The global sports industry has undergone a tremendous growth in past five decades. The industry has attracted the attention of economists, and sports economics is now a growing subfield in the economics profession (Fort, 2004). The organization of sports leagues has significantly encouraged economists interested in industrial organization questions (Fort, 2010). The labor markets for professional sports men and women have been of interest to labor economists, given the abundance of statistics related to player performance and productivity (Fort, 2004). Football has a large following around the world.
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This has attracted a large number of investments in the football industry. However, it is paramount to note that the economic analysis of sports industry differs markedly from that of other sports, many of which have a relative high gross of domestic share. This peculiarity of sports economics is manifest in the fact that sports firms (leagues or clubs) need competition to maximize their profits (Sandy, 2004). Apparently, the joint product is as a consequence of the need for two firms to produce a game and the need for the other firms to produce a tournament or competition. The Australian Football League (AFL) is not an exception. The League is going to expand by the introduction of two new teams. This paper endeavors to discuss the relevance of this expansion to sports economics.
Background: League History and Structure
The Australian Football League (AFL) is the most competitive professional competition in the sport of Australian Rules football (SRMCA, 1991). AFL is governed by the AFL Commission. The league was started in 1897, and at that time it was known as the Victoria Football League (SRMCA, 1991). All teams that participated in the Victoria Football League came from the Australian state of Victoria. During the 1990 season, the name ‘Victoria Football League’ was changed to Australian Football League (AFL). This move was influenced by the inclusion of new teams that did not come from the state of Victoria. Currently, the league is composed of eighteen teams that come from various states.
However, ten out of the eighteen teams come from the state of Victoria. The league has been undergoing constant growth and the last season saw two new teams join the league. Traditionally, the AFL is composed of a preseason which is then followed by the regular tournament. The regular tournament has 23 rounds that are composed of home and away matches. The competition has been designed in a manner that ensures only eight teams make it to the finals. The 23 rounds ensure that only the best teams make it to the finals. The eight finalists then play off in the final series commonly known as the AFL Grand Final. This famous final is usually held at the Melbourne cricket grounds annually. The final marks the end of the season and the winning team is crowned as ‘the ‘premiers. The coveted premiership cup provokes the admiration of all teams in the league. The tournament usually runs from March to September.
At the end of the season, top performing players are also awarded. The fairest and best player is crowned with a Brownlow medal. The top scorer is awarded the Coleman medal. On the other hand, the best player on the ground gets the Norm Smith medal. The best performing young player of the season gets the Rising star crown. On top of that, the best 22 players each season are selected to form the All Australian team. This competitive league operates as a single table and it does not have divisions, promotions or relegations. Australian Rules Football (ARF) has a special system of signing new players into the league called the Australian Football League draft.
Fizel, (2006) conducted a study in 2003 to elucidate the impact of sports league expansion on fans in the existing locations and fans in the new locations. Fizel (2006) study illustrated that the expansion of a league puts a strain on the existing fans. In addition, Butenko (2010) notes that sports economics relies on the organization that sports administrators provide. As any other sport, the Australian football is governed by rules and regulations. The set rules regulate the conduct of players, fans and other stakeholders in the football industry. The sporting world has realized several challenging situations especially when fans become rowdy. Thus, the set regulations need to ensure that players and fans are safe guarded at all times (Fizel, Gustafson, & Hadley, 1999). In addition, such regulations should ensure that justice is done when fans misbehave.
For this matter, AFL should ensure that the new comers are fully aware of the tournament’s set regulations. Humphreys and Howard (2008) argue that for stakeholders to realize full benefits, good management practices need to be implemented. For that matter, there should be a national regulatory body which ensures that the set rules are followed to the latter. Good sports governance ensures that the tournament runs smoothly because any interruption often causes huge loses to investors (Leeds, 2005). AFL commission has been on the forefront in safeguarding Australian football rules and regulations.
Key issues Impacting on the Expansion of the League
Justification for league expansion
Investors led by the president of Collin Wood Eddie McGuire, have been vocal in drumming support for the expansion of the league. Grand reported that Eddie was going to organize a shareholders meeting with his colleagues in the industry to demand more details from the AFL on its plans to introduce two extra teams by the 2012 season. However, other key players in the industry are unhappy with this move because they think league expansion lowers average player rating. Thus, it is paramount to note that this issue has drawn mixed reactions from different key players in the industry. Nevertheless, it is also important to note that league expansion will lead to an increase in revenue generation. On thee other hand, key players in the industry are afraid of stiff completion might oppose this move.
