Impact of Commercialisation of English Football Clubs - Research Proposal Example

How English football are clubs working commercially Introduction Football as a sport has had a long history of development. Over the course of time, both social and economic forces have worked to influence the owners, fans and other stakeholders in the management of the game. As a result of this, English football clubs have undergone changes in their operations and overall management in the current times. In this proposal, details about the study on different ways in which English football clubs are working commercially are presented. The proposal is divided into different sections, with every section presenting specific information as follows. In the first section, brief background information of the subject is presented. This covers how the subject of commercialisation of English clubs has been treated in academic literature. In the section on the significance of the study, knowledge gaps in the subject which the research intends to fill are highlighted. In the literature review section, academic and non-academic literature regarding the subject of research is evaluated. The review is based on the research questions established for the proposed research. In summary, the literature review seeks to evaluate academic findings on three key issues: the strategies that English football clubs employ in their commercialisation; the history of commercialisation in English football and the impact of commercialisation of English football clubs. Lastly, the proposal contains information about the methodology to be employed in carrying out the study. Basically, it is proposed that the study will be based on data obtained from secondary sources. Background English football clubs as they are known today are a product of a long history of development. Initially, the clubs started as voluntary community organisations primarily interested in the game of football (Williams & Neatrour 2002, p. 2). As such, the primary interest that drove the clubs and the game itself was mere participation in football matches. However, with the growth of the game in the 1870s and 1880s, several changes were introduced which marked the first steps towards commercialisation of the game. These changes were reflected in introduction of admission charges, organisation of the matches between teams into fixtures and development of football stadia (Williams & Neatrour 2002, p. 3). As a result of the large number of spectators, revenues were collected from the events that were enough to compensate the players. Although English football clubs have maintained a commercial aspect since their early development, their commercial characteristics have undergone rapid development in the recent past (Andreff 2005, p. 11; Gilmore & Gilson 2007, p. 409; Morrow 2003, p. 6). Commercialisation has actually been fuelled by the actions of different stakeholders who have played different roles in the management of the clubs in particular, and the game at large. This was manifested in several ways. For instance, as a result of the relationship between the English Premier League and satellite television stations, a lot of revenue was introduced into the league (Gilmore & Gilson 2007, p. 410). This acted as capital that fuelled the commercialisation of many clubs participating in the league. Also, Holt (2009, p. 17) observes that commercialisation of football is manifested in the number of international professional football competitions being held across the world. With a professional and central management system under the International Federation of Association Football (FIFA), international competitions are scheduled and carried out systematically across the world. Morrow (2003, p. 8) observes that commercialisation of football in general has been necessitated by an increasing role of the media in professional competitions. As such, this arrangement has led to a rapid growth in the amount of revenue associated with football activities across the world. With the loyalty of supporters, sponsors and the media, the revenue generated by football activities across the world has continued to increase. In essence, factors such as media coverage and the rise of professional competitions have contributed to the rise of revenue for football clubs. With the increase in revenue, the wages for professional footballers increased considerably as well, creating a market for professional footballers. Several studies have been conducted to evaluate the impact of commercialisation of football clubs on the overall trend of the game and the management of football clubs. For instance, Lonsdale (2004, p. 386), evaluates the impact of increased revenue and overall commercialisation of English football on the major classes of suppliers for the clubs: upstream suppliers and downstream suppliers. This observation arises from the proposition that English football clubs are similar to commercial organisations in that both have a complete supply chain network that can be exploited to gain competitive advantage in the market (Lonsdale 2004, p. 387). On the other hand, with the increase in revenue for football clubs, there invariably follows a rise in the ticket prices for matches (Gilmore & Gilson 2007, p. 411). Although this trend is justified by the current nature of the game which attracts top global talent, the rise on prices threatens to lock out a large section of the population that once formed the base of football fans. One possible effect of this trend on the game is a decline in the role of fans in influencing the way football teams are managed. This is because considering the fact that fans play an important role in the game, their attitude about their role in the game is most likely to be affected by the increasing role of other stakeholders – primarily the media and corporate stakeholders (Gilmore & Gilson 2007, p. 412). As a result of this phenomenon, the fans feel that their stake of ownership in club is diminishing. Significance of the study In general, the sporting industry plays an important role in the global economy (Deloitte 2013, p. 5; Hone 2005, p. 3; Rose & Spiegel 2010, p. 13). In particular, the English Premier League, together with other leading football leagues in Europe is expected to continue in growth (Deloitte 2013, p. 7). This increase in revenue is predicted to arise from match day takings, broadcast arrangements and other commercial activities. In the recent past, English football has epitomised all the commercial characteristics of the game. With an increase in revenue from media coverage, match ticket sales and corporate sponsorship contracts, English football clubs have epitomised all the features of current commercial football. With this rapid growth of the industry as a commercial business arrangement, there is need for a research to find out different ways in which the clubs operate commercially. The proposed research is intended to fill this gap by examining different ways in which football clubs in