Stefan Szymanski is a leading sports economist at the Cass Business School and an Oxford alumnus, although he says “with some confidence” that his career path has had nothing to do with his experiences at the university. After initially studying how a business’s economic strategy corresponds to their success with John Kay, a fellow at St. John’s, he later dedicated his research to sport, where success is easy to quantify: “if you don’t win the league you can say you’re the better team, but no-one will believe you” he quips. Furthermore, the financial transparency of English football clubs gave Szymanski an enormous and easy-to-access sample before he expanded his research to America to understand “how sports league are organised and how they work as commercial enterprises”.
Much of his attention is focused on the unique differences between the European and the American sports leagues, which presents an economic paradox. In economic terms he would expect an “iteration towards a single best structure”. In fact, the two systems are still remarkably different. The American “monopolistic system” is based around a closed league, where teams’ existence at the top level is never threatened, whereas promotion and relegation are a major part of almost every European sports league. A closed system (for example the NFL, where all television revenues and merchandising sales are shared) allows teams to act collectively in each other’s interests, treating the league as a “joint venture”. By contrast, clubs in the Premier League have only their own safety in mind: why would Aston Villa share their revenues with West Ham if they might be threatened with relegation the next year?
But, according to Szymanski, the gap between the leagues is narrowing. What interests him is the introduction of the financial fair play regulations (demanding that teams break even over a three-year period or be subject to disqualification for European competition) and the increase in parachute payments to clubs relegated from the Premier League.
The fair play regulations “could end up acting like a salary cap system” creating “a mechanism which limits a club’s capacity” to outspend its rivals. Moreover, the financial help given to relegated clubs (£48m over four years) creates a “semi-closed system”, whereby realistically only six to eight clubs can be promoted back into the league because of their financial firepower. This in itself is evidence that the European leagues are leaning towards the American system which in turn, along with the greater “global appeal of football”, has attracted American owners to the Premier League. John Henry, Liverpool’s principal owner, in fact stated that the introduction of the financial fair play regulations reassured him that he would be able to turn the club into a profitable business.
While Szymanski thinks that the new American commercial owners (there are five of them currently) are “looking for changes to regulations which will make it [the Premier League] more like American leagues” to guarantee themselves sustainable profit, he thinks that there would be a political uproar from the governing bodies as well as the fans if a few owners tried to abolish the system of relegation and promotion. Moreover, he doubts the effectiveness of the imminent financial regulations. He says they are “unlikely to make any fundamental difference to the structure of European football” but will also be hard to implement.
Hypothetically, if Barcelona were excluded from the Champions’ League both the Spanish FA and UEFA would suffer, losing fan interest in the best team of the competition and subsequently large chunks of revenue.
Talking to Szymanski was remarkably enlightening and his knowledge in his field is predictably profound. He gives a global and intellectual picture of the sporting world and how two systems that many presume to be separate are in fact becoming closer and closer. Football fans need not worry, however. The day where the Premier League is run like the NFL will likely never come, but nonetheless Szymanski’s revelations provoke some thought as to the future of European sport.
