This is an author's accepted manuscript.

The final, definitive version of this paper has been

published in Journal of Sports Economics, 11 (2), 186-202 by SAGE Publications Ltd, all
rights reserved. The original article is available online at http://jse.sagepub.com/
content/11/2/186.refs

2
1 Top Clubs’ Performance and the Competitive Situation in
3
European Domestic Football Competitions
4
Tim Pawlowski, Christoph Breuer, Arnd Hovemann
5
6
7 1. Dr Tim Pawlowski (correspondence)
8
9 Graduate in Political and Sports Economics
10 Research Assistant
11 Institute of Sport Economics and Sport Management
12 German Sport University Cologne
13 Institutsgebäude II, EG, Raum 5
14 Am Sportpark Müngersdorf 6
15 50933 Cologne
16 Germany
17 phone: +49-221-4982-6098
18 fax: +49-221-4982-8144
19 e-mail: pawlowski@dshs-koeln.de
20
21
22 2. Prof. Dr Christoph Breuer
23
24 Full Professor at German Sport University Cologne
25 Institute of Sport Economics and Sport Management
26 German Sport University Cologne
27 Research Professor at German Institute for Economic Research (DIW Berlin)
28 Institutsgebäude II, EG, Raum 5
29 Am Sportpark Müngersdorf 6
30 50933 Cologne
31 Germany
32 phone: +49-221-4982-6095
33 fax: +49-221-4982-8144
34 e-mail: breuer@dshs-koeln.de
35
36
37 3. Arnd Hovemann
38
39 Graduate in Sport Economics, European Master in Sport Management
40 Ernst & Young AG
41 Wittekindstrasse 1a
42 45131 Essen, Germany
43 phone: +49-201-2421-21956
44 fax: +49-181-3943-21956
45 e-mail: Arnd.Hovemann@de.ey.com

1
1 Top Clubs’ Performance and the Competitive Situation in
2 Domestic Soccer Competitions
3

4 Abstract (100 words)

5 The increase in payouts to European football clubs appearing in the UEFA

6 Champions League (CL) in 1999/00 had a lasting impact on the performance of top

7 clubs in domestic football leagues. This policy change is treated as a natural

8 experiment to compare the level of competitive balance in five top European leagues

9 (England, Spain, Italy, Germany, and France) before and after the turn of the

10 millennium. Based on several competitive balance measures, this paper reveals a

11 significant decrease in competitive balance after the modification of the CL payout

12 system.

13 Keywords (4–5)

14 competitive balance, football, media income, UEFA Champions League

15 Authors’ Note

16 We are grateful to the guest editor, Brad Humphreys and two anonymous referees

17 whose comments and suggestions significantly improved the paper.

18

2
1 1. Introduction

2 Since the introduction of the Champions League (CL) (previously called the

3 European Champions Clubs’ Cup), an annual pan-European football competition that

4 takes place at the same time as domestic league competitions, many modifications

5 have been made to the format of the CL. One of the most striking was put into

6 practice in the 1999/2000 season: an increase in number of participating teams from

7 24 to 32 and a large increase in payments to the participating clubs. Alongside

8 numerous other factors (e.g. an increase in national media revenues, investor market

9 entries, successful internationalization efforts of European clubs), this boost in the

10 payment to clubs participating in the CL might have a lasting impact on the

11 performance of clubs participating in the CL in domestic leagues since these clubs

12 are able to invest more money in talent (salaries, transfer fees) compared with other

13 clubs in the league. Figure 1 illustrates the increase in payments to CL participants.

14

35.0 before 1999/00

after 1999/00 30.6
30.0
26.0 26.2
24.8 23.9
25.0 23.1 23.1 22.3
in EUR million

22.1 21.0
20.0

15.0 11.5
10.3 9.3
10.0 8.5 6.9
5.2 5.5
5.0
0.0 0.0 0.0
0.0
rin
d.

on
n
rid

l
oo
ic

do
ila

on
nt

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Tu
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te

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ea
es

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pi

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ve
ye

FC
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Ba

ly
an

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15
16 Figure 1: Average payments per year of participation in the CL to selected participants before/after
17 1999/00 (source: UEFA).

