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Abstract
Monopolization of broadcast rights for collective sales is a widespread practice in sports leagues. Proponents of this system claim that it is a necessary tool for the maintenance of competitive balance (tension) in sports. In this empirical paper, I argue that, in European soccer, collective sales do not increase competitive balance as compared to individual sales. Further, I demonstrate the negative effect of the UEFA Champions League and the beneficial effect of a more equal distribution of drawing power and a larger domestic market size on competitive balance. These results shed new light on antitrust policies towards the sports industry.
Keywords: competitive balance, broadcast rights, antitrust policy, soccer
Introduction
European soccer has seen two major financial developments over the last decade. First, the Champions League has emerged as a supranational competition, and second, the value of media rights has risen immensely. In the 2008-2009 season, the Champions League distributed almost 600 million Euros in prize money among 32 participating clubs (UEFA figures). On top of this, participating clubs are able to generate extra income through ticket sales and they enjoy surplus media exposure. Meanwhile, revenues from TV rights sales have become (one of) the mainstay(s) of club finances in all European leagues. In the top leagues, they now far exceed 500 million Euros per season (see TV Sports Markets, 2008 for further details). The potentially dramatic impact of these developments on the European soccer industry raises questions about such issues as the financial stability of clubs, player wages, and competitive balance. These concerns have resulted in a lively debate among policymakers and people in the industry. A crucial issue in this debate is the manner in which TV rights are sold. Two rivaling sales systems have emerged: one individual, the other collective. Under the individual system, each club owns and sells the rights to its home games; under the collective system, the league monopolizes all the rights, sells them as a package and subsequently distributes the revenues among the clubs. In certain cases some of the individually selling clubs have voluntarily opted to pool their rights without forcing the other teams to participate in the collective agreement. This has lead to a third "mixed" regime. Opponents of the collective system point at the...