating a competitive platform for sports that was governed differently from the normal approaches adopted in running of businesses (Whannel, 2008:240). Sports associations or clubs did not seek to profit maximize and did not affiliate themselves with the “entertainment business”, this is irrespective of their roles as entertainers through different sporting competitions. The main focus of these clubs and associations was to achieve success on the sporting field, irrespective of the professional game they participated in. For the better part of the century sporting took this compassionate business approach. Despite many of the sporting clubs having huge financial burdens the stakes at the time were still low and this ensured that the sporting activities took on a rather predictable course (Maguire et al, 2002:126). However, this situation was not to persist for long as wide spread changes in the past two decades distorted this sporting setting, and the benign sporting culture. The new situation came along with worrying trends which since the turn of the millennium have brought forth questions on the very role of professional sports, especially in Europe (Fort, 2004). These concerns were echoed by the current UEFA chief, Michel Plattini, who feared that current sporting trends were first contributing to the erosion of the fundamental purposes of sports. Sports, he said, has always been a strong catalyst for social and cultural integration, he feared that emphasis on the economic aspect of sports would inevitably lead to extinction of these two crucial elements of sport (Hudson, 2012:2). Further, extinction of the social and cultural role of sporting would upset the relationship that exists between sport and society. Concerns on Sports Commercialization The greatest question has always been what constitutes these new trends and when did they set in? As mentioned earlier, the trends represented the change of sports from benign activities to commercial events which were not only intent on generating money to offset their “genuine” expenses but to profit those who had founded these sporting associations and clubs. The start of sport commercialization, which is described as the modern worrying trend, is traced back to have started two decades ago. At least, this is the case with football commercialization in England which will be the main focus among other European football clubs and associations. However, this focus should not be taken to mean that only football has been the focus of commercialization as other sports have also fallen victim (SHRADER & EVERDEN, 2007). The choice of English football is only informed by the need to be clear and help in providing one hypothetical example which traces the commercialization trend. Football Commercialization-England In England, commercialization of football was not necessarily triggered by a single event but a series of events which were spurred by the formation of Football Association (FA) Premier League at the start of the 1992-93 football season. Prior to the creation of the Football Association (FA) Premier League, Football Association had handled England football since 1893 and was responsible for the football framework and schedules existent in the country by 1992. (Hudson, 2012:2) Besides, being among the earliest football associations globally FA had contributed greatly to the establishment and management of football by mentoring other associations across Europe and beyond (Horne & Whannel, 1999:259). In regard to running of the English football, FA had constituted a professionalized league which had four divisions composed of ninety two professional clubs. The size of the English football league was indicative of the deep football culture in England, but with passage of time, mainly in the 1980’s and 90’s there was call for change. This change was focused on improving the commercial situation of the England clubs in light of Italian and Spanish clubs whose financial base had been secured through affiliations with the local businesses (Hudson, 2012:2). At the time, the Football League was running English football in a collective manner, for example, they would sell television rights on behalf of the League participants and then share the resources equally to all League teams. But, at the time there was increasing competition for live broadcasting rights for prime matches. The big clubs knew that by agitating for changes in the earlier agreements on distribution of money gained from television rights they stood to rake in a much bigger portion than previous distributions (Wigglesworth, 1996:6). These agitations started in 1985, and often involved threats of constituting a separate/breakaway league, these threats were only halted by increases on the resources distributed to the big clubs. Formation of FA and Advent of Satellite Broadcasting However, come early 1990’s the FA found it plausible to hold consultative meetings where they welcomed various proposals from the football clubs and other football stakeholders. Football League proposed a merger with FA a situation which would make it difficult for the big clubs to breakaway. However, FA had an alternative idea and which they carried on with; they supported the idea of a break-away super-League (Hudson, 2012:2). This was not supported by a number of football stakeholders who sighted that by allowing a break-away the FA was giving up its role as football regulator, and controller of commercialism. At the start of the 1992-93 season the independent FA Premier League was formed. The change coincided with groundbreaking changes in the Broadcasting industry. In 1989, British had seen the launch of its first satellite television broadcasting; these were courtesy of British Satellite Broadcasting and Sky Broadcasting companies (KE?SENNE, 2007). Two