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.
As your co-author in arguing that transaction costs in sports are huge (which is why a separate commercial entity, rather than the Premier League clubs, should decide this question), your analysis is certainly plausible, but not completely convincing. Unless you’re going to set up an unusual imbalanced schedule, expanding to 30 either means a 58 game schedule — overloading players in the PL teams participating in Europe and the Cups — or ending the PL round-robin, which inevitably means fewer games among the top teams. The loss of TV ratings, in particular, may outweigh the benefits. In addition, to the extent that non-economic socio-cultural reasons prevent the top 6-8 teams from maximizing ticket price value (in which case fewer top games might well result in reduced live gate revenue), there is a unmeasured but serious drop in fan utility if Spurs fans, for example, see fewer games against Man U, Man C, Chelsea, Arsenal, etc. Not to say on balance you might be right, but it might be worthwhile to piece out attendance and TV ratings data more to clearly demonstrate your hypothesis.
I think an unbalanced schedule would be the most attractive option, but there are probably several ways it could be achieved without losing too many important derbies.
Stefan,
Can the gap between average attendance in EPL and BL.1 simply be answered by stadium capacity?
Mean EPL capacity 37,714 (stdev 14,532).
Mean BL.1 46,025 (stdev.17,085).
Robbie
Quite right- but the question we’re all really interested in is why this difference exists. We know that the top German teams have invested in the last decade or so, several of whom were helped by the government in order to prepare for the 2006 World Cup.
The critics of the English model will argue that the clubs are frittering too much of their money on players and regulation of the kind used in Germany would encourage investment in capacity rather than overpaid players.
This argument doesn’t make economic sense to me. It’s only worth building capacity if you have the fans to fill the stadium. If the big clubs currently in the Championship were in the EPL they would easily sell out their capacity and would find it worthwhile to build more. But since by the law of averages they can expect to spend most of their time in the Championship, they already have more than enough capacity for that division. Hence my argument that there are too many “big” clubs in the second tier.
Since stadium capacity is no guarantee of promotion, we actually have smaller teams in the bottom half of the Premier League than in the top half of the Championship (ranked by attendance).
However, I’m not sure this is sustainable over the longer term.
Isn’t this idea much like the one Bolton was advocating a couple of years ago? They wanted a two-tier Premier League with 16 teams in each tier. Essentially, this would be a First and Second Division premier league with promotion/relegation but with greater revenue-sharing since tv rights would be for both divisions.
I don’t remember that proposal – but it sounds similar
The proposal by Bolton’s Philip Gartside was to create a two division Premier League, possibly with no promotion and relegation from below and to include Celtic and Rangers. I’m suggesting something quite different- an American style system where all teams can potentially play each other in the same season, and clubs no longer play a balanced (home and away) schedule.
Hey Stefan,
Great article. I love a good, proactive idea. However, could the difference in the German and English attendances on your table be because British fans are more prone to attend football matches of successful teams whereas German fans are slightly more loyal to a side, regardless of results?
The top flight of the Championship obviously win more than the bottom half of the Premier League, so people want to attend matches involving the former. The league your propose would still be hampered by this, surely.
Jack
Interesting thought. An alternative interpretation is that German fans only want to watch teams in BL.1 and so are less loyal. What we’d really like to know is the pattern of attendance by individuals, and attendance data really conceals a huge world of possibilities. As you suggest, this is just an idea suggested to me by the data, but if anyone were going to seriously develop it (which I doubt) then there would need to be more detailed market research.
A fine retort.
I think football suffers from a lack of good data in general, and struggles because of this. Football is quite resistant to viable, sensible, and economically beneficial ideas because of its traditions I suppose. A great shame. Keep up the excellent work Stefan.