3
1 We can also observe a significant spread in the market value of first division teams

2 within domestic leagues following this change in CL payments. According to Frick

3 (2007), the market value of the smallest first division teams in millions of Euros in

4 2006/2007 was well below 50 million Euros -- Watford FC (England): 37, Gimnastic

5 de Taragona (Spain): 19, Scoli Calcio (Italy): 14, Ernergie Cottbus (Germany): 17,

6 AFC Valenciennes (France): 12) -- while the most valuable teams in each domestic

7 league had market values in excess of 300 million Euros -- FC Chelsea: 405, FC

8 Barcelona: 356, Juventus Turin: 320, Bayern Munich: 182, Olympique Lyon: 166.

9 Given the interdependency between economic and sporting outcomes (Dietl &

10 Franck, 2005), a comparison of clubs’ performance before and after the increase in

11 CL payments can be thought of as a natural experiment to understand the effect of

12 CL participation on the level of competition in the top five European football leagues

13 (England, Spain, Italy, France, and Germany), before and after this policy change.

14 This paper makes two contributions to the literature:

15 (1) Identify and discuss changes in competitive balance in domestic football

16 competitions in Europe that can be attributed to the increased value of CL

17 participation;

18 (2) Explore the economic and financial implications of the dual system of football

19 club competitions currently in place in top-level European football.

20 The paper is organized as follows: section 2 discusses the dimensions of competitive

21 balance (CB), the factors influencing CB in football leagues and reviews the relevant

22 research on CB in football; section 3 discusses the measures of CB in sports leagues

23 used in this analysis; section 4 presents the results of our analysis of CB in the top

24 five European leagues; section 5 discusses the implications of the results and

4
1 possible policy responses, and makes an overall assessment of the consequences of

2 the two level competition in European football.

3 2. Previous Research on Competitive Balance

4 Sports economists decompose competitive balance into a within-season component

5 (e.g. Cairns, Jennett, & Sloane, 1986) and the within-team component (e.g.

6 Buzzacchi, Szymanski, & Valletti, 2001). The former refers to performance

7 differences across teams in a league within a season (e.g. uncertainty of the

8 outcome for championships, relegation, and qualifications for the pan-European

9 competitions); the latter refers to the performance of a given team over a period of

10 time (e.g. long-term dominance). A certain degree of CB is often seen as a key

11 component to success of sports leagues and therefore “each competitor has an

12 inherent interest in maintaining the health of their rivals” (Groot, 2008, p. 25). A

13 central argument in this context is that excessively imbalanced competition might

14 have a negative impact on fan interest and, hence, on demand (Késenne, 2006;

15 Zimbalist, 2003). Furthermore, unbalanced sports competitions are linked to certain

16 risks, like the risk of the splitting-off and reorganization of top clubs into a separate

17 league or the risk of bankruptcy of lagging clubs (Michie & Oughton, 2004). In

18 addition, CB depends on the distribution of player talent among clubs (Késenne,

19 2000). Although Drewes (2003, p. 245) mentioned “that it is not revenue potential

20 that makes a club a strong club, but what club management makes out of this

21 potential,” clearly access to different revenue streams (e.g. qualification for pan-

22 European competitions like the CL [1]) might have a lasting impact on domestic

23 league competition given the observed interdependency between economic and

24 sporting outcomes (Dietl & Franck, 2005). Sanderson (2002) identified several

25 factors that indirectly influence CB in sports leagues: differences in the access to

5
1 publicly financed infrastructure; differences in access to technology; a lack of integrity

2 in club or league outcomes (e.g. the betting scandal in Italy); doping; and

3 physiological differences between players, which can be closely related to player

4 talent. Furthermore, non-sports-related factors like distribution of media rights fees

5 (i.e. centralized marketing with revenue sharing yields a smaller income gap between

6 the top and the bottom clubs than decentralized marketing), differences in national

7 tax systems (i.e. lower taxation on players’ income might yield a competitive

8 advantage for a domestic league in that country), regulation of property rights like

9 the 50+1 rule that makes investor market entries less likely in Germany, and salary

10 caps might influence inter- and intra-divisional revenue distribution and hence CB

11 within and between leagues. In addition, sports-related regulations like the promotion

12 and relegation system, the point score ranking system, and the number of opponents

13 in a league might also have an impact on CB.