years later, 1992, the two satellite broadcasting companies were still making losses mainly because most people had not gotten used to the idea or found it expensive. Therefore, they were still looking for that single venture that would generate adequate interest for the satellite broadcasters (UNITED STATES, 2001). So, with the break away of the league teams, the broadcasting companies found an opportunity to encourage viewership. This prompted them to buy exclusive broadcasting rights, for the live broadcast of the Premier League matches. At the time of the purchase, the two companies had merged to form BSkyB, the idea worked to their advantage as the number of subscriptions rose significantly from 2 million in 1993 to 6 million five years later (1998). Even though this rise in subscription was not solely due to football, most subscribers took to the company’s sports channels (Hudson, 2012: 3). This was the start of the process of football commercialization in England, partly because of the competitive nature of the broadcasting rights which soared significantly from 1992. Prior to the BSkyB rights purchase in 1992 at a cost of ?305 million, ITV had previously bought the same rights at a cost of ?52 million indicating how fast and competitive the bidding process had become. This rate further increased in 1996, as BSkyB had to pay ?676 million for the same rights for a period of four years. The same rights cost a staggering ?1.1 billion when BSkyB purchased the rights in 2000. This continuous increase in the value of broadcasting rights provided the Premier League with a huge influx of money. However, as would have been expected the additional revenue for the clubs never led to subside in ticket prices for those attending matches. In stead, the money was used to improve the wages of the existing players and a significant amount was channeled to scouting and transfer of new top players (Noll, 2007:403). This saw the wage bill as well as the value of money spent by the clubs during transfers’ sky rocket. This situation was further worsened by the intention of the clubs to create some form of a European super league. This created another confrontational phase, with threats of a break-away owing to the lucrative nature of the European competitions. This time, Union of European Football Associations (UEFA), reengineered its cup competitions to form the lucrative European Champions League which would involve major teams from Europe (Hudson, 2012:3). Formation of such a League again heightened the need for major clubs within England and beyond to create competitive teams by competitively bidding for top players across the world, albeit, to improve the chances of reigning in this superior league. These growth and competitive needs necessitated additional finances as the amounts generated through television rights would not sustain the new level of expenditure. This again paved way for alternative avenues to bridge the new resource requirements, four key routes were recognized. The first was an increase in the value of match tickets. These increases were at times unreasonable, an example being Chelsea which increased its ticket value from ?7.50 to ?30 in a period of less than ten years (1990-1997) (Hudson, 2012:3). The justifications of such increases were mainly founded on the increased quality of football as well as the presence of a wide range of top players from all over the globe. The clubs also cited the improved status of football facilities such as the stadiums which had received major uplifts following Taylor’s Report released in 1990 which stressed the need for better stadiums in terms of safety and capacity. The second approach in raising club revenue was launch of club merchandise, the merchandise mainly involved sale of team kit replicas, most clubs also opened up specialized stored in strategic parts of the country and beyond. This has further increased to involve foreign affiliations to sell and manage team kit replicas. The third approach involved more purposeful and focused pursuit of sponsorship deals, this involved kit sponsorship and pitch side advertising this further increased the revenue gained from such sources. Lastly, several clubs such as Sunderland and Leicester sought to raise additional revenue through share floatation in the stock markets this would avail capital for investing in long term projects such as stadium development and other forms of buildings (WESTERBEEK & SMITH, 2002). Issues resulting from commercialization The above account represents the process of commercialization which has seen football become the current lucrative sport it is. Today, players playing in the English league command high wages and those playing in other leagues have also seen a significant increase in the level of wages paid to them. This is mainly the case in Spain and Italian leagues which are also beneficiaries of sports commercialization. However, commercialization has raised concerns bordering on the purpose of sports in society and has also raised a number of issues. The concerns are well captured by the views of Tony Blair in 1995, Blair was particularly concerned with the direction of football clubs in as far as player pricing was concerned and their insistence on hiking attendance fee, and merchandising (Hudson, 2012:4). His greatest fear was that with these moves the clubs had become extortionist and their social function was fast fading. However, Blair’s views only pointed to one issue that had come as a result of sport commercialization (Blair, 2012). The truth being that almost every aspect of the commercialization process had raised serious economic and legal issues that warranted immediate attentions by the concerned parties. As mentioned, the advent of Premier League also saw competitive bidding for television rights