Economic Theory

The European Super League, and the economics of football


Today, the media are full of reports and outrage about the shock news that twelve European teams (including six from the Premier League) are proposing to set up a European Super League as an alternative to the Champions League (and possibly domestic football for those teams if national leagues and associations follow through on their threats). Quite frankly, anyone who was surprised by this has been living on Mars for the last twenty years, as this has been discussed/threatened for a long time, and the prospect of it has driven the creation of the Champions League and proposed revisions to it. This will be the big news story for some time, and I think it could crystallise quite a few feelings about how the world economy in general has been developing, and lead to a big reaction. Much of the initial reaction, while passionate, has also missed the point – this is not a matter of simple greed for example. That doesn’t mean it is a good idea though, from either a footballing or business point of view. What we need to do is to think more analytically and economically about this. In that spirit – here are some initial thoughts.

Firstly, this is a clear illustration of a number of contemporary trends in the world economy. One is the increasing disconnect between products and specific localities or geographically-based identities (is Louis Vuitton a French company in any meaningful sense for example?). This is driven by modern marketing and distribution and, above all, television. National TV from the 1970s onwards gave certain teams a national following and satellite TV combined with specific factors has given some teams a global following that has no connection to the actual place the teams are based in. Other teams aspire to this and are looking to create such a global brand (City and Chelsea, for example).

Another is the movement away from territorial (usually national) states as the organising units of the world economy and towards city regions and, increasingly, leagues of cities. This proposed ESL will radically undermine the role of national associations and federations. It is basically a league of teams based in major cities with global connections (Madrid – London – Barcelona – Milan – Manchester – Liverpool). If it succeeds it will be followed by other transnational leagues (discussions about forming an ‘Atlantic League’ took place a few years ago for example). This also reflects the declining significance of national competition (international football). Being banned from international competition is not the threat many think it is for a lot of players (not least because of the devaluation of international football in recent years).

Yet another is the shift of economic power away from Europe and towards Asia and even Africa. This move is American-inspired and driven (not to mention funded) but it is clear that the strategic thinking behind it is to create a product that will sell outside Europe, in East and West Asia, Africa, and Latin America. What we can see in this case but also in others is the appearance of a powerful political backlash against these trends. This (the ESL) is going to cause a huge political storm. There has already been a reaction against the first of the two trends and moves to reassert local ownership and identity or origin in various ways. This is something that transcends the old divisions between left and right – it lines up rather with the new division between local and global. The evidence from immediate surveys is that attitudes to this ESL are sharply divided by age, with younger fans generally positive and older ones overwhelmingly against.

Secondly, this shows clearly that when you look at professional sport as a business the unit of competition and analysis is not the team. Rather, it is the league or organising body – something we have seen in other sports before, such as cricket.  In economic terms this is a classic example of an attempt to form a cartel to establish regulated oligopolistic competition. It has the classic features of such efforts. Firstly, it’s defensive. The impetus has come from teams like Madrid, Barca and Juventus that are feeling the pressure of competition and (crucially) American-owned teams in the PL (Liverpool, Utd, Arsenal). The reason is these teams have a business model that depends on CL qualification and that is very uncertain because there are now as many as 7-8 teams with a realistic chance of getting only four places. Secondly the goal of the cartel is not primarily to maximise revenue, it is to ensure predictability and stability of revenue. It is done by the established teams plus the ‘upstarts’ who have provoked the crisis but now have to be brought inside (Chelsea, City, Atletico Madrid) while shutting the door firmly on anyone else with ideas of breaking in (Everton, West Ham, Atalanta).

This all raises the question of what the nature of the good that football fans value is. I think that it is increasingly clear that there are two kinds of fan who have very different ideas as to what it is they value. One lot value the uncertainty and competition (because it brings added tension and failure makes success all the sweeter) and also value traditional identity and rivalry which means the whole lot of local (i.e. national) rivalries. The others focus more on individual players and on skill and display and follow simply one brand or team in the same way that they have a favourite type of food or beer. So, there’s two very different ideas of what the ‘product’ or good is. I suspect they will actually become distinct with time.

You can tell whose oxen are being gored by the squeals: those of the Premier League, UEFA and FIFA, the national associations, and the established broadcasters, particularly Sky. And the traditional fans – but I suspect that if they follow one of these teams, they will soon realise they are now in the minority on a global basis. Finally, a little remarked aspect so far of these proposals is that they also import another feature of American sports which is strict financial controls, above all salary caps. This is should all concentrate the minds of football authorities throughout Europe. What they cannot do, faced with this competitive challenge (because that is what it is – it is setting up a challenger to the existing monopoly provider of football i.e. the national associations and UEFA) is try to preserve the way things are and have been for the last forty years. That order is on its deathbed anyway, as the condition of the great majority of football teams throughout the various leagues makes clear. They should be thinking of adopting some of the measures the proposed ESL suggests while looking to strengthen the internal competition and uncertainty that the people behind this proposal so dislike.

 

Head of Education

Dr Steve Davies is the IEA's Senior Education Fellow. Previously he was program officer at the Institute for Humane Studies (IHS) at George Mason University in Virginia. He joined IHS from the UK where he was Senior Lecturer in the Department of History and Economic History at Manchester Metropolitan University. He has also been a Visiting Scholar at the Social Philosophy and Policy Center at Bowling Green State University, Ohio. A historian, he graduated from St Andrews University in Scotland in 1976 and gained his PhD from the same institution in 1984. He has authored several books, including Empiricism and History (Palgrave Macmillan, 2003) and was co-editor with Nigel Ashford of The Dictionary of Conservative and Libertarian Thought (Routledge, 1991).


3 thoughts on “The European Super League, and the economics of football”

  1. Posted 19/04/2021 at 17:10 | Permalink

    Steve Davies, Bluestreak, Legend.
    A good article Steve.
    Best wishes from all at Izzet 🙂

  2. Posted 20/04/2021 at 11:15 | Permalink

    You’re right about the two types of fans. But it’s been a thing since at least the 1980s. Lots of boys become fans of whichever club is the champion or FA Cup winner, and stick with them for life. Many never went to a game.

    What’s happened over time is that TV and merchandising revenue have become bigger for clubs than fans going to matches. It’s why matches are all over the week, instead of the traditional Saturday and Wednesday. Putting some matches on Monday and Tuesday allows Sky viewers to have a match to watch.

  3. Posted 20/04/2021 at 13:08 | Permalink

    ‘You can tell whose oxen are being gored……’ Oh dear….

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