14

15 Previous studies on CB in football reveal important differences in CB across leagues.

16 Some of the findings appear contradictory, which can be attributed to differences in

17 the time periods analyzed. While some studies detect no significant changes in CB

18 (Feddersen, 2005; 2006: German first division; Feddersen & Maennig, 2005: German

19 first division; Goossens, 2006: German, French, and Spanish first divisions; Groot,

20 2008: French and Spanish first divisions; Koning, 2000: Dutch first division; Michie &

21 Oughton, 2004: French first division; Szymanski, 2001: English first division), others

22 contain evidence of a decline in CB in some leagues (Goossens, 2006: English and

23 Italian first divisions; Groot, 2008: English, German, Italian, and Dutch first divisions;

24 Michie & Oughton, 2004: English, German, Italian, and Spanish first divisions).

25 Some studies exist that analyzed the impact of specific factors on CB in football

6
1 leagues, including the promotion and relegation system (Buzzacchi, Szymanski, &

2 Valletti, 2001; 2003; Noll, 2002), the point score system (e.g. Haugen, 2008), salary

3 distributions (Hall, Szymanski, & Zimbalist, 2002), the number of competitors (Cairns,

4 1987; Groot, 2008), and revenue distribution within a league (e.g. Andreff & Bourg,

5 2006). All of these factors were found to influence CB in football leagues in

6 predictable ways.

7 Summing up, the competitive situation in European football leagues has already

8 been analyzed in previous studies. In particular, recent research found empirical

9 proof for a decline in CB in some leagues as a result of different impact factors.

10 However, no study exist that analyzed changes in CB in domestic football

11 competitions that can be attributed to the increased value of pan-European

12 competitions.

13 3. Measures of Competitive Balance

14 Common indicators of competitive outcomes in sport leagues include league position,

15 winning percentage, and points won by clubs. In general, winning percentage is the

16 most widely used indicator in studies of CB in North American sports leagues. In

17 sports like football, where drawn games are possible and common, winning

18 percentage might be a biased indicator [2]. While Szymanski (2001) argued that

19 winning percentage is still a reliable indicator of success in English football, the CB

20 measures used here depend on the points scored in a season and the team’s league

21 position at the end of a season. For inter-seasonal comparability, and to capture the

22 transition from a 2–1–0 to a 3–1–0 point award system, the results from the 2-point

23 system in place in France until 1993/94 and in Germany, Spain, and Italy until

24 1994/95 are converted to a 3-point system based on actual match results.

25

7
1 We use the following measures of competitive balance to analyze the effect of the

2 increase in payments for CL appearances after 1999/2000. The Hirshman Herfindahl

3 Index (HI) is used, based on the sum of the quadratic share of points ( si2 ) won by

4 each club in a league with N teams. For inter-divisional comparability and to account

5 for changes in the size of leagues over time, this measure is modified to the so-called

6 H-Index of Competitive Balance (HICB), which is the ratio of the HI to the HI of a

7 perfectly balanced league (Depken, 1999):

N (1)
∑s 2
i
HICB = i=1
* 100 .
1N

8 The concentration ratio (CRi) is used, based on the share of points (si) won by the

9 n=1,2,…i clubs compared with the entire league. The CR measure is calculated for

10 the top five clubs (CR5) on the table for each league since these clubs regularly play

11 in pan-European competitions. Since this measure is sensitive to league changes as

12 well, the CR5 is modified to the so-called C5-Index of Competitive Balance (C5ICB),

13 which is the ratio of the observable CR to the CR of a perfectly balanced league:

5 (2)
∑s i
C5ICB = i=1
* 100 .
5N

14 The most commonly used measure in studies of CB in North American leagues is the

15 standard deviation (SD) of team winning percentage within a season. Based on the

16 individual points (TPt,i) of a team i and the average number of points within a league

17 of N opponents TPt , one can describe the standard deviation of league points

18 (SDLPN,t) for a certain season t as:

8
 N (3)
∑ (TP t,i − TPt )2
SDLPN,t = i=1
.
N

1 All three of these measures capture within-season CB. For each of these measures,

2 a decline in CB is reflected by an increase in the index.

