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danieldwilliamI’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.
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Date: 2012-02-21 11:16 am (UTC)no subject
Date: 2012-02-21 11:21 am (UTC)My starting point is that markets should be free unless there exists a very good reason for them not being free.
Where I think markets should not be free I tend to be very strongly of this opinion.
Non-free markets will be co-opted or subverted. Or at least there is a strong risk of that happening.
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Date: 2012-02-21 11:24 am (UTC)My starting point is that all situations are different and hence local starting points are best reasoned rather than assumed.
I can come up with arguments both ways on this one. I don't have a strong feeling either way, and I'm unlikely to do enough thinking to reach a firm conclusion. But it's far from clear to me that benefits of free market automatically outweigh costs.
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Date: 2012-02-21 11:51 am (UTC)One of the current problems is at the moment is that free markets are concentrating money and therefore economic and therefore political and cultural power in the hands of a few. These are solvable problems if we wish to solve them and they don’t necessarily require non-free or non-market forms of information exchange. I think markets become much less democratic very quickly when the participants are significantly unequal.
I’d be in favour of what I would call demarchy with more mutuals, more co-opts, more local and more powerful local government, more direct democracy but we don’t seem willing to invest in the bandwidth.
Free markets are the least bad way we have found so far, for collectively working out what people want and what they are prepared to do once we started living in communities that were too large to get everyone in to the same room.
Specifically for football, the above and I see no compelling reason to change. It’s not important enough to warrant government regulation. It’s not a necessity. It’s not a natural monopoly. It doesn’t control flows of information or opinion. The economic actors are sufficiently autonomous that a failure of one is unlikely to lead to a cascade failure in the wider market, industry or the whole economy. There don’t seem to me to be ethical issues inherent in football (or sports more widely) that warrant government regulation that aren’t already subject to regulation.
My distaste for the private lives and consumption habits of many footballers doesn’t strike me as sufficient reason for me to meddle in their business. Particularly as a likely side effect of my meddling is that I would make the likes of Rupert Murdoch or the Glazier brothers richer.
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Date: 2012-02-21 11:52 am (UTC)Re starting points; my mind is not flexible or strong enough to call order from the void.
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Date: 2012-02-21 11:53 am (UTC)I think the social argument about the role-modelling that footballers provide is really very important indeed, although it's also not clear to me how regulation could help.
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Date: 2012-02-21 12:11 pm (UTC)There are ways of correcting for re-enforcing success. Income tax, inheritance tax, vigorous anti-trust laws, strong cultural norms on philanthropy, the occasional riot and hanging.
I guess my position when encountering something new is best described as – happy to be talked out of a free market, start talking.
As for footballers role as role models I think they have a social obligation to be better role models but that’s a position that is fraught with moral and political difficulty.
I don’t see how regulation of the market for their labour would particularly help. Unless you are happy that the shareholders of Man U or Sky pick up an additional 60% of the turnover or you happy with a marginal tax rate of 90% footballers are still going to be earning many multiples of the average salary. Given the socio-economic backgrounds many of them come from and their ages this is still going to be a big shock and they are still (some of them) going to wig out. As will musicians and writers or comedians.
I think you can either regulate their behaviour as role models or their presentation. I’m not sure I’m hugely happy with much state involvement in either of those.
What might help is if fans booed players who behaved “badly” or boycotted their appearances on TV. Or we could a few more of them in prison.
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Date: 2012-02-21 12:12 pm (UTC)no subject
Date: 2012-02-21 12:16 pm (UTC)I keep wanting to get in touch with him and add my own "what about transaction costs?"
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Date: 2012-02-21 12:31 pm (UTC)no subject
Date: 2012-02-21 12:45 pm (UTC)I see how someone who has expressed the views he has on Libertarianism might take an interest in consequentialism.
What is the focus of the discussion, may I ask?
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Date: 2012-02-21 12:56 pm (UTC)(Fantastic example: funding for IVF. Two strong and entirely consistent arguments for different conclusions, based on different premises. How to evaluate the premises?)
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Date: 2012-02-21 01:08 pm (UTC)no subject
Date: 2012-02-21 01:08 pm (UTC)no subject
Date: 2012-02-21 02:38 pm (UTC)There's a couple of factual errors in there, but nothing major (teams in the SPL play each other 3 times a year or more, if you take in cup competitions).
I think mostly you're in error by considering that the major source of income for football teams is gate money - if that were so, then the team attracting most supporters through the gates would have a major advantage. However, this would not be enough for them to offer huge salaries to the best players.
Total income to a club is broken up into gate money, merchandising, sponsorship and TV money (a special case of sponsorship)if you like. This money tends to go to the biggest clubs, and the more money which goes to a club, the better it's able to recruit good players, and the bigger it becomes.
