Why Competition is necessary for a Sports Club to Survive
Modern Economics is built around free markets. The free market is the mechanism for organizing the production and distribution of goods and services without much interference from the government. This implies that anyone can buy and anyone can sell in any manner at any price they choose. The competition in the market amongst sellers helps customers get the best quality products at low prices. If this was not the case and the market was to be run by a single supplier, it would result in higher prices and a decline in the quality of the goods. As you already know, the fancy word for this is ‘monopoly’. A monopoly is a situation in which there exists one supplier and no possible alternative.
To counter this problem, the Sherman Act was passed in the United States in the late 1800s, which is commonly known as the AntiTrust Regulations. Later many European countries adopted this model to their own markets. In simple words, the Act enforces that an individual who creates or attempts to create a monopoly or colludes with a fellow competitor shall be deemed guilty of a felony. This rule holds up for every corporation and company, as colluding or forming a monopoly is a disadvantage for the consumers and in turn an advantage for the organization. Right from Petroleum to Automobile to Steel Industries the Anti Trust Regulations are seen everywhere. The Act’s purpose was to promote economic fairness and competitiveness and to regulate interstate commerce.
However, apart from the fact that regulations often become hindrances, this rule makes very little sense when it comes to Sports Enterprises, where having a monopoly can actually prove to be a bane and problematic in terms of success and growth. Because all teams in a given league share certain common interests and business objectives — such as preservation of competitive balance among teams, maximization of broadcast revenue, and general promotion of the league — some degree of cooperation and agreement among teams is necessary and unavoidable.
Drawing a parallel to this in football, or any sport for that matter, the most important reason why the sport enterprise runs successfully is the rivalry and the competition between the teams. Fans don’t stay up late at night to see their team cruise past the opponent every matchday. They want to see the fight, the ups, and downs their team goes through which makes victory taste even more fruitful.
For a broader understanding, let’s take the example of Juventus, a club in the Italian Football League where they have won every possible trophy there was to win in the last 12 years. Such dominance looks astonishing on paper but the fact is that this dominance has created such a huge gap between Juventus and the rest of the league that it is virtually impossible for the remaining clubs to catch up. The smaller clubs are growing financially weaker by the day and can’t sustain to compete with the likes of the bigger clubs in terms of infrastructure, quality of players that are brought in and culture of the team itself. If the smaller teams can’t survive, the entire point of the competition, which is naturally, to compete, is wiped off. To fix this, Juventus colluded with these smaller clubs and paid them dividends every season to help them sustain their status as an enterprise and thus indirectly save Juventus as a club.
Another example can be taken of the El Clasico game. The most popular football match of the Spanish League season is played between Barcelona and Real Madrid, two giants of the game. If even one of these clubs were to cease to exist tomorrow the other one would be at a huge disadvantage, even though it was now the only dominant team in the league. One can say that even if Real Madrid is Barcelona’s biggest competitor, without Real Madrid, Barcelona’s reach as a football club in the world would have been only half as much as it is today. It might sound ridiculous to a diehard Barcelona or Real Madrid fan but they two clubs in a way, complete each other and push themselves to be better.
On the contrary, the English Premier League has 7–8 teams with top-notch players and each of them have enjoyed great success. There is a different winner every year and this singular dominance of sports is eliminated. As one can imagine, this level and intense competition between the teams makes the English Premier League the most popular league in the world which is watched by millions over the globe. This earns truckloads in broadcasting rights, sponsorship deals, and merchandise revenue for the clubs. This money gives them the resources to sign the brightest talents of the world and shoot their valuation through the roof.
In conclusion, a corporation would realistically benefit from monopolization but sports enterprises are the ones that will suffer the most. This sounds staggering and inconceivable but then, that’s football for you.