4 One CB measure that captures team-specific variation across seasons is the

5 standard deviation of team points (SDTP). Following Humphreys’ (2002) measure

6 (which is based on winning percentage), the SDTPT,i is the individual standard

7 deviation of total points won per season (TPt,i) by team i across a certain number of T

8 seasons:

T (4)
∑ (TPt,i − TPi )2
SDTPT,i = t =1
.
T

9 Here, a decline in CB is reflected by a decrease in the index. The competitive

10 balance ratio (CBR), which is a comprehensive measure that captures both CB

11 components, can be easily derived as the ratio of the average standard deviation of

12 team points to the average standard deviation of league points (Humphreys, 2002):

SDTPT (5)
CBR = .
SDLPN

13 The smaller the value of the CBR, the less balanced is the league. Compared with

14 other approaches (e.g. Groot, 2008), the CBR is made up of both components and

15 therefore provides a comprehensive and comparable measure of CB.

16

17 Finally, we make use of the Markov process technique (Bherends, 2000) that was

18 first used to evaluate competitive balance in MLB by Hadley, Ciecka and Krautmann

9
1 (2005). They analyzed the probability that a given team’s performance (whether it

2 qualifies for postseason play or not) in one season depends on its performance in the

3 previous season (Leeds & von Allmen, 2005). Like Hadley, Ciecka and Krautmann

4 (2005) we identify two different states in terms of a team’s finish to check for the

5 variation of top clubs’ performances:

6 1. A team qualified for the CL group stage (in)

7 2. A team did not qualify for the CL group stage (out) [3].

8 Four transitional probabilities are calculated based on the final place of each team in

9 the league standings in two consecutive seasons: (1) a team repeats in qualifying for

10 the CL (Pii), (2) a team goes from not being in the CL in one season to being in the

11 CL in the next season (Poi), (3) a team goes from being in the CL in one season to

12 not being in the CL in the next season (Pio), (4) a team repeats in not qualifying for

13 the CL (Poo).

14 4. Results

15 Figure 2 shows the average H-Index of Competitive Balance in the top European

16 leagues before and after the change in payout to CL participation that took place at

17 the turn of the millennium. Like Eckhard (1998) we compare two time periods of

18 equal lengths (1992/93–1999/00 and 2000/01–2007/08). Based on the H-index

19 values CB declined in three (Germany, Italy, England) out of the five leagues after

20 the turn of the millennium. The English Premier League and the Italian Serie A

21 especially were more unbalanced in the later period.

22

10
 111.0
1992/93–1999/00 110.1
110.0 2000/01–2007/08 109.7

109.0 108.5
108.0 107.4
107.0 106.5 106.6
106.3 106.5
106.1
106.0
105.3
105.0

104.0

103.0

102.0
France Germany Italy Spain England
1
2 Figure 2: The average H-Index of Competitive Balance in the European top leagues before and after
3 the turn of the millennium.

5 Observed changes in the average C5-Index of Competitive Balance in these leagues

6 reinforces the results above. With the exemption of the French Ligue 1 all the

7 leagues experienced a decline in CB based on the C5-Index (see figure 3). The

8 parallel changes in the two CB measures suggests that the performance of the top

9 five clubs had a considerable impact on the competitive situation in the leagues, and

10 that the increase in payments to CL participants had an adverse impact on CB in

11 these leagues.

12

11
 145.0 143.2 143.1
1992/93–1999/00
2000/01–2007/08
140.0

135.9
134.7 135.1
135.0 133.5 134.1
132.5 131.9
129.5
130.0

125.0

120.0
1 France Germany Italy Spain England
2 Figure 3: The average C5-Index of Competitive Balance in the European top leagues before and after
3 the turn of the millennium.

