Matt Scott: Competitive balance – when big club share they are caring for themselves

“You just can’t beat the person who never gives up.” Babe Ruth

The fans of football’s middling clubs must go to games right now with heavy hearts. It’s that time of year, the one where those teams who are wrapped in the unambitious security blanket of mid-table are already thinking more about their holidays than points tallies.

West Ham, in the Premier League’s Champions League-qualification positions at Christmas, now lie ninth, having picked up only 11 points from a possible 42 since. There is no fear of relegation and no hope of joining the European elite. The story is similar at Genoa in Italy, who were third in Serie A in mid-December but have won only twice in 14 games since, slipping down to 10th. The Spanish club Villarreal, who after a 10-game-unbeaten run from November to January, have returned 12 points from 24 in the Primera Liga since. They are unassailable in sixth and yet are unable to assault the Champions League places.

It seems that whatever the language, whatever the football culture, the outcomes are the same. It is a question of incentives, of natural human reactions that are common to us all, wherever we are. But whereas in Spain and Italy there are only one or two examples of this early holiday-making due to the circumstances for the clubs being just so – no scope for aspiration and no fear of relegation – in the Premier League, it is more pervasive. Southampton, third as recently as the start of February, now lie sixth after taking 11 points from 27.

Newcastle United, fifth in late November, have drifted to 13th on the back of a run that has yielded eight points from a possible 33. Their fans are so upset about it that they have organised a social-media campaign by the name of Boycott The Spurs Game, aimed at driving Newcastle’s owner, Mike Ashley, out of the club. His team’s form is a reflection of the owner’s objectives, as Ashley has famously made Premier League survival his sole priority for players and staff. Fundamentally though, it is not Ashley that the supporters are railing against but the economic imperative of the Premier League and the way it structures its rights sales.

The Premier League has a self-reinforcing cycle of success for the biggest clubs, which earn the most from “merit awards”, the cash payments according to league-finishing position. Frustrating though it evidently is for Newcastle fans, this model is the best conceivable system for the greater benefit of the league as a whole, as has been identified in a number of economic studies into the effect of finances in sports competition.

Ashley knows that with 2013 revenues, Newcastle’s most recently recorded, of below £100 million a year, it is impossible to compete with Manchester United (2013: £363.2 million), Arsenal (£278.8 million) Manchester City (£271 million), Chelsea (£255.8 million) or even Liverpool (£169 million) for the four Champions League places. Though an ardent casino-goer, he is not prepared to gamble his club’s future to lift the club artificially higher. Even as a billionaire owner, he does not have the financial resources of a sovereign-wealth fund to call on as at Manchester City or Paris Saint-Germain. Ashley knows that for those who attempt to force the system without such riches, the consequences are inevitable ruin, as the examples of such as Leeds United and Portsmouth attest.

As in most walks of life, football will always have its big fish. And like sharks who protect the ecosystem of a coral reef, their presence is a good thing for those who share the water with them. Stefan Szymanski, the professor of sport management at the University of Michigan and co-author of Soccernomics, studied what effects revenues had on football teams in his 2001 paper ‘Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer’.

He found: “If some teams draw on larger (or more devoted) fan bases, then the success of these teams will yield greater total utility than the success of teams with small fan bases… If fan support is unequally distributed between teams… then a utilitarian welfare function is likely to suggest that imbalance in favour of more strongly supported teams is optimal.”

Separately Helmut Dietl, Tobias Duschl, Egon Franck and Marcus Lang found in their paper A Contest Model of a Professional Sports League with Two-Sided Markets in 2003 that this is to do with “network externalities”, or what effect a user has on a product’s value to other people. If everyone in your peer group is following Manchester United, a Premier League club, then that fact will encourage you to watch Premier League football. That interest will generate revenues for all Premier League clubs, which in turn enhance the quality of the playing talent on display in that league.

Javier Tebas, the president of the Spanish Professional Football League, said as much yesterday at the ‘TPO Seminar: The Way for a Sustainable and Competitive Future in World Football’. He said: “[The status quo] could precipitate [a situation wherein] the Premier League becomes like the NBA in five years. The difference of two billion euros between La Liga and the Premier League makes it impossible to retain talent [in Spain]. They’re all going to the Premier League… If regulation is not resolved in five years the effect the NBA has had in basketball will be repeated in football.”

Tebas’s league is suffering from what blighted the FA Cup competition in England between 1970 and 2000, as Szymanski discovered. “The FA Cup is a competition where the resources of the participants have become more unevenly distributed (compared to the league) over time,” he wrote in 2001. “The data show, just as one might have predicted, that this relative increase in inequality has led to a relative decline in attendance.

“In the 1960s it was not unusual for attendance at an FA Cup match to be 50% higher than the attendance at the equivalent league fixture. By 1998 the average attendance at FA Cup matches was lower than at the matched fixture. [This] appears to confirm the standard hypothesis about the impact of income inequality and competitive balance on the attractiveness of sporting competition.”

Tebas rightly identifies that better competitive balance is required in La Liga to prevent interest in it waning too far. The regulation he is calling for is a system of collective selling of television rights. But assuming he succeeds in persuading the Spanish government to introduce the necessary broadcast architecture that will permit the kind of competitive auctions that make the Premier League rights so valuable, he should be careful how their proceeds are redistributed. Selecting the optimal level of competitive balance is a delicate balancing act. If too much of the value accrued by the most-marketable clubs – in Spain’s case Real Madrid and Barcelona – is given away, it risks undermining the marketability of the league as a whole.

Using (the rather limited) metric of German TV ratings in F1 as its statistical sample, a September 2010 research paper by the Institute of Public Economics at Germany’s University of Münster found: “On the one hand there is the wish to see a thrilling duel at the top and on the other hand a high level of competitive balance is not interesting for the viewers.”

A later report analysing competitive balance in F1, published in the Journal of Sports Economics by Matthew Knight and Inez Torre in August 2013, expanded on the theme with this: “Too high a level of competitive balance is as undesirable as too low a level… viewer interest and by implication television broadcasting revenues and gross sponsor exposure are maximised by a season-long ‘duel’ between superstar drivers, with the occasional race won by a noncontender.”

So creating a situation where unexpected results become routine would be a turnoff for the television viewers who have served the Premier League so well. This is a fundamental fact that has forever been true in sport, and it is what led Szymanski to declare that “redistribution on the basis of performance” is a good thing – it produces a self-reinforcing cycle perennially pitting the so-called Premier League big five against each other.

Newcastle fans might not like how they are shut out of the English and European elite, but it is a situation that Ashley – or, quite likely, any other owner – would find impossible to change. Newcastle’s manager, John Carver, had this to say to his club’s fans over their boycott threat: “We’re at the business end [of the season] and I’m pleading, ‘Get behind the team, give us your support, because it makes a difference’.”

And he is right. Because if there is one leveler in the face of seemingly insurmountable odds it is doggedness. As Babe Ruth knew: it doesn’t matter how good you are at sport, you just can’t beat the person who never gives up.

Journalist and broadcaster Matt Scott wrote the Digger column for The Guardian newspaper for five years and is now a columnist for Insideworldfootball. Contact him at oc.ll1558560410abtoo1558560410fdlro1558560410wedis1558560410ni@tt1558560410ocs.t1558560410tam1558560410m.