Opinion of existing teams
Existing teams were worried that some of their players might be taken away by AFL to establish new teams on the Gold coast and Western Sydney. A majority of the current teams have spent massive resources in developing their current players and any they warned AFL that any attempt to snatch them players would not be taken lightly. For that matter, AFL is considering employing a limited form of free agency for more than 670 players on its lists. AFL assured the existing teams that it will not use earlier methods which appeared inconsiderate. AFL indicated that it will offer existing clubs alternative options of how the new teams are going to be reconstituted. Such options may include offering them priority picks in the national drafts and salary cap concessions.
Opinion of AFL commission
AFL commission has the mandate to increase or decrease the number of teams taking part in the competition. The decision to include two new teams is seen as a way of enhancing competition and lowering the monopoly level. The commission argues that an increase in the number of teams taking part in the competition will give the football industry a chance to nature many talents. The commission notes that by increasing the number of teams taking part in the competition, many young people will be encouraged to join the sport. On top of that, football and sports at large are known to enhance harmony and unity amongst people. The growth of the league is an indication that the sport is growing rapidly. Most importantly, the commission notes that this move will benefit investors in the football industry.
Economies of many countries around the world receive a significant boost from sporting events. Sports franchises, stadiums, and mega sporting events continue to receive significant attention from the mass media. The mass media and mostly television will benefit immensely from sporting events. The competition to acquire rights for airing major tournaments has intensified lately owing due to an increase in the number of sports followers. Many investors have invested heavily in the field of broadcasting. Studies have indicated that the AFL is the most competitive competition in Australia. Thus, the television sector will realize improved revenue generation from the expansion of the league.
Possible outcomes, Impacts and Benefits
AFL will be required to dig deep into its pockets for the intended plan to succeed. Regular season games like the Australian Football league promote eye popping estimates of potential benefits (SRMCA, 1991). Leagues, teams and event organizers have a strong incentive to provide economic impact numbers that are large as possible so as to realize huge public subsidiaries. Sports leagues are unique among industries in that competition between businesses (teams) and industry (league) is the product on sale (Humphreys & Howard, 2008).
Impact on social amenities
Key players in the country’s economy have invested heavily in the sports industry. The intended expansion will have various impacts on a number of social amenities. The public transport sector will be amongst the beneficiaries (Bale, 1993). The two new teams will lead to an increase in the number of fans nationally. Both teams are expected to receive solid support from their backyards. The tournament usually involves home and away matches, for this reason, fans have travel on several occasions. Studies have indicated that fans like traveling in groups (Blair, 2011). Although some of them can afford private means of transport, they would rather travel in groups. Therefore, the pubic transport sector will benefit immensely from this increase. This will add a significant number of clients into the market.
The other public sector which will benefit from this expansion is the hotel industry. When fans travel in order to attend an away much, it means they have to spend a couple nights away from home. Thus, the hotel industry will also be boosted owing to an increase in the number of potential clients. On the other, hand stadium management boards will also benefit from the intended expansion. Stadium management boards usually collect huge revenues from tickets sold during the competition. The newcomers will add a significant number to the current pool of fans, and this will greatly benefit revenue generation by stadium management boards.
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Summary of Findings
The expansion of the league has drawn mixed reactions. However, a number of economic benefits are likely to be realized in case the expansion is implemented. However, these benefits can only be realized if AFL ensures that the set rules and regulations are followed to the latter (Downward & Dawson, 2010). In addition, the success of Sports economics relies on the type of governance that the sporting regulatory bodies implement. Expansion of the league will enhance competition and necessitate the identification of new talents. On top of that, the intended expansion will also enhance social cohesiveness.
This paper has noted that the Australian Football League (AFL) is the most competitive professional competition in the sport of Australian Rules football. Football has a large following around the world. This has attracted a large number of investments in the football industry. The global sports industry has undergone a tremendous growth in the past five decades. The industry has attracted the attention of economists, and sports economics is now a growing subfield in the economics profession. The organization of sports leagues has been has significantly encouraged economists interested in industrial organization questions. The labor markets for professional footballers have been of interest to labor economists, given the abundance of statistics related to player performance and productivity.
The intended league expansion will bring a number of economic benefits. The intended expansion will have various impacts on a number of social amenities. The public transport sector will be amongst the beneficiaries. The mass media and mostly television will also benefit immensely from the intended league expansion. On the other, hand stadium management boards realize huge profits from the intended expansion. Although people have mixed reactions with regard to the intended expansion, it is important to note that the economy will benefit immensely from the expected league expansion.
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