In Scotland, that has led to two giants and a lot of minnows. In England, probably half a dozen giants and a lot of minnows. However, the minnows in English football receive a lot more from SKY's TV deal than the minnows in Scotland.
Existence for 90% of teams in Scotland is marginal, and one of the two giants have bankrupted themselves by trying to play on the same scale as the English giants.
National leagues need more than two teams, so the free market does not work here. It's no use saying that a Clydebank fan is free to go to see his local team when they've been driven out of business. And no one will pay to watch Celtic play Rangers 32 times a year. Essentially this is an argument for amalgamation - initially of leagues, as the giants come together, and then of teams, as the giants become minnows in turn.
I'd say we're in the early days of this, globally, but locally it's already taking effect.
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Date: 2012-02-21 03:38 pm (UTC)no subject
Date: 2012-02-21 04:07 pm (UTC)Broadly:
(1) IVF is a good use of public funds even in a limited-resource environment (eg because the cost of averting trauma in parents who cannot give birth naturally is worthwhile).
(2) In a limited-resource environment, using the available money to treat and / or prevent illness in people who already exist is a better use of funds than investing trying to create more people.
Each of these have social policy implications (eg importance of parenting, seeing children as a right vs a responsibility, possible social engineering if you want more middle class parents).
There's also a position (3), which is 'it depends upon context', where context in this instance is, I suppose, mainly defined by amount of funding available and map of the population needs.
But - I am not sure that I even think that (3) is an entirely pragmatic heuristic in policy formation. There will still be some underlying beliefs that drive that decision, which will be consequential - what is seen to be the value to the general population of going one way or the other. But that view will not be the same for everyone.
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Date: 2012-02-21 04:08 pm (UTC)I was assuming that television revenue is the major source of income.
In fact the whole post and accompanying thought process is based the assumption that the majority of club revenues are from television. Seats in a stadium being not non-rivalous. For the purpose of the analysis I’d mentally excluded all other forms of revenue.
I would suggest that existence for Scottish clubs is marginal precisely because of the market interactions I’ve outlined. Minnow class Scottish clubs don’t have any bargaining power with players. Players have no chance of reputation enhancing trophies or of becoming famous enough to launch their own range of underpants. They don’t have much bargaining power with TV companies. They aren’t part of an exciting or prestigious leagues and the quality of play seems very low. They don’t have much bargaining power with fans. There are probably more Rangers and Celtic fans (i.e. people who would pay to watch the Old Firm play) in the catchment area of every Scottish club than there are actual fans of the local team. So minnow class clubs are reduced to handing over most of their cash to their current crop of players which makes them financially risky ventures if you are a share holder or bond holder.
Sponsorship revenue I suggest is tied more closely to television appearances than anything else. I’d see sponsorship as a special form of TV revenue rather than the other way round.
I’m not for a minute suggesting that the free market will *necessarily* deliver a stable league structure which retains an element of sporting competition over decades and rewards (in competition terms) the ability of an organisation to create a team spirit and a winning ethos. It can do but it’s not automatic. The experience of the NFL is interesting here. Over the last ten years I think all but two of their teams has made the play-offs compared and they’ve had 8 different winning teams and to the finalists. I think this compares well to the English Premiership and the SPL.
My point is that if you have a free market in sporting endeavour it is inevitable that a small number of players will end up with most of the money.
I agree with you on the move to a global set up. There’s already a global market for sporting rights and for players. The old joke about there being more Man U shirts sold in Mumbai than there are in Manchester I think has a grain of truth in it. David Beckham is a global brand.
The Champions League I think will become the dominant competition in Europe with national leagues increasingly relegated to feeder leagues status. I think the best thing the SPL could do would be to take a leaf out of rugby’s book and create a multi-nation league. I’d suggest top teams from Wales, the Irelands, Holland, Belgium perhaps.
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Date: 2012-02-21 04:25 pm (UTC)To me it's obvious that the free market, and the injection of TV cash in particular) will lead to the collapse of by far the majority of clubs and leagues, and lead to a very small amount of players earning a living from the game.
There have been suggestions for a Scandinavian league floated for at least a decade, but no appetite expressed for it.
Maybe the interesting argument is that the nature of football as a spectator sport has been completely changed by the free market. I have a whole working class lament about that...
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Date: 2012-02-21 04:29 pm (UTC)As I understand consequentialism it’s looking at the moral value of the outcomes of decisions that I make. So rather than considering if I have the right to peform Act A or Act B I have to consider what the outcome of my decsion will be on people who are affected.
