Competitive balance and revenue sharing in European football. Some novel insights

Table of Contents

1. Introduction

2. Related literature

2.1 Theory and relevance for today’s sports industry

2.2 Previous research on competitive balance

2.3 Why case study on the Bundesliga?

3. Measurement of competitive balance

3.1 Measures of competitive balance

3.1.1 Standard deviation of winning percentage

3.1.2 The Herfindahl-Hirschman Index

3.1.3 The Competitive Balance Ratio

3.1.4 Top k ranking

3.1.5 Requirements for comprehensive measures of competitive balance

3.2 The Surprise Index

3.3 Data

4. Development of competitive balance for European Top leagues

4.1 German Bundesliga

4.2 Other European top leagues

5. Revenue sharing in the Bundesliga

5.1 Econometrical analysis

5.1.1 1980/81 – 2017/18 regression models

5.1.2 1992/93 – 2016/17 regression models

5.2 Results

5.3 Policy recommendations

6. Conclusion

Research Objectives and Thematic Focus

This master's thesis examines the impact of revenue sharing agreements on the competitive balance within European professional football leagues. Specifically, it seeks to determine whether financial solidarity mechanisms, such as collective broadcasting rights, positively influence the league's competitive equilibrium and consequent attractiveness to fans, with a primary focus on the German Bundesliga.

• The theoretical relationship between revenue distribution and competitive balance.
• Evaluation and application of existing measures and the development of the "Surprise Index".
• Empirical case study of the German Bundesliga's competitive environment over time.
• Econometric analysis regarding the effect of broadcasting revenues and Champions League rewards.
• Strategic policy recommendations for sports league governance.

Excerpt from the Book

Summary of Chapters

1. Introduction: Presents the motivation for the study, focusing on the increasing financial inequality in European football and the hypothesis that revenue sharing fosters competitive balance.

2. Related literature: Provides an overview of the uncertainty of outcome hypothesis (UOH) and evaluates existing research on revenue sharing mechanisms like individual club ownership vs. rights pooling.

3. Measurement of competitive balance: Reviews common standardized measures like the Herfindahl-Hirschman Index and introduces the "Surprise Index" as a novel tool for measuring competitive outcomes.

4. Development of competitive balance for European Top leagues: Offers a descriptive analysis of the Surprise Index for the Bundesliga, Premier League, Serie A, and La Liga from 1980/81 to 2017/18.

5. Revenue sharing in the Bundesliga: Conducts an econometric analysis using regression models to test the impact of national broadcasting revenues and Champions League rewards on the competitive balance in the German league.

6. Conclusion: Summarizes the study's findings, highlighting the positive impact of national revenue sharing on competitive balance while acknowledging data limitations.

Keywords

Competitive balance, revenue sharing, Bundesliga, Surprise Index, Uncertainty of outcome hypothesis, sports economics, broadcasting rights, European football, econometric analysis, league attractiveness, financial solidarity, Champions League rewards, rights pooling by the league, UOH, professional sports.

Frequently Asked Questions

What is the core subject of this thesis?

The thesis investigates the relationship between financial distribution models in professional football and the resulting competitive balance within these leagues.

What are the primary themes discussed?

Key themes include the uncertainty of outcome hypothesis (UOH), the economics of different broadcasting rights systems, and the empirical measurement of match outcomes via a newly applied Surprise Index.

What is the main research question of this study?

The research asks if revenue sharing agreements in European football, specifically within the German Bundesliga, contribute positively to the competitive balance of the league.

Which scientific methodology is employed?

The author uses a combination of descriptive longitudinal analysis and empirical econometric regression models, including OLS and ARIMA specifications.

What topics are covered in the main section?

The main section covers the theoretical framework, a detailed explanation of the Surprise Index, a descriptive timeline of four major European leagues, and a rigorous econometric testing phase using German domestic data.

Which keywords characterize the work?

The work is characterized by terms such as competitive balance, revenue sharing, sports economics, the Surprise Index, and football league management.

Why focusing specifically on the German Bundesliga?

The author argues that the Bundesliga is the most suitable candidate for testing these hypotheses because its unique regulatory environment (50+1 rule) and relatively transparent revenue structure provide a clearer data set than other commercialized leagues.

How is the "Surprise Index" defined in this study?

It is defined as a ratio identifying the degree of surprising match results based on historical standings, effectively measuring suspense and unpredictability in sports leagues.

What is the main finding regarding Champions League rewards?

The analysis suggests that Champions League rewards often disproportionately benefit a small group of teams, which can act as a counter-force to revenue sharing and negatively impact domestic competitive balance.