By Robbie Butler

Horse racing seems to be the sport that dropped the curtain on sport quite late on these islands  (late March). The Cheltenham Festival inexplicably continued as normal until sport was called to a halt in the UK the following week. Irish horse racing went on for longer with Thurles being broadcast in free-to-air television in the UK. 

 The curtain was raised  again this week. With racing in the UK returning at Newcastle on Monday, and Kempton Park yesterday, the show is very much back on the road. The 2,000 and 1,000 Guineas will be held at Newmarket over the weekend, while Irish horse racing will return at Naas next Monday the 8th of June.

One noticeable difference to the before and after Covid break has been the reduction in prize money on offer. The table below provides an overview of some aspects of this. 

The difference between Ireland and Great Britain are listed. While not identical, there are similarities. British races will see an increase in prize money at the lowest end of the races. Class 5 and Class 6 races are now more valuable. This is not the case in Ireland. Maybe this is because about 2/3 of all prize money is sourced from exchequer funds. 

By Robbie Butler

The Club by Joshua Robinson and Jonathan Clegg is an excellent overview of the rise of the English Premier League told through fascinating stories of those of involved. There is a book review on this site if anyone wants to know more. Gary Neville's recent comments about how English Football League clubs are in grave financial peril got me thinking about one of the stories in the book.

According to Neville the top tier clubs in the Premier League, and not the British Government, should bail out clubs in the lower leagues that face bankruptcy. MP Damian Collins claims this could be 10 clubs in the coming days. Huddersfield Town owner Phil Hodgkinson is far more pessimistic and told the BBC “50 or 60” ELP clubs could be forced out of the game if stadiums are empty when football returns.

The story in The Club that this reminded me of was a meeting of US-based Premier League owners in the early 2010s. I think the book recalls a meeting in a classy New York restaurant which included representatives of the Glazers, FSG and Stan Kroenke. (The book remains locked in my office so I cannot check as I still don't have access).

As the story goes, the owners of bitter rivals Man Utd, Liverpool and Arsenal met to discuss their investments. In years gone by it would have been unheard of for such a meeting to take place with local owners. But the Premier League had changed.

The US ownership model is very different. While owners compete on the pitch, they are committed to cooperating off it. In this sense sports economics is almost unique as it requires competition and cooperation. One of the topics up for discussion at the meeting? Relegation.

For many in the US this is a strange concept. It does not exist in the major leagues. Franchises that finish bottom or near the bottom are not punished by demotion to a lower league. In the Premier League, and other major football leagues, this is the ultimate punishment. For American owners, this is far from ideal. If they could, they would probably undo the 150+ year tradition of promotion and relegation, to ensure their team could never leave the paradise and riches that is the Premier League. The value of their investment would soar.

Unfortunately for them, 72 other clubs in the Football League and hundreds of others in the non-leagues would never allow this to happen. Relegation will remain. The negative consequences of this for team owners each year are there for all to see. Just ask American Ellis Short, the one-time owner of Sunderland, who endured a double relegation before selling the club. The Nextflix series Sunderland Till I Die captures the story.

So when Gary Neville calls for the Premier League clubs to rescue those in the lower leagues, I wonder about the motivations of either side. Neville is a co-owner himself of 4th tier Salford City. Naturally, he would like to see investment flowing from the top tier to the lower leagues.

But if Huddersfield Town owner Phil Hodgkinson is right, and 92 clubs were to become 42 or even fewer, this would dramatically alter the competition structure. Imagine if just 30 clubs survived. Could relegation be scrapped? Could two equal conferences emerge with a play-off system. Sounds familiar. It's the MLS and other major sports leagues in the US.

If only the Premier League survived, the owners of each club would see the value of their assets soar. Relegation would be no more. Just guaranteed top flight income and revenues indefinitely.

By Robbie Butler

Last week our paper Bonus Incentives and Team Effort Levels: Evidence from the ‘Field’ was accepted for publication in the Scottish Journal of Political Economy (SJPE). The SJPE has a long association with sports economics and published the first paper in Europe on sports economics in 1971 - Peter Sloane's examination of the labour market in football.