Thus, if I were your landlord I might have the moral rights inherent in property rights to raise your rent significantly but I ought to consider the impact on you and if you were to be made homeless as a result that might be morally bad.
So far, so straightforward a chain of causation.
I’m thinking of situations where the chain of causation is less clear or more probabilistic in nature.
If I were to create a risk in your life of undesired outcome. For example, where I own a newspaper and present my opinion (that all unemployed Maths grads ought to be made to do National Service in one of our Nationalised Banks) as fact and create the risk that my opinion might become generally accepted as fact and the consequential risk that it will be acted upon and then you suffer some harm because you end up with an undesired outcome (being made to work for one of Nationalised Banks.)
What is my moral liability for creating a risk? If I create a 1% chance of something bad happening to you is that an acceptable risk? Does it become acceptable if I a balance a 1% chance of a mildly bad outcome with a 99% of a great outcome?
One might see this in drugs policy when discussing harm reduction and prohibition perhaps.
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Date: 2012-02-21 04:31 pm (UTC)I'm not sure 3 is entirely pragmatic either. It's a pragmatic response to the politics which sits on the values and expression of same by the population.
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Date: 2012-02-21 04:56 pm (UTC)I think the injection of TV money has changed the relative financial situations of all the clubs and leagues in Europe with some (Man U and the EPL) doing well and some (Gretna and the SPL) doing less well.
There is a famous quote about the setting up of the NFL by the franchise owners “A bunch of capitalists walked into a room and voted for communism.”
The comercialisation of the televised football does seem to have changed the cultural value of football. I can certainly see one outcome where only a small number of players make enough to live on from playing and many of that subset make a fortune. I don’t think it’s guaranteed. With rising incomes and falling working hours there might be space in people’s lives and wallets to go and see Stenhousemuir play to a full house and then head home to watch the EPL big hitters on Sky.
My former boss S was an avid fan of Stenhousemuir and, talking to him about it, they seem to have retained their community focus. The loss of football clubs as a focus for the community does seem sad. That’s Thatcherism for you. Seductive at the atomic level, caustic in aggregate.
If I were a Glaswegian and a bit wealthier / healthier I’d be tempted to try and instigate a community buy out and an ownership structure like Barcalona’s. I think the fans of GRFC have a unique political ability to buy the club at a knock down price.
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Date: 2012-02-21 05:01 pm (UTC)But I've SEEN many more Celtic games, because they are always on the bleeding telly (and I don't, and won't, ever, have a SKY box).
I guess this has always been the way of Glasgow, and probably of other large cities which support more than one team.
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Date: 2012-02-21 05:11 pm (UTC)People I've spoken to in Barcelona tell me that real Barcelonians support the small team who play out of the Olympic stadium.
Why do you suppose it is that Partick Thistle fans aren’t able to get more PT games on the box?
Growing up in Aberdeen in the 80’s there was only really one team in city. The only other football team of note in Aberdeen is Cove Rangers. They are never on TV. You can’t even get reception in Cove.
A big “Reverend” to the Sky box thing. Certainly not whilst Murdoch owns a chunk and controls its strategy
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Date: 2012-02-21 09:56 pm (UTC)no subject
Date: 2012-02-21 09:57 pm (UTC)no subject
Date: 2012-02-22 08:55 am (UTC)The subjective evaluation of costs and benefits is one of the things underpinning my thinking about indepedence. If I had a lot of money I'd find out what people value about the current and proposed constitutional set ups.
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Date: 2012-02-22 08:56 am (UTC)no subject
Date: 2012-02-22 09:19 am (UTC)no subject
Date: 2012-02-22 09:19 am (UTC)no subject
Date: 2012-02-22 09:46 am (UTC)What I'd like to do is to do a large opinion poll to find out what aspects of the independence question matter to people. Is it the economy, is social justice*, is it a general feeling of happy nationhood>
Then I'd like to do some more focused work on a smaller sample - perhaps some open space work, certainly something dialogic to build up a better picture of what people are thinking about.
I'd be interested in how different groups weight the various factors.
Then the real work of explore how indepedence might affect those areas would begin.
Interest on billion is going to be a little more than it costs to run the Parliamentary Service each year, and that includes the care and maintenance of iconic** building large enough for the SPS and a few hundred plus others.
*what ever that means
**expensive
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Date: 2012-02-22 10:18 am (UTC)Do we follow the same pattern with benefitsw as we do with risks i.e. over emphasising large rare benefits and not seeing the benefits inherent in the status quo or is the pattern different?
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Date: 2012-02-22 10:22 am (UTC)no subject
Date: 2012-02-22 10:36 am (UTC)Most of them have foundered on budgeting long before we got onto benefits capture.