5 To analyze the within-team component of CB requires a focus on individual team

6 identities. Since teams participating in the CL are of special interest, this section

7 focuses on the top five teams in each league during the entire sample period

8 (1992/93–2007/08) in terms of the total number of points won in the domestic

9 leagues. The top teams in each league advance to pan-European competitions in the

10 following season. These teams are in France: Olympique Lyon, AS Monaco,

11 Girondins Bordeaux, Paris St. Germain, AJ Auxerre; in Germany: Bayern Munich,

12 Werder Bremen, Bayer 04 Leverkusen, Borussia Dortmund, Schalke 04; in Italy:

13 Juventus Turin, Inter Milan, AC Milan, AS Rome, Lazio Rome; in Spain: Real Madrid,

14 FC Barcelona, Deportivo La Coruña, FC Valencia, Athletic Bilbao; and in England:

15 Manchester United, Arsenal London, FC Chelsea, FC Liverpool, Aston Villa. As might

16 be expected, most of these top clubs also participate regularly in the CL (see table 1).

12
1 Table 1: The distribution of domestic CL qualification places to clubs (focus: year of qualification, x =
2 direct qualification for the CL group stage in the following year; o = CL qualification, no
3 qualification for the CL group stage).

1992/93
1993/94

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08
CL qualification ∑
Bayern Munich x x x x x x x x x x x x 12
Bor. Dortmund x x x x x x o 7
Bayer Leverkusen x x x x x x 6
Werder Bremen x x x x x x 6
FC Schalke 04 x x x o 4
VfB Stuttgart x x 2
Hamburger SV x x 2
1. FC K’lautern x 1
Hertha BSC Berlin x 1
1860 Munich o 1
Manchester Unit. o x x x x x x x x x x x x x x 15
Arsenal London x x x x x x x x x x x 11
FC Chelsea x x x x x x x 7
FC Liverpool x x x x x x x 7
Newcastle United x x o 3
Blackburn Rovers x 1
Leeds United x 1
FC Everton o 1
Juventus Turin x x x x x x x x x x x 11
AC Milan x x x x x x x x x x x 11
Inter Milan x o x x x x x x x 9
AS Rome x x x x x x 6
Lazio Rome x x x x x 5
AC Florence x o x 3
AC Parma x o o 3
Udinese Calcio x 1
Olympique Lyon o x x x x x x x x x 10
Ol. Marseille x x x x 4
AS Monaco x x x x x o 5
Giron. Bordeaux x x x 4
Paris St. Germain x x x x 4
OSC Lille x x x 3
FC Nantes x x 2
AJ Auxerre x x 2
Racing Club Lens x x 2
FC Metz o 1
FC Toulouse o 1
Real Madrid x x x x x x x x x x x x x 13
FC Barcelona x x x x x x x x x x x x x 13
FC Valencia x x x x x x 6
Dep. La Coruña x x x x x 5
Atlético Madrid x x 2
FC Villarreal x x 2
Real CD Mallorca o x 2
FC Sevilla x 1
RS San Sebastián x 1
Celta Vigo x 1
Betis Sevilla x 1
Atletic Bilbao x 1
CA Osasuna o 1
4

13
1 Table 2 summarizes the Markov transition probabilities for each league. Due to the

2 limited number of CL qualification places (e.g. 2007/08: 1st–3rd place in Germany and

3 France; 1st–4th place in England, Spain and Italy), the probability that a team will go

4 from not being in the CL in one season to being in the CL in the next season is quite

5 low (Poi <.10). This probability remains relatively constant in before and after the

6 change in payments for all leagues. In a balanced league every team has the same

7 chance of being in the CL in season t+1, regardless of its performance in t, i.e. Poi =

8 Pii. From Table 2, this is not the case. With the exemption of France in the period

9 1992/93–1999/00 (Pii =.077), the probability that a team repeated qualification for the

10 CL is far larger than 0.3. Furthermore, this probability increased dramatically after the

11 turn of the millennium. For example, the probability that a team in the English

12 Premier League repeated qualification for the CL is .844 in the period 2000/01–

13 2007/08 and only .538 in the earlier period.