Our paper, co-authored with Liam Lenten (La Trobe) and Pat Massey (Compecon), explores the effect of bonus incentive mechanisms with a focus on how such a scheme influences aggregate production levels of teams of workers. What better place to do this than in the highly competitive setting of professional sport. 

Using data from European rugby's Heinken Cup from 1996 to 2014 we explore that the introduction of bonus points for the 2003/4 competition, and all years that followed, influenced the number of tries scored.

The modelling results demonstrate qualified evidence that introducing bonuses encouraged teams to score more tries, incentivised teams to increase effort to earn the bonus, and without reducing production after the bonus is achieved.

The paper should be available in the coming months in SJPE.

By Robbie Butler

The 18th of January 2003. That was the date. Munster versus Gloucester in the final pool game of the 2002-03 Heineken Cup - rugby unions' European Cup. 

For many reasons today, this seems like a lifetime ago. For one thing, the old Thomond Park was packed to the rafters with 12,500 people. No social distancing.

​The tale of the game is one that has never been forgot and demonstrates the power of incentives and the importance of bonuses for increased production (winning and losing bonus points) in today's game. What happened that day is testament to economic theory and has gone down in Munster folklore as the "Miracle Match". 

​Going into the final game Pool 2 looked like this. 

With Perpignan set to face Italian side Arix Viadana, it was accepted that Munster would have to beat the brilliant English side Gloucester to have any chance of progressing. If both of these things happen, all three teams would then end up on 8 points. 

Munster remarkably won the game 33-6, scoring four tries in the process. A winning margin of 27 thanks to Ronan O’Gara’s last second conversion. So too did Perpignan, meaning a three-way tie at the top. Munster's winning margin and method are crucial in the miracle. Here is why.

Before kick-off Munster knew that they would need at least a 27 point winning margin AND four tries to progress. This was a time before bonus points so no extra point was given for scoring four. There are a number of interesting article online that overview the match, and the winning combination needed for this miracle to happen, but none that I could find explained why this was needed. 

I was lucky enough to have a contact to a player that played a starring role for Munster on the day. He admitted to knowing what was needed (27 points winning margin and 4 tries) but not knowing why. With his help and those in Munster Rugby I was guided towards the tie-breaking rules. I could figure out the rest.

So here is why the Munster Miracle was a minimum margin of 27 points and at least 4 tries.

The rules dictated that in the event of a three-way tie like this, the next criteria used to separate the teams would not be points difference but tries scored. And not just tries scored, but tries scored excluding the games against the Italian team. 

Before the final pool game, head to head tries scored read:
 
Tries Scored (Before Last Game)
Perpignan = 10
​Munster = 5
Gloucester = 9
 
With Gloucester on 9, this is why Munster needed at least 4 tries. If Gloucester were to score a try in the game against Munster, the Irish team would have needed 5 tries in that game (total of 10). This of course would have had them level with Perpignan, with the French club stuck on 10.

Munster managed to get 4 tries which got them level with Gloucester, as the English club were held try-less. So, at the end of the final pool game, with all three teams on 8 points, the criteria for tie-breaker (Head-to-Head tries scored) read:
 
Tries Scored (After Last Game)
Perpignan = 10
Munster = 9
Gloucester = 9

As a result, Perpignan topped the Pool and qualified for the knock-out stages. This was not the end for Munster, as they could be one of the two best second placed teams to qualify from the pool stages. This was decided by points difference across all six pools.
 
To separate Munster and Gloucester, tie-breaker criteria two was Head-to-Head on points difference, but across all three teams. Before the last Pool game this read:

With Munster on -25 and Gloucester on +28, the Irish side were 53 worse off going into the last game or -26.5 when you consider a score for Munster is subtracted from Gloucester. This is why there was a need for a 27 winning margin. This then looked afterwards:

Munster were +2, and Gloucester +1. In the seconds before Ronan O'Gara's last minute conversion, Munster were 0 and Gloucester +3. That famous kick saw a 4-point swing and was enough for Munster to progress.