as the number of satellite channels had increased, it was no longer ITV but BSkyB had also joined the broadcasting industry. Once accompany successfully bids for broadcasting rights it is exclusively accorded the rights to air the sport, and any other broadcaster wishing to air the same event must seek the consent from the right holders. Such were the implications of winning the Premier League broadcasting rights. So, when BSkyB won the rights in 1992 it was officially supposed to broadcast the Premier League matches through its sports channels (Noll, 2007: 405). However, BSkyB was also intent in recouping the huge cash outlays used in winning the rights so it had to pass on the cost to consumers who were required to subscribe. This raised several issues; the most featured was the affordability of the sporting services offered by BSkyB. Most individuals could not afford these services and yet the desire to follow football was there so the option was to seek alternatives which would come at a lower price. A good number of individuals in England found the alternative in using foreign decoders, particularly Greek decoders which provided the same viewership but at a cheaper rate (BENDER & SCHORSKE, 1994). However, English Premier League held that any viewership of live football matches in England must be through Sky Subscription (Dunning, 1996:179). In 2005, the English Premier League sued a pub Landlady, Karen Murphy, for showing live Premier League matches without a Sky subscription. Murphy was compelled to pay fines worth ?8000 but she sought redress from the European Court of Justice. ECJ held that Karen Murphy had not violated any rules or regulations as European Union had not banned buying of decoders from Greek and their subsequent resale in England with Greek subscriptions (Slack, 2004:226). This raised serious issues on the extent English Football Association Premier League (FAPL) sought to enforce its rights, bringing into light the likely cases of harassment and exploitation of the citizenry resulting from football commercialization. The other issue resulting from commercialization comes from the competitiveness of the League clubs (SPORT AND RECREATION MINISTERS' COUNCIL, 1991). As mentioned earlier the increase in the amount of funds distributed to the clubs from television rights, the increased amount of match attendance tickets and merchandising raised the money at the club’s disposal to use in luring top talent across the globe (Williams, 2008). Apparently, the clubs were raised with the need to remain competitive and they knew they would heighten the chances of remaining on form by having the best players. This raised issue on two fronts; one was the extent to which club’s were prepared to go to get the best players. The second was the extent to which the players were prepared to go to join these club’s. These issues are best brought to focus by analysis of The Bosman Case. The Bosman case was a legal decision enforced by the ECJ in 1995. This case challenged the legality of the quota system which restricted the number of foreign players that would play for a European team in a match. The subsequent ruling bound all European based teams and associations and indirectly touched on UEFA competitions irrespective of the fact that the latter is based in Switzerland which is a non EU country (GREENFIELD & OSBORN, 2000). The case arose as a result of a player, Jean-Marc Bosman arguing that his club RFC Liege had restricted his movement to his club of choice, Dunkerque in France. He cited that his club’s insistence that it be paid a transfer fee hampered his rights as a European Union member for free movement, as stated in the then (Article 48 of the Treaty of Rome - now Art. 39 of the EU Treaty). The court ruled in favor of Bosman noting that the club’s insistence on a transfer fee for out of contract players was illegal and the club’s quota system was also illegal (ASBL v Jean-Marc Bosman). This case had immediate impact on the competitiveness of sports, one it allowed club’s a chance to build on foreign talent due to abolition of the quota system (Chappelet, 2010). Secondly, it allowed players a chance to actively participate in deciding the club’s to play for and the terms of play (Anderson, 2010). However, these freedoms raise the question of the enforcement of contracts and their binding capability. This is because players are now able to disregard their contracts in order to join other club’s which may offer better wages or play time. It also raises the question on the disregard of contracts by clubs on existent contractual terms between players and their current clubs (Walsh & Giulianotti, 2007:7). This remains a thorny issue as legally there is need for the concerned parties to respect the terms of any existent contractual agreements something that seems to have gone out of the window following Bosman’s case and with sport commercialization (ASBL v Jean-Marc Bosman). The other issue emanates from the club’s participation in trade. In the formative years, football clubs solely concentrated on playing football, however, this has changed with their involvement in merchandising a factor which brings forth new regulations not traditionally associated with sport. As may have been mentioned earlier, clubs have chosen merchandising as a way of supplementing their revenue needs (Blair, 2012:58). This raises concern on the pricing of these merchandise goods, which are mainly kit replicas, as well as their availability. Following the formation of Premier League many clubs looked at merchandising as a favorable way of generating additional revenue, however, it was felt that most of these clubs were involved in artificial shortages which led to increased prices. These issues were raised by the Office of Fair Trading (OFT) which went ahead