the English Premier League are working commercially. Also, with the rise of commercialisation in football, several stakeholders have been brought into the management of football clubs as an international business (Rose & Spiegel 2010, p. 14). Although commercialisation bears a direct positive impact on the clubs in terms of increased wages for the professional players and earnings for the ownership, there is need to evaluate other ways in which commercialisation of English football clubs affects other stakeholders in the industry. The proposed research answers this question by evaluating the impact of commercialisation of English football clubs on all the stakeholders of specific the clubs and the game in general. Lastly, it has been stated that the rise of commercialisation of English football clubs arose with the formation of the football association. The proposed research answers the question by evaluating the historical developments that not only necessitated but also shaped the commercialisation of English football clubs. Research questions Essentially, the proposed research will seek to show how English football clubs are working commercially. In order to achieve this overall objective, the research will address the following research questions. 1. How did commercialisation occur in English football clubs? 2. What are the defining features of commercialisation in English football clubs? 3. What is the general impact of commercialisation in English football clubs? Literature review Several studies have been carried out about the general topic of commercialisation of football. Most of these studies have sought to outline the historical developments that have shaped commercialisation of football clubs in general. For instance, Andreff (2005, p. 11) observes that the origins of commercialisation of sport in Europe, in general, dates back to the work of the Committee for the Development of Sport in 1984. Following this work, many countries in Europe established official bodies to examine the economic effect that various sports had on their economies. One of the distinctive forces that have influenced the commercialisation of sport in general and football in particular has been the media. Through sports broadcasting rights, the media has generated different demands for the consumption of sporting events (Bolotny & Bourg 2005, p. 122). It is observed that the influence of the media has actually taken place by creating different markets for sports which have included monopoly, supply side monopoly and oligopsony. Williams and Neatrour (2002, p. 3), analyse the importance of different factors in shaping the history of commercialisation of football in England. They identify the media as an important force that shaped the course of the way football clubs are managed during the early 1990s. With increasing involvement of the global media corporations in football, many viewers and advertisers were attracted to this coverage. On the other hand, Zimbalist (2011, p. 13) observes that commercialisation of the way football clubs are managed has largely been shaped by the increasing role of capital as the determining factor for the success of football clubs. It is observed that the ownership of football clubs by independent investors means that the performance and behaviour of the clubs is shaped by the objectives of the owners. With the increasing need for financial capital, football clubs have been forced to compete with each other in terms of broadcasting, sponsorships and merchandising. It is important to point out that this stands in stark contrast to what the situation was before the 1990s. During this period, football clubs were solely concerned with attracting fans by achieving sporting success (Slade 2013, p. 99). With this change, football clubs changed from working as entities that sought to maximise utility to ones that sought to take advantage of the market conditions. Another issue that shaped the commercialisation of football clubs in general was the emergence of the transfer market for professional footballers. This development took place concurrently with the changes in the financial fortunes of football clubs as well as the implementation of a legislative framework by the European Union, The Football Association (FA) and the Union of European Football Associations (UEFA) (Leeke 2003, p. 25). With the emergence of commercial sources of revenue for football clubs in the form of sponsorships and merchandising, football clubs had enough revenue to attract the best football players. Dobson and Goddard (2006, p. 180) observe that with the beginning of the Premier League, English football clubs accessed increased revenue arising from satellite television broadcasts and related advertising. With increased revenue for football clubs, the international transfer market for professional players developed. One important feature of the emergence of the international transfer market of players is the role that players’ wages play in the overall management of football clubs. According to (Soderman 2013, p. 2), player salaries constitute the highest cost component in the management of professional football clubs. As such, many English football clubs seek to control this cost component by determining the type of players to incorporate in the squad and their wages. This way, they manage to control the cost component of players’ salaries which varies with their performance and the activities of their agents. According to Madichie (2009, p. 26), the emergence of the international transfer market for professional footballers has had a major impact on the English Premier League. This was witnessed in increasing transfer fees, increasing need for clubs to gain a competitive advantage and the rise of new premier football competitions like the UEFA Champions League. With this, football clubs sought to use their financial resources to recruit the best players as a way of gaining competitive advantage over their rivals. In essence, it can be seen that many studies trace the origin of commercialisation of English football clubs to a number of closely related events. The rise of the FA-managed premier league ushered in a period of increased revenue for English football clubs. Increased financial capital arising from satellite television, and corporate sponsorships made it necessary for football clubs to recruit the best talents of the sport across the world. With increased spending power of football clubs, the international market for player transfer was created and sustained. These events were tied to the creation of the UEFA Champions’ League which made it necessary for English football clubs to use their financial resources to gain a competitive advantage over their rivals. Currently, there are several ways in which English football clubs are working commercially. Soderman (2013, p. 130), states that English football clubs operate as profit making organisations which experience the same management challenges as those that face business organisations. This