Competitive Balance and Consumer Demand in the English Football League

• Published in: Applied Finance and Accounting Vol. 3; no. 2; p. 49
• Main Authors: Martinez, Misael, Willner, Jonathan
• Format: Journal Article
• Language: English; Japanese
• Published: 07.06.2017
• ISSN: 2374-2410; 2374-2429
• DOI: 10.11114/afa.v3i2.2411

Competitive balance in sports leagues is often used to justify revenue sharing agreements. The justification is that competitive balance leads to higher attendance and higher attendance generates more revenues. By sharing revenue, small market teams can afford to pay for high quality talent, assuring more equal distribution of that talent. Unlike US professional leagues, English football operates under a system of relegation and promotion so that at the end of each season the worst performing teams are "relegated" and the top performing teams in the next level down are "promoted". This may serve as an alternative to revenue sharing to maintain competitive balance.Using data from the top English football league (currently the Premiership) from 1888-89 through the 2014-15 season we calculate multiple measures of league competitive balance for each year using both 3-1-0 and 2-1-0 point systems. We then use these measures with available macroeconomic control variables to examine the relationship between competitive balance and match attendance.We find that, counter to related work in US sports leagues, competitive balance in English football is negatively associated with attendance. This is particularly true in the case of the Premiership era, wherein only five teams have won the championship and in the past 10 seasons, the top 4 places of the championship has been dominated by 7 clubs, yet attendance has steadily increased. This result raises questions about the utility of revenue sharing in increasing attendance in English football.