14 Table 2: Estimated transitional probabilities before and after the CL modification.

League Transitional probabilities 1992/93–1999/00 2000/01–2007/08
Germany Pii 0.375 0.600
Pio 0.625 0.400
Poi 0.079 0.069
Poo 0.921 0.931
England Pii 0.538 0.844
Pio 0.462 0.156
Poi 0.042 0.031
Poo 0.958 0.969
Italy Pii 0.375 0.625
Pio 0.625 0.375
Poi 0.079 0.079
Poo 0.921 0.921
France Pii 0.077 0.500
Pio 0.923 0.500
Poi 0.090 0.077
Poo 0.910 0.923
Spain Pii 0.500 0.594
Pio 0.500 0.406
Poi 0.056 0.081
Poo 0.944 0.919
15

14
1 To compare leagues of different sizes, we normalized the total number of points won

2 by clubs to a standardized league of 18 teams where each team plays 34 matches

3 [4]. Based on this normalization, we calculate the standard deviation of team points

4 across season, shown in figure 4. From figure 4, we can observe an increase in CB

5 in France and Germany, while the CB level in England and Spain remained constant.

6 Based on these results, the top five clubs in France and Germany showed increased

7 persistence in the standardized number of points earned in the later observed period.

8 Only Italy experienced a significant increase in the variability of points earned. While

9 we considered the relegation of Juventus Turin, the results in Italy reflect the

10 additional deduction of points for Lazio Rome and AC Milan in 2005/06 due to the

11 match fixing scandal.

12

12.0
1992/93–1999/00
2000/01–2007/08
10.0
10.0
8.5
8.2 8.1
8.0 7.7 7.5
7.0 7.0 7.0 7.0

6.0

4.0
13 France Germany Italy Spain England

14 Figure 4: The within-team component of the top five clubs in the European top leagues before and
15 after the turn of the millennium.

16

17 The average standard deviation of league points and its differences across the

18 1992/93–1999/00 and 2000/01–2007/08 periods are shown on figure 5. Based on

19 this figure, the average number of points won by the top five clubs compared with the

15
1 rest of the teams in each league increased in the later period. This effect is most

2 obvious in the Italian and the English first divisions.

25.0 1992/93–1999/00
21.7 21.2
2000/01–2007/08
20.0
16.2 15.7 15.3 15.3
15.2
14.2
15.0 13.0 13.4

10.0

5.0

0.0
France Germany Italy Spain England
4
5 Figure 5: The within-season component of the top five clubs in the European top leagues before and
6 after the turn of the millennium.

8 Based on the average standard deviation of team points (within-team component)

9 and the average standard deviation of league points (within-season component), we

10 can calculate the CBR, shown on figure 6.

1992/93–1999/00
0.700 2000/01–2007/08
0.650 0.631
0.600
0.600 0.573

0.550 0.515
0.500
0.463 0.459 0.463 0.455 0.453
0.450

0.400

0.350 0.329

0.300
11 France Germany Italy Spain England

12 Figure 6: The CBR of the top five clubs in the European top leagues before and after the turn of the
13 millennium.

16
1 Based on the CBR, a distinct difference before and after the turn of the millennium

2 can be seen in all of the domestic leagues. Based on these findings, CB in all the

3 domestic leagues decreased as the top clubs repeated their good performance

4 season after season and/or the difference between the performance of the top clubs

5 and the other league competitors within a season increased over time. The declines

6 in England and Germany were particularly large.

7 Summing up, most of the metrics point to a decrease in CB after the CL payouts

8 increased. Thereby, the transition probabilities match the CBR results. This decrease

9 appears to be more significant in England, Italy and Germany compared to Spain or

10 France.

11 5. Discussion and Conclusion

12 With due regard to the methodical limitations discussed above, the study contains

13 clear evidence of a persistent decline of competitive balance in the five domestic

14 leagues analyzed since the turn of the millennium. The change in the CL payout

15 structure appears to be an important source of this reduction in competitive balance,

16 based on the timing of the payout change. This negative impact could become more

17 significant in the future, since CL TV revenues are expected to increase by around 30

18 percent in the near future and the principle underlying the distribution of revenues in

19 the CL creates a vicious cycle (or blessing, depending on your perspective).