is so even if it contradicts the social aspect of football clubs which arises from the relationship established with the home community which sees the clubs being regarded as social organisations. The idea that football clubs can be regarded as profit making companies is not a new one. Zimbalist (2011, p. 14) considers football clubs as profit making companies that sell an increasing amount of products to the market. This way, the clubs can be seen as transnational corporations that sell the soccer match, merchandise and other products to an internationally spread fan base that can be regarded as the consumers of the products of the clubs. Separately, Marshall and Tomlin (2011, p. 9) state that the English Premier League earned 479 million euro in the year 2010 from selling television rights to foreign markets. In general, the activities of current football clubs are characterised by an increased range of commercial activities in which they engage, as well as a proactive approach towards other commercial activities. To begin with, there has been a sharp rise in the price of tickets being charged by all the clubs in the English Premier League (Williams & Neatrour 2002, p. 19). This has led to a rise in the average amount spent by the fans not only on match tickets but also on club merchandise. For instance, in a 2001 survey, Arsenal and Chelsea led in the average amount spent by the fans on team merchandise and season match ticket sales respectively (Williams & Neatrour 2002, p. 20). This is buoyed by a large revenue source that comes with media coverage of the competitions. For instance, through monopoly, sporting leagues such as the English Premier League have managed to use a policy of prestige which allows them to collect large profits with correspondingly little financial risk (Bolotny & Bourg 2005, p. 124). This is so because the policy comes with high broadcasting fees, low volume of broadcasting and high unitary profits. Chanavat and Bodet (2009, p. 463), examine how football clubs have utilised modern marketing methods on their operations. For instance, it is observed that many football clubs regard the fan base as the essential consumers of their commodities. As such, football clubs seek to develop and position themselves as brands in the international market. This is used as a vital strategy to take advantage of the emotional relationship that football clubs almost invariably develop with their supporters. It can be seen that once football clubs have positioned themselves as brands, they are able to exploit the loyalty of their supporters as a way of providing additional revenue through commercial transactions in different products and services. The need to connect with their fans is enhanced by the fact that there have been concerted efforts by football fans to gain a voice in the way the football clubs are managed. This has been through associations such as the Football Supporters Association and various independent supporters’ associations (Barber 2002, p. 3). According to Deloitte (2013, p. 8), football clubs operate commercially in terms of the relationship between their financial budgets and their overall outcome. With increasing financial expenditure, football clubs are able to access the player market that represents a free movement of highly skilled labour. Concomitantly, there is the corresponding increase in returns and skills which translates to improved outcomes for the clubs (Madichie 2009, p. 28). With the assumption of increasing returns to scale, it can be seen that football clubs operate commercially by tapping into the free movement of highly skilled labour and increasing returns which, in turn, leads to an overall increase in output which is represented by football results as well as commercial performance. Although this is the norm, exceptions seem to occur. Szymanski (2012, p. 3) examines reasons that caused insolvency in many European football clubs between 1974 and 2010. It is observed that in most cases, club insolvency is a result of either of the two factors: an unrealistic achievement for the clubs by the owners or the finances of the clubs being subjected to negative shocks in the market. If applied to English football clubs, it can be seen that their operations as commercial entities is based on several issues. To begin with, the clubs have diversified their commercial interests. This has led them to depend on corporate sponsorships, merchandising, broadcasting and fan attendance as their primary sources of revenue. Secondly, commercial operations are reflected in the way the football clubs seek to capitalise on the loyalty of their fans to achieve their commercial interests. This is done by positioning themselves as international brands, thus increasing their grasp to their fan bases who offer a vital base of consumers. Lastly, based on the assumption of increasing returns, football clubs are investing their revenues in recruiting the best talents, investing in improved facilities and resources. The expected result is that with increased investment, the clubs will benefit in terms of success in both the local and international competitions as well as increased financial gain. Methodology In the proposed research, data will primarily be collected from secondary sources. The research will be carried out in the form of collecting secondary information about commercialisation of football in general and ways in English football clubs are working commercially in particular. Secondary sources to be used in this research will include the following: (1) articles from academic journals, (2) books, (3) industry reports and (4) other publications that are relevant to the topic of research including club websites. Once the data is collected, it will be subjected to comprehensive analysis to determine trends and other features important to the questions of the research. The findings of the research will then be presented in the form of diagrams, charts and using other appropriate methods of presentation. Conclusion In conclusion, English football clubs, as they are known today, have undergone rapid developments over the recent past. The proposed research will show different ways in which these clubs are working commercially. In doing this, the research will address three key questions: what the history of commercialisation of English football clubs has been; what the defining features of commercialisation in English football clubs are and what the general impact of commercialisation of English football clubs to different stakeholders is. In addressing these questions, the proposed research will address gaps in the knowledge about ways in which English football clubs are working commercially. Finally, it is proposed that the research will be carried out using secondary sources of information. References Andreff, W 2005, ‘Sports accounting’, in W Andreff & S Szymanski (eds), Handbook on the economics of sport (pp. 11-21), Edward Elgar Publishing, Cheltenham. 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