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Sport Economics and the Design of Competitions

Overview

  • Credit value: 15 credits at Level 7
  • Convenor and tutor: Sean Hamil
  • Assessment: a two-hour examination (75%) and a coursework essay of up to 2500 words (25%)

Module description

Football and other professional league sports differ from standard industries in a number of important ways. Firstly, the product that is offered is partly a 'league' product and partly a 'participating team/individual competitor' product - this joint production has a number of important implications for the way the industry is organised and governed. Secondly, sports leagues usually redistribute income from stronger to weaker clubs in order to promote competitive balance. Hence the industry is characterised by a mixture of competition and cooperation. Thirdly, the nature of the relationships between a football/sport club and different stakeholders is atypical. For example, the customers of football/sport clubs - supporters - have a very high degree of brand loyalty which means that they are unlikely to switch allegiances even when the product being offered to them is poor. Fourthly, unlike most other businesses, football/sport clubs have a dual objective: to win on the pitch (utility maximisation) and to run the business side of the club (profit maximisation/breakeven). All too often these two objectives conflict as clubs are tempted to overspend on players in order to win, thus undermining the financial viability of the club. Fifthly, the labour market for professional football/sport players is unusual in that it has been highly regulated and players have monopoly power over their talent. Sixthly, there is a very high degree of integration with media industries which drives a substantial proportion of revenue, the management of which is in part influenced by considerations to maintain competitive balance via mechanisms such as collective selling of broadcasting rights. Finally, the industry is governed by a combination of the laws affecting all businesses and by separate regulation by the sport authorities at national and international levels.

In order to understand the economics and governance of the sport industry, and in particular of sport competitions, it is necessary to understand how the factors identified above interact, often in a complex fashion. This course explores these peculiar features of the football industry and other professional sports and their implications. The analysis is discussed in the context of recent developments in the sport industry including the changing relationship between sport and the broadcasting industry and other commercial interests.

Learning objectives

By the end of this module, you will be able to:

  • demonstrate a thorough understanding of the 'peculiar' economics of sports leagues (Neale, 1964)
  • explain the historical development of sport from its roots as a recreational pastime through to its transformation into a major commercial business
  • explain key theoretical issues in sport economics, eg need to maintain competitive balance, financial stability, integrity of sporting competitions etc
  • reflect on how the application of the key theoretical principles in sport economics informs the design of professional sports leagues.