Interestingly, Perpignan were -3 and lucky Head-to-Head Tries Scored was the first criteria! In fact, any Munster win with 5 tries would have been enough to secure at least 2nd (even a one point win) so long as Gloucester didn’t score a try.  

Thankfully, the introduction of bonus points in the 2003/4 competition means the complications associated with Munster's "Miracle Match" is unlikely to be repeated. 

By Robbie Butler

Under any criteria, the rise in the economic value of football in my lifetime has been remarkable. Two of the most obvious examples of this can be the found in transfer fees and broadcasting revenue.

In 1982, one of the greatest players of all time, Diego Maradona, left his native Argentina and signed for Barcelona. The cost of the transfer fee - just £3 million. That was almost 40 years ago. What about inflation? This must be a £100 million today, no?

Using UK data, and pound sterling fees (the euro was only created in 1999), Diego Maradona's real fee today is just £10.65 million. Just £10.65 million! In the most recent transfer window, Championship side Fulham signed Portuguese winger Ivan Cavaleiro for about the same real price as Maradona.

The rise in the real cost of footballers has been truly astonishing over the past 40 years. Data on this, considering each time the nominal record fee was broken, is presented below. As I pointed out in a post a number of years ago, on three occasions the nominal record was broken, but the real fee remained below the record price. 

The real increase in transfer fees is remarkable when compared to the 1982 Maradona fee which Barcelona paid to Boca Juniors. For example, by 1992 one Gianluigi Lentini of AC Milan was worth roughly 2.5 Maradona's. I doubt there is a football fan anywhere, ever, that could make a case for this. The Italian was good but a shadow of the player the great Argentine was. 

Zinedine Zidane and Kaka are the equivalent of 7 Diego's. Gareth Bale and Paul Pogba are today worth 9 Mardona's, Cristiano Ronaldo is worth 10. Neymar almost 20. That's an entire squad of players.

What funded this extravagant increases can be found in the far right columns - broadcasting fees. My data is only for English top flight football but is a reasonably good comparison. In 1982 Maradona's fee was worth more than the entire 1st Division broadcasting agreement between the FA, BBC and ITV. 

The ratio between this and subsequent agreements makes the increase in the real cost of transfers seem small. It is astonishing growth. Today, the Premier League broadcasting rights are worth more than 200 times what they were when Maradona left Buenos Aires in 1982. And this is in real terms! It is what largely continues to fuel transfer fees and salary increases.

Will Covid-19 lead to a transfer fee correction? There are many factors at play, but it is possible.

To what extent, will depend on changes in the broadcasting fees paid by providers and the impact of the crisis on the wealth level of rich owners. Any correction may also be a short run effect. If broadcasting fees are unaffected, 'normal' service will likely resume sooner rather than later.

By Robbie Butler

This post builds on the two most recent on the site. Again, promotion and relegation is the central issue. It is this that is, and will continue, to pose the greatest level of difficulty for sports administrators in the wake of Covid-19.

Earlier this week I argued that leagues would be better off finishing 2019/20 before attempting to start 2020/21, whenever that may be. Those in Scotland think otherwise.

The Scottish Professional Football League (SPFL) has now voted to end a number of domestic leagues. This decision covers the 2nd, 3rd and 4th tiers of Scottish football and means various clubs will be promoted and relegated based on current league position, even though the seasons were all cut short.

Enter Heart of Midlothian (Hearts). The Edinburgh club are currently bottom of the Scottish Premiership. While the  SPFL decision is not currently in place for the Premiership (1st tier), Hearts must fear it will be extended in time if things do not improve in the UK. A ready-made replacement is now waiting in the wings. Dundee United have now been promoted from the 2nd tier following the decision to end the season and will expect a place in the Premiership in 2020/21.

Fearing that Hearts will be the one to drop out, Hearts owner Ann Budge has said:
"I have said from the outset that it was imperative that we find a solution that ensures no club is penalised by relegation in a situation where the leagues cannot be finished. The financial consequences are enormous."

