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Competitive Balance in the Sports Fraternity Essay (Article)

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Updated: Dec 19th, 2019

Introduction

Authors and researchers have over time explored competitive balance by identifying the particular aspects of sports that equalizes different teams in the same league. This ensures that teams are motivated to compete and the fans on the other hand appreciate the fairness in the sport.

They also point out that competitive balance makes the entire sports industry vibrant as it ensures that teams are motivated to win so as to make even more money, not only in their home grounds, but also in the away matches that they take part in (Palomino & Rigotti, 2000).

The increased concern over competitive balance is based on the current lucrative condition of the sports industry as it has been identified that a lot of money is spent not only in the stadiums in terms of entry fees, but also in television payments as well.

It has also been identified that with the increased commercialization of the sports industry there is quite a lot of money at stake and this has warranted the interest of economists seeking to explore the available possibilities on streamlining the sports industry to a point where it is self sustaining and stable.

This interest has increased the amount of interest that authors have on the issue and this has come with varied theories on competitive balance. This paper seeks to critic the works of different authors who have discussed the issue of competitive advantage as it has been applied successfully as well as unsuccessfully in the sports fraternity.

This is done in regard to the journal articles written by Szymanski, (2001), on ‘Income inequality, competitive balance and the attractiveness of team sports: some evidence and a natural experiment from English soccer’; Sanderson, (2002), on ‘The Many Dimensions of Competitive Balance’;

Tonazzi, (2003), on ‘Competition policy and the commercialization of sport broadcasting rights: the decision of the Italian Competition Authority’; Berri, et al. (2005), on ‘The Short Supply of Tall People: Competitive Imbalance and the National Basketball Association’;

Szymanski, (2007), on ‘The champions league and the Coase theorem’; Lewis, (2008), on ‘Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball’; Szymanskiw & Sennez, (2004) on Competitive balance and gate revenue sharing in team sports;

Marburger, (1997), on ‘Gate revenue sharing and luxury taxes in professional sports’ and finally, Palomino & Rigotti, (2000), on ‘The Sport League’s Dilemma: Competitive Balance versus Incentives to Win’.

Summary of the articles

All the authors seem to agree on the particular aspect of revenue allocation as it is meant to satisfy their shared theories on team finance. One notes that they all agree on the sharing of gate fees as well as particular match endorsements between different teams participating in a match or tournament. The issue that one notes they mostly differ on is that of team motivation (Szymanski, 2007).

This is in regard to the particular monetary incentives that winning teams enjoy, which some of the losing teams traditionally miss out on (Tonazzi, 2003). This incentive is supposed to encourage teams to invest more in their winning tactics and this makes the sport more competitive.

While it may be identified by most of these authors that the adoption of competitive balancing techniques is supposed to bring in some level of equality in the sports industry, the particular theories that they have identified tend to undermine the basic principles of competitive sportsmanship (Szymanski, 2001).

It has been identified that in any industry that has a business twist to itself there must be some level of competition, which is meant to spur innovative as well as creative sportsmanship (Berri, et al. 2005). This should not only be limited to the sporting events themselves, but it should apply to the particular management as well as the marketing of the sports teams themselves (Palomino & Rigotti, 2000).

The authors identify that there is a particular interest in the need to improve the collective bargaining of team managers as well as players in regard to the specific revenues that they rake in from the sports events that they participate in.

It has been noted that the more the income that teams manage to acquire from matches the better placed they are in negotiating better paying sports events (Szymanski, 2001). This is in regard to the number fans that attend a particular math that they are participating in.

It is also means that the more competitive a team is the higher it is ranked and the better performed or rather talented a team is the higher its chances of it being ranked as a competitive team (Szymanski, 2007).

The identification of the particular value that the game has on the fans means that while most teams may be raking in a lot of money from their rival teams in away matches, they still have to invest heavily in a talented and high performing squad of players (Marburger, 1997).

Theoretical premise

While the authors may be identified to introduce a new concept in the balance of resources in the sporting fraternity to promote competitiveness, some level of debate still prevails as the application of most of the theories generated by researchers seem to be useless in an environment where there are too many human factors to be included in the strategic management of teams.

It has been identified that most of the fans in as far as sports is concerned act irrationally and do not conform to the particular business theories that are often applied in other sectors of the economy (Tonazzi, 2003).

The need to understand fan perceptions and behavior has been overlooked in the theories advanced by most of the authors as well as researchers as they only evaluate the contribution made by fans with no regard the particular aspects of the teams that draws fans into the stadiums (Szymanski, 2001).

It has been identified that fans are mostly attracted by the need for entertainment. In this case, entertainment means that they should be in a position to sit through the entire match and enjoy competitive sports (Lewis, 2008).

This raises the question of where the competitive balance should be based. While most authors identify that the competitive balance should be driven by the equitable distribution of resources, the needs of the fans may be ignored if the resources are not identified to flow from the gate payments made by the fans (Szymanskiw & Sennez, 2004).

The need to share gate fees should be followed by an evaluation of the repercussions in regard to the performance of the teams.

This is especially after the identification that while most teams are motivated to perform better and even nature their talents more, some may be free riding on the notion that their appearance in particular matches warrants them an equal share on the gate fees collected on that particular event (Sanderson, 2002).

While most of the authors may be identifying the need to increase the cooperation the different between team managers to a point where they share the particular financial resources that are reaped from a common match between their different teams will increase their competitive balance, the fact still remains that they may be killing the competitive force behind the sports, which is responsible for customer loyalty (Berri, et al. 2005).

Evaluation

It is identified that while most of these authors may be approaching competitive balancing from an equality point of view, the need to identify the particular drivers of the sporting industry has been overlooked (Sanderson, 2002).