20 Successful clubs obtain ever-increasing payouts from persistent CL appearances,

21 which allow them further dominate domestic league competitions, in turn increasing

22 the probability of appearing in the CL again in the future. The revenue distribution

23 mechanism also benefits the top five leagues examined here, since these leagues

24 also play in the largest television markets in Europe. The current revenue distribution

25 policy also allows teams from the top five leagues the possibility of obtaining

17
 1 relatively high bonuses even if they do not perform well. For example, in 2008/09 the

2 clubs that participate in the UEFA CL group stage were expected to obtain at least

3 around 15 million Euros. Nevertheless, as mentioned above, numerous other factors

4 including increasing national media rights revenues, investor market entries, and

5 successful internationalization efforts by European clubs, might also have had a

6 lasting impact on the top clubs’ performance in domestic football leagues. For

7 instance, in contrast to other European countries, the broadcasting rights for football

8 matches in Spain and Italy (as well as Greece and Portugal) have been marketed by

9 individual clubs based on a decentralized system since the end of the 1990s. As a

10 matter of fact, the ratio of the minimum to the maximum media rights revenues in a

11 league with a uniform marketing model is around 50 percent while it is only 6 percent

12 in Italy and 9 percent in Spain. In this context, the centralized model affords an added

13 advantage over the decentralized model in that it can improve the competitive

14 balance of domestic leagues.

15 In order to counter any further decline in competitive balance in domestic leagues,

16 football’s governing bodies should consider the possible ramifications of (re-)

17 distribution of revenues generated by pan-European competitions within and across

18 leagues. UEFA has announced (and partly implemented) a far-reaching reform of the

19 CL and its payment distribution system in particular like the introduction of annual CL

20 solidarity payments for youth development in clubs to the leagues of UEFA’s member

21 associations. For example, in total, 36.1 million Euros were distributed to leagues

22 with participants in the 2008/09 UEFA group matches and 7.2 million Euros were

23 distributed to leagues without participants in the 2008/09 UEFA group matches. This

24 appears advisable and should be combined with the idea that all domestic leagues

25 and national football associations be subject to the same standards in the future with

18
1 respect to club licensing, and for clubs to pursue the objective of maximizing their

2 sporting success while giving due consideration to economic objectives. In some

3 cases, club owners or presidents use private assets to cover losses. This is to the

4 detriment of clubs that finance their payroll internally using existing cash flows. If one

5 accepts the accuracy of press reports concerning clubs that have overdue liabilities

6 to their players or other clubs in connection with transfers, such clubs are in clear

7 contravention of the “A” criteria prescribed by the UEFA Club Licensing Regulations.

8 This would mean that such clubs would have to be denied licenses. Furthermore, a

9 uniform marketing model for media rights for all countries would also foster a more

10 balanced national and pan-European competition.

11

12 However the exception in the top Italian league, increasing attendance figures since

13 the turn of the millennium may mitigate the need for such regulations. Increasing

14 attendance leads to increased revenues for all teams in domestic leagues, and could

15 offset revenue disparities generated by CL payouts. Do fans care about the decline in

16 CB in the top five European football leagues? Do different groups of fans exist that

17 care more or less about the decline in CB in the top leagues? These are two relevant

18 questions that need to be explored in future research.

19 Notes

20 [1] “The revenues that the [clubs] draw from the Champions League distort the

21 domestic championship economic balance, since these revenues are bigger than the

22 overall turnover of most domestic competitors (…)” (Andreff & Bourg, 2006, p. 37).

23 [2] In the German Bundesliga (season 2006/07), 1. FC Nürnberg finished in 6th

24 position with 11 victories (and 15 draws) while Energie Cottbus finished in 13th

19
1 position also with 11 victories but with 8 draws. Examples like this indicate the

2 potential biases when the winning percentage is applied.

3 [3] In 2008/09 the ‘group stage’ was made up by 32 teams and preceded by two

4 qualification streams for teams that did not qualify directly. However, since only

5 teams participating in the group stage have access to considerable revenues from

6 the CL, our analysis is focused on this.

7 [4] By interpolating the total points won by Juventus Turin in 2005/06 to the season

8 2006/07, we try to consider approximately the (extraordinary) relegation of the club in

9 2005/06.

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