Along with higher salaries for players and longer contracts, the Bosman decision (see previous post) created one of the most interesting case studies for economics, a phenomenon known as competitive imbalance.
While labor flow became international, the consumption markets remained domestic. In other words, while Slovakian players might play in the Scottish Premier League, the viewership of the SPL is still predominantly domestic.
Most other EU industries faced the opposite result. While their products became international, their labor inputs remained largely domestic. German automobile manufacturers still make their Volkswagons in Germany with German laborers, but EU integration allows them to sell in France and Sweden and the Czech Republic.
This is because football labor is highly distinct, meaning it is easy to tell which components of a team are good and pick them up and move them to other leagues. Players are also highly mobile. Since their skills rely less on communication and language barriers, and since the sport is theoretically the same in every country, they are less reluctant to change countries. Plus, multi-million Euro salaries are a large incentive to change countries.
Leagues also existed in all countries before integration and the Bosman ruling, and residents already had connections with domestic teams. Unlike the sugar or shirt industry, where people are going to pick the highest quality for the lowest price, football fans are complicated in their allegiance, and just because they can watch a team other than Anderlecht, doesn't mean they will all of a sudden be Manchester United fans.
In fact, European football might be the only industry in the world that faces this particular brand of problem.
And the results might have serious repercussions for the future of the sport.
Leagues are becoming increasingly stratified throughout the continent. In the era when clubs relied predominantly on gate receipts (ticket sales) for revenue, clubs made roughly the same amount of money, though clubs in larger markets like London and Paris tended to bring in more income. However, the transfer system, wherein the big clubs had to buy talent from the small clubs at a hefty price, helped ensure revenue sharing and that all teams remained on an essentially even level.
This has changed with the advent of television viewership and merchandising. Now those clubs that can reach wider markets bring in substantially more revenue. This became clearly evident with the initial stratification and emergence of the “big five” leagues – Germany, Italy, Spain, France, and England – since these countries have higher populations and viewership. Even then, before the Bosman ruling, these five leagues were not substantially wealthier than the second tier of leagues such as Scotland, The Netherland, Belgium, and Portugal.
But with the changes wrought by the Bosman ruling have seen a greater stratification of leagues. Smaller clubs and leagues no longer see the return when a talented player leaves for a larger league that they did in the transfer system era. In fact, they see no return at all. And as soon as a talented player is identified he is scoped up out of the smaller league for a salary several magnitudes greater in a larger league. Smaller clubs and leagues lose their ability to compete, and become less competitive in the sport as well.
And the stratification has extended inside leagues.
Just like the discrepancies between wealthy and poor leagues, wealthier clubs have the resources to purchase more and better players at higher salaries than smaller clubs. In Europe, several clubs have emerged at the upper echelon of wealth. These clubs - British clubs Chelsea, Arsenal, Liverpool, and Manchester United; Spanish clubs Real Madrid and Barcelona; and Italian clubs Juventus, Internazionale, and AC Milan - have dominated club competition, both within their domestic leagues and in the Champions League.
Within their domestic leagues, these clubs routinely finish in the top spots. In the Champions League, clubs from Britain, Spain, Italy, and to a lesser extent Germany, continually dominate. This year, Chelsea and Manchester United squared off in the final after battling it out to finish first in the Premier League. Liverpool were Champions League semifinalists. Last year three British clubs were also semifinalists. Many are expecting a similar outcome in the next few years.
Even in the smaller leagues, teams that can make more money have emerged as perpetual champions in their leagues. In Scotland, Celtic and Rangers are perpetual champions. In The Netherlands, PSV Eindhoven has won the last four consecutive Dutch League titles. Lyon in France has won the last seven League titles. Spain is dominated by Real Madrid, and Switzerland by Basle.
And the system in which these clubs work perpetuates this imbalance. Winning means more air time, more sponsorship money, more tickets sold, and more merchandising. More air time, sponsorships, tickets sold, and merchandising means more money. With more money, clubs are better able to purchase the best talent, which will most likely see repeated success.
The English Premier League has notoriously stepped over the domestic hurdle and expanded its viewership well beyond the domestic market, which was already the largest football market on the continent. It is easy to find EPL games on television in other European countries, and even in Asia and the Americas, but much harder to find Italian matches. EPL games are being broadcast globally, with especially big markets in Southeast Asia and growing markets in the Americas.
For this reason, people think that the English Premier League is continuing to distance itself from the rest of the pack, and within the EPL, the big four are distancing themselves from the rest of the league.
Many people say the logical conclusion to this imbalance is to create a European super league, with these best teams competing against each other over the course of a season, and giving other teams the chance to be promoted into the league, just as teams move up in leagues within domestic leagues.
Others say that the English Premier League is slowly emerging as the European league as it becomes more and more wealthy and continues to attract the continents best talent. The problem with this result, however, is that the wealth remains concentrated in England, unless ownership continues to become international, like Manchester United, which is owned by American investors, and Chelsea, which is owned by Russian Roman Abramovich.
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