On Living in the Panopticon - with the lights off

As I was logging in to LJ this morning an advert was placed in front of me offering to find out if my husband was cheating.

The next time someone gets paranoid about the panopticon of corporate data gathering and processeing I might mention this to them.

On The Market Structure of Football as an Entertainment

I’ve noticed some comment recently on the wages of professional footballers. I think very high wages for successful footballers are the inevitable and natural result of the market structures of the football industry. Further, I think that the current market structure is the only way that a free market for football could be created.

There are two processes at work. How the money available for paying for football is concentrated? How the money, once concentrated, is disbursed?

Football is a non-rivalous (1) product. Televised football.  The fact that I am watching the game on TV doesn’t stop you watching the game on TV.   

Football is also a near perfectly competitive market.  Within Europe there are perhaps half a dozen to a dozen leagues offering a world class standard of play. In addition there a number of league of leagues.  Spectators also have the choice of other, not so world class, more local entertainment if they wish.  Players, of which there are several thousand in Europe able to hold a place in a top league team, are able to take their labour to any club willing to hire them. Language barriers are slight compared to professional services. Any club is able to hire any willing player.  Any willing spectator can arrange to watch a club of their choice. Within each league every combination of clubs play each other twice.

Players have a choice about working for Manchester United or working for Accrington Stanley. I have a choice about watching Manchester United play Barcelona or Accrington Stanley play Crewe Alexandria.

In this situation, as a spectator, why would you not want to watch the best(2) teams play in the most interesting games?   Watching by television you are not restricted by the size of a stadium or by its proximity.  The whole of Europe could watch the Champions’ League Final on their own TV and your view would not be impeded at all.

Through the magic of  a free, perfectly competitive market an aggregate view of the best teams will emerge and they will be given money as a reward and incentive.  Spectators are drawn to the better clubs in the better leagues and they take their money with them.  With thousands, nay hundreds of thousands willing to pay a small amount of money to watch Manchester United play but not willing to pay to watch Accrington Stanley play it is inevitable that spectators’ money will flow to the Manchester Uniteds of Europe(3).  What happens when it gets there?

Some 68% of it goes in players’ wages in the English Premier League.  This is a similar proportion to that of American Football’s top competition, the National Football League, which operates a formal salary cap and a more collective system of revenue sharing. A salary cap that recognises the free bargaining position of the players seems to yield about 2/3rds split. A salary cap that didn’t takes money earned by the club and gives it to the club owner.

Hundreds of thousands of people want to watch Manchester United play; concentrating huge amounts of cash in a few clubs. Manchester United can only use some 30 players in any one year but those 30 player can each go to almost any other club in Europe. So long as they are free to move and free to negotiate a contract *and* any potential rival for their place is just as free and just as certain of their skill players will negotiate as much money out of a club as they bring in.

In a free market money tends to go to those who control scarce resources, particularly those that are hard to replicate or hard to substitute. Being very good at football appears to be a rare skill. It takes tens of thousands of hours to become good. To become one of the top thousand or so players in Europe is hard to do.  If it were easy to do more excellent players would come forward. Accrington Stanley would take the field with Jean-Marc Bosman in goal, David Beckham in midfield and Jimmy Hill in attack.

But the problem for Accrington Stanley is one of best compared to good. Even if it were possible to increase the objective quality of all players I still want to watch the “best” and because television makes that a non-rivalous game I can.

The relatively scarce resource here as a spectator is not money but time.  I don’t have time to watch both Manchester United play Barcelona and Accrington Stanley play Crewe Alexandria. No matter how good the players in each match are I’m still going to watch the one where the players are best. You might be able to broaden the shape of the funnel by narrowing the gap in quality between Manchester United and Accrington but so long as spectators want to watch the best players attention and money will still be focused towards some clubs more than others.

What of the non-playing staff. It doesn’t appear to be that difficult to produce fitness coaches or physios, club accountants, architects of stadia, groundsmen, camera operators, sound technicians,  meat pie vendors or television directors or any of the other jobs that contribute. Certainly, in a free market for their labour they don’t appear to be able to negotiate for higher wages. Perhaps because the consequences for a player and a cameraman are different if they miss a last minute penalty in a cup final.

Television naturally focuses the attention of fans onto a small number of clubs.(4) Practical squad sizes and scarcity naturally focuses the remuneration from gaining that attention on a small number of players.

 The same logic holds true for other industries where the attention of the fan is limited and they tend to want to consume the best. Music, acting, writing all have salary demographics similar to football.

So long as fans want to watch the best players and they only have a limited amount of time to watch football the money they are prepared to pay to watch football is going to end up in the pockets of football players.

  

(1) to some extents it is a non-excludable product – you can support Manchester United and enjoy their success without ever having to pay to see them.

(2) best is a broad concept. It could include the team that wins most, the team that plays the most exciting matches, the team with the most illustrious history, or the team that your grandpa took you to watch when you were three. You pays your money, you takes your choice.

(3) and I would argue that if you don’t like this go and pay to watch your local team play and I respect and applaud people like my old boss who used to do just that.

(4) Fans, voting with their wallets don’t seem to me to be generally interested in the community aspects of the game. Supports of smaller teams are also focused on the more illustrious clubs, longing to play and beat them, rise to their level in the league or have a bonanza pay day of a cup tie.