to carry out an investigation on the issue. The report noted that most club’s marketing practices continuously violated the Resale Prices Act 1976 in a bid to retain the market prices at a higher than necessary level (Blackshaw, 2012:17). The most common practice involved the club’s request to kit manufacturers to limit stock distribution to retailers who sold the merchandise at lower than recommended prices. Office of Fair Trading (OFT) found this to be the same as price fixing (Kennedy & Hills, 2009). A short while since, OFT assumed greater powers and it would now be able to enforce a fine of not less than 10% of the total turnover realized by companies or businesses involved in price fixing (COUNCIL OF EUROPE, 1995). In this case such fines would be enforced on Premier League clubs, the Football Association and kit manufacturers. However, these parties confirmed on abstaining from price fixing or related behavior (Butenko, 2010). Ownership Over the past decade or so Premier League has attracted a number of investors who are mainly focused on the lucrative nature of football. The concern here is that these new owners are likely to shift the focus of football clubs from the social integrative and improvement functions to pure focus on profit maximization in a bid to generate adequate returns for the owners. This may cut down the amount clubs dedicate to the growth of the sport by sponsoring community based clubs and projects a factor that would in the long run kill the talent flow (Blair, 2015: 58). To safeguard the initial function of football, UEFA introduced the multi-ownership rule which holds that no single individual or company will have controlling interests in more than one of the clubs competing in UEFA club competitions, these being the Europa League and the Champions League (Peterson, 2009:4). This rule came under focus after an appeal by, ENIC Plc, which is an investment Company with stakes in six clubs. The investment firm had cited that the cap introduced and adopted by UEFA Executive Committee in 1998 limits competition among clubs by thwarting and hampering investment in European competition. The European Commission which was handling the appeal identified that even if the rule was in conflict with prohibition principle set in Article 81 (1) of the European treaty, it was justifiable as the association was only informed by the need to guarantee integrity of the competitions. Further caps on ownership are due to come to force with UEFA introducing the Financial Fair Play which requires that all clubs competing in Europe break even or earn their profits, primarily based on the earnings they earn from football revenues (Parrish, 2003:9). This limits the participation of owners a factor which accelerated competition to alarming levels, in the current situation club owners inject additional capital for immediate needs such as transfers and alarmingly draw on club finances. These actions are expected to come to an end with full implementation of the Financial Fair Play rules due to come to force next year (Fizel, 2006). Government Intervention Due to the accelerated rates of sports commercialization there have been calls by football stakeholders for a more proactive role by the government in safeguarding the interest of the society and shaping the playground (FOWLER & SPELLMAN, 1998). The main concern for the government has been the financial health of the clubs and their consideration of the fan’s interest. One of the most recent and much publicized government acts was on 12th October 2011 when through the Sports Minister, Hugh Robertson, and the government constituted a committee to look at football governance in England. This followed from concerns that the football clubs were living beyond their means, this was reflected in the clubs operations as at 2011 all Premiership clubs had a collective debt amounting to ?3.5 billion (Maguire, 2002:26). The government’s overall aim was to ensure proper running of the game, which was necessary in securing the future of England’s football heritage. The committee’s report indicated that the most critical aspects for safeguarding England football is ensuring adequate fan participation. To this end the committee suggested that the club’s should work in handing over a stake of up 25% to the fans to maintain the linkage with the local community (HEALEY, 2009). The other suggestion was a clause allowing fans to make a joint bid for a certain percentage of a club’s scale if such club was up for sale (Fort, 2012). Other concerns that the government sought to address were the strengthening of the FA and their mandate in overseeing and monitoring club takeovers as well the need for FA to have a phase within which to streamline their operations and strengthening their oversight role by ridding of vested interests (WAKEFIELD, 2007). In light of these developments and in consideration of the commercialization process it is necessary that appropriate action be taken immediately to ensure that even as the process continues the bond between the game and society is left intact. Firstly, there is need to regulate the level of involvement of the football clubs in other activities beyond football. This is because of two reasons; one is these activities demand for capital and these capital costs maybe directly or indirectly be passed on to the fans or other stakeholders which present an undue burden to the society. Secondly, participation of clubs in activities beyond football brings about divided loyalty as the shareholders or owners try to balance the two. Besides, this translates into football being considered a project rather than an activity a factor which is likely to affect its growth as a societal activity rather it develops as a business unit. 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