It is hard not to have sympathy with Budge. However, the sentence also holds for the soon-to-be promoted Dundee United. The financial consequences of not being promoted are enormous. 

Something has to give. I get the feeling sports lawyers in Scotland are going to be extra busy very soon!

By Robbie Butler

Football (soccer) leagues around the world are almost all open systems. This means teams move up and down divisions.

For those of us with an interest in sport and economics, this is crucial to competition design and makes these leagues different to closed systems like the National Football League (NFL), Major League Baseball (MLB) or Major League Soccer (MLS) – a rare example of a soccer league with no ‘punishment for failure’.

In the world of Covid-19, the difference between open and closed systems is now more apparent than ever.

Debate continues to rage as to whether leagues should restart (when safe) or should be scrapped. For the majority of leagues that follow an August-May schedule, at least two problems with declaring the season null-and-void present themselves.

Firstly, most leagues are probably 80% complete hence a narrative is written. Secondly, and more critically, open systems promote and relegate teams. The designation of champions, while important for bragging rights and prize money, is not as critical as promotion and relegation. Qualification for intercontinental tournaments is a further element of complexity.

Turning to the Premier League in England as an example, while Liverpool are clearly the best team so far this season, the plight of Norwich City, Aston Villa, Bournemouth, Watford, West Ham, Brighton, etc. is far more critical to the league structure. Relegation will result in the loss of millions of pounds of revenue in season relegation+1. This is exemplified the longer one is outside the Premier League.

Nottingham Forrest are now 20 years outside of the Premier League. This is important too. The East Midlands club are currently 5th in the English Championship. Promotion to the Premier League is in sight. In fact, 13th placed QPR are just 6 points away from the coveted 6th placed, that could lead to Wembley and the Premier League.  

Finishing these leagues is crucial so that a restart is possible. A restart without finishing 2019/20 is more complicated than the delay leagues currently face. The obvious league battles that will arise could last for years.

Cups on the other hand could get the axe. There does not need to be an FA Cup winner for 2019/20 to have the competition next year. The same is true of the UEFA Champions League. The 2019/20 is effectively closed, aside from the winners getting automatically into the following seasons competition.

The best way to start 2020/21 is to finish 2019/20. This is why all open system leagues will have to finish – probably.
​
For Liverpool, top of the Premier League, their near 30-year association with Carlsberg couldn’t be more apt. They will be league champions - probably. 

By Robbie Butler

Tokyo must be cursing their luck. What is it about the Japanese capital and cancellation of the Summer Olympics Games? The 2020 gathering were set to be the 29th installment of the modern Games, have first started back in Athens in 1896.

Organisers of the 2020 Games will be very much aware that the last time the event was cancelled, with everything in place, was back in 1940 with Tokyo set to host their first Games. London was subsequently cancelled in 1944, having been awarded the Games, but little planning was ever put into the event.

The cancellation of 1940 put to an end 5 Summer Games in a row (1920-1936). This was preceded by five Games in a row from Athens in 1896 to Stockholm in 1912. World War 1 broke the link. 

Based on these earlier experiences, where the world managed to string just 5 Games in a row before major disruption hit, the recent run of 19 Games is quite remarkable. It demonstrates the stability of the world order since 1945 and the general success in avoiding major upheaval on a global scale. Covid-19 has put an end of this run. 

We have taken this and many other things for granted. I recently read a tweet that said how unlucky someone born in the year 1990 has been. They have lived through a global financial crisis and now global pandemic by 30. But what about 1900? These people lived through a pandemic, world war and depression by the time they were 30. A second war was on the way.  If you were Russian this also included a revolution. 19 Games in a row is proof of the success of many global institutions, both economic and political.

Had we followed a similar pattern to the past, following the cancellation of Tokyo in 1940, the Games would have restarted in 1948 in London for a chain of 5. This would have meant London, Helsinki (1952), Melbourne (1956), Rome (1960) and Tokyo (1964). ​At least the Japanese city would have missed out of losing the Games again...just.