This is in regard to the particular interest that talents in the sports fraternity attract as it is identified that the best performing players are paid more than their less performing counterparts (Szymanski, 2007).

With the adoption of equality and balance among the different competitors the superiority enjoyed by those who perform better than others fades and this reduces the financial performance of the whole sports industry (Tonazzi, 2003).

This has some obvious repercussions in as far as incomes are concerned and this cannot be ignored due to the particular value of sports in various economies in the world. It has been identified that reduced performance in the NFL for instance would be a great loss to the American economy due to the balance of payments that the tournaments rake in (Lewis, 2008).

The English premier league has as a matter of fact been identified to be one of the greatest contributors to the English as well as the European economies due to the particular amounts of revenues that it rakes in. These are often split among the teams and the stadiums while the governments end up collecting substantial amounts of taxes at the same time (Sanderson, 2002).

On the other hand, there are the lucrative European leagues that are responsible for the economies of various countries in Europe with Britain enjoying the bulk of the incomes drawn from sports. The incomes that are often enjoyed by television stations that air different matches are another line of income that should be incorporated into the whole competitive balance equation (Szymanskiw & Sennez, 2004).

This is especially after it was identified that the interests of advertisers as well as television stations and newspapers that inform the public on the performance of different teams as well as the results of different matches, lie with the fans who are in a position to pay for the services rendered by the stations and newspapers (Lewis, 2008).

The need to create a level playing for different teams in sports tournaments is identified to particularly conflict with the need to increase competitiveness and promote sports. This is especially after it was identified that while competitive balance seems to encourage teams to participate more, it doesn’t seem to encourage them to perform better (Berri, et al. 2005).

This particular strategy seems to be encouraging free loaders who make money through their appearance in matches, but do not really put an effort in performing.

The need to win has made most sports teams to invest more in procuring quality and talented players and while this may be identified as just another competitive move the motives lie in the business aspect of the sport where team managers identify that they may be able to rake in more incomes if their fans are impressed even more with their new players (Szymanski, 2007).

Some of the authors actually identify that there is a need to create some form of fan loyalty through team performance. What they do not actually identify is the need to research on the particular drivers behind fan loyalty (Marburger, 1997).

While most of the authors identify that some level of fan loyalty is based on the financial performance of the teams that they are fanatics of, they overook the sporting aspect of it and do not identify that some of the fans are drawn to support some of the teams due to their love for the sport as well as the professionalism and talent portrayed by the various members of the teams (Szymanskiw & Sennez, 2004).

The need to attract better talents obviously corresponds to the need to increase the team’s fan base. This then translates in more income for the team (Sanderson, 2002). On the other hand, there are the advertisements as well as the endorsements that various teams enjoy due to their superior performance in the league.

The advertisements or rather sports endorsements mainly stem from market research where the influence of a particular team to a particular population of fans is identified and used in the equating of fan support to revenue from sales (Lewis, 2008).

Companies identify that most fans who love the particular sport will often choose to watch competitive matches where they are more likely to get the desired level of entertainment (Berri, et al. 2005).

This market research informs investors as well as endorsement partners on the teams to put their money into as this has to translate to financial results in terms if increased sales.

This is the reason behind the observation that most of the authors proposing competitive balance theories have no idea of the business motivations behind the success of the teams even though they identify that the monetary gains from endorsements advertisements and gate fees are especially crucial to not only the short run success of the teams, but their long-term success as well (Szymanski, 2001).

Conclusion

What most of these authors do not identify are the particular drivers behind the sport’s success no matter their nature as they seem to have no interests in identifying the particular reasons why there is a need to increase team motivation from their internal structures rather that sharing of external resources (Tonazzi, 2003).

Most of the incomes that are enjoyed by clubs are sourced from the fans that frequent the stadiums during matches. Stakeholders in the industry identify that the need to woo in more supporters who will frequent the match event has forced most sports franchises that in this case most authors identify as mere teams, to market themselves to a variety of audiences (Szymanskiw & Sennez, 2004).

It is, therefore, safe to conclude that the different authors are biased to the ethical forces of the sporting industry while they ignore the financial and economic forces that operate naturally in the market, which have the tendency to balance themselves out and promote the growth of the industry in general.

References

Berri, D. et al. (2005). The Short Supply of Tall People: Competitive Imbalance and the National Basketball Association. Journal of Economic Issues. 34(4), 1029-1041.

Lewis, M. (2008).Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball. Journal of Marketing Research. XLV(I), 535–549.

Marburger, D., R. (1997). Gate revenue sharing and luxury taxes in professional sports. Contemporary Economic Policy. 15(1), 114-123.

Palomino, F, & Rigotti, L. (2000). The Sport League’s Dilemma: Competitive Balance versus Incentives to Win. Applied Economics. 14(1), 1-34.

Sanderson, A., R. (2002). The Many Dimensions of Competitive Balance. Journal of Sports Economics. 3(2), 204–228.

Szymanski, S. (2001). Income inequality, competitive balance and the attractiveness of team sports: some evidence and a natural experiment from English soccer. The Economic Journal. 111(1) 69-84.

Szymanski, S. (2007). The champions league and the Coase theorem. Scottish Journal of Political Economy. 54(3), 355-373.

Szymanskiw, S, & Sennez, S. (2004). Competitive balance and gate revenue sharing in team sports. The Journal of Industrial Economics. LII(1), 165-177.

Tonazzi, A. (2003). Competition policy and the commercialization of sport broadcasting rights: the decision of the Italian Competition Authority. International Journal of the Economics of Business. 10(1), 17–34.

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