I have an article in today’s Times of London about the value of Championship playoff final. You can read the article here, but you need a subscription. The gist of the argument is that the Premier League is too small, and should be expanded to 30 or so teams.
The playoff game is worth about £120 million: £55 million as next year’s share of the Premier League broadcast income and £60 million over 4 seasons in parachute payments if relegated immediately. The loser essentially gets nothing. This makes it the most valuable prize for a single game in the world of team sports. By contrast, Bayern Munich received a mere €4 million more than Dortmund for winning the Champions League.
The prize is so large because interest in the Premier League is so high, arguably much greater than for any other league. However, we are constantly told at the moment that the Bundesliga is more popular because average attendance is around 43,000 compared to 36,000 for the Premier League. In earlier discussions I’ve pointed out that size should be measured not in averages but in totals. Switzerland has a higher average income than Germany but is not a larger economy, and likewise the Premier League has more teams, plays more games and sells more tickets in a season (13.7 million this season compared to 13.0 for the Bundesliga).
However, the lower average attendance in the Premier League is revealing, especially when contrasted with the average attendance in the next division down. The table below is from the 2011/12 season.
|average attendance||total attendance|
|bottom half of the EPL||23,170||4,402,243|
|top half of the Championship||23,271||5,352,261|
|bottom half of BL.1||32,807||5,019,403|
|top half of BL.2||23,608||3,612,092|
For England I compare the bottom ten teams in the EPL to the top ten teams in the Championship ranked by attendance, and for Germany I show the bottom nine teams in BL.1 compared to the top nine teams in BL.2, also ranked by attendance.
The interesting point is that in Germany the bottom half of the higher division does better, as one should expect, since these teams are regularly facing the biggest teams in the country, while in the second tier the competition is generally weak. However, in England the reverse is true, if only just. In that season the big teams in the Championship have a higher average attendance than the bottom teams in the Premier League.
Now, this is not necessarily true in every season. In fact, I originally posted a version of this claiming the same reversal was true for 2012/13, but it has been pointed out to me by Philip Arlington that there was a mistake in my arithmetic. In 2012/13 there was no reversal, teams at the top of the Championship had lower average attendance than teams in the bottom half of the Premier League. This is what we should expect.
Is the reversal of 2011/12 just a fluke or is it symptomatic of a problem? The value of the playoff game tells us that being in the EPL is very attractive. Since teams playing in the EPL sell out almost every game, it’s reasonable to think that when in the EPL clubs would like to have a larger capacity. But because there are so many big teams in the Championship, that investment is not worthwhile. Consider some of the names that did not get promoted from the Championship this season:
Birmingham City, Blackburn Rovers, Bolton Wanderers, Brighton & Hove Albion, Burnley, Charlton Athletic, Derby County, Ipswich Town, Leeds United, Leicester City, Middlesbrough, Nottingham Forest, Sheffield Wednesday and Wolverhampton Wanderers.
In any other country most of these teams would be in the top division. And most of them have been in the top division in the last decade or so, but not for very long. So their incentive to invest in a larger capacity is limited. In other words, the capacity of teams in the bottom half of the EPL is too small, and the capacity of the teams in the top half of the Championship is too large (generally they do not sell out).
In economic terms this is a signal, and if the Premier League were solely concerned with maximizing its appeal, it would expand. It would be feasible to expand the EPL to 30 or so teams and operate an unbalanced schedule. For example, there could be two regional divisions (North and South?) of 15 teams, with each team playing rivals in its own region twice, and teams from the other division only once. Or the schedule could be designed on the basis of last season’s performance (so that strong teams play each other more often). With a little thought it would be possible to design several viable structures (there would be no need to do away with promotion and relegation).
The model is obviously based on the American one where the major leagues have 32, 30 or 28 member teams. It is, of course, unlikely to happen in practice. But the reason that it wouldn’t is also interesting. Imagine the EPL were a closed league without promotion and relegation, that sold expansion franchises like the Americans do. Then there would be an incentive to expand, because the teams outside would be willing to pay to join. With the EPL however, the teams outside already have the promise of access via promotion, and so would be unwilling to pay that much extra for guaranteed participation.
From an economic perspective there’s a missing property right here, an argument typically associated with the Nobel laureate Ronald Coase. If you accept my argument that a 30 team EPL is worth more than a 20 team EPL (and I accept that the data is inconclusive- it would require more detailed research to support the claim), the failure to expand must reflect the lack of tradable property rights in membership of the EPL.