By Robbie Butler

Ireland's Economic and Social Research Institute have issued revised scenarios for economic activity in 2020. The projections have changed from gross domestic product increasing by around 3.5%, to a deep contraction in the order of 7.1%. 

Some have argued already that 7.1% might be on the conservative side, and that the Irish economy, which is driven by exports and imports, could contract by an even greater extent. Might we even surpass the 9% contraction of 2009 in the depths of the Irish banking crisis?

The fallout from the crisis will be extensive and long-lasting. The economic, political and social ramifications will probably last years. Right now however, the focus is on getting from one day to the next. Sadly, another 10 people lost their lives yesterday in Ireland due to Covid-19. This brings the total number here to 19. We can only hope that the actions of the vast majority of Irish people, and people around the world, will help slow the spread of this virus, so than 

Such actions have come at a cost. Restriction of movement requires sacrifices. Not seeing family, grandparents in particular, isn't easy. However, it is a price that is worth paying. Movements have been largely reduced to essential activities - basically trips to the supermarket or pharmacy.

The other form of movement encouraged is physical exercise. People have been advised to stay active by walking, jogging or running. This benefits both physical and mental health.

It seems to be very successful. I have noticed a marked increase in the number of people passing our house, at various speeds, over the past 2 weeks. In fact, the number seems to be growing daily. Not only have I witnessed this, but I have also been part of the increase.

Normally at this time of the year, my road running distance covered would be 0km. This only starts in mid to late April with our focus on the Cork City Marathon in early June. 2020 has been different. So far this year I have run nearly 26km in the past 9 days. I suspect this will grow in the weeks ahead, despite the cancellation of the Cork City Marathon until September.

The Covid-19 pandemic is going to leave many legacy effects. People might queue much further apart in shops in the years ahead. Handshakes might become a thing of the past. Working from home may become more frequent. Let's hope greater physical activity becomes habit and is retained long after this crisis passed. And pass it will. 

On the 30th of September 1859, Abraham Lincoln recounted the following story:
It is said an Eastern monarch once charged his wise men to invent him a sentence, to be ever in view, and which should be true and appropriate in all times and situations. They presented him the words: "And this, too, shall pass away."  How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction!

By Robbie Butler

While most popular team sports globally follow a playing season that mirrors that of the academic cycle (Aug-May), there are some examples of those that do not. On these islands netball, rugby league and most domestic soccer in Ireland are exceptions and play through the summer. However, the most obvious example of this in Ireland can be witnessed in Gaelic Games (GAA).

While GAA is now effectively played all year round with clubs, county, schools and 3rd level matches scheduled from January to December, the most significant games are held between around April and September. Under normal circumstances we would all be preparing for upcoming inter-county games across all codes of the sport (football and hurling). Sadly, Covid-19 has put pay to this and one can only wonder when the Championships will commence.

The competition design of these must now be under consideration. For more than 100 years, counties played each other based on geographic location, across 4 different provinces. A straight knockout system was employed so that the 4 area winners met in 2 semi-finals and a final. The winner of the final was crowned the All-Ireland Champion. 

In the late 1990s and early 2000s, both hurling and football deviated from the traditional competition style and a "back-door system" was introduced. Put simply, this separated the provincial championships and All-Ireland series so that counties had 2 chances of success but could only be beaten once in either competition.

Further changes have happened over the years and the system is now quite complicated for passive observers. For example, the football championship goes from knock-out (Provincial Championship) to league (Super 8s) to knock-out (All-Ireland). The upshot of all these competition changes is more games. More games means more tickets sold in total (average match attendance has declined) and more broadcasting revenue.

Attendees at our recent research event in county Kerry will also know that the design changes also decreased competitive balance. John Considine's research demonstrated this and provided an insight into how stronger teams are now more dominant. Removing a straight knockout reduced the role of luck and has made it harder for underdogs to win outright. 

The pandemic we find ourselves in has seen the postponement of the GAA Championships. Assuming it can restart in June or July, this could mean a reduction in the number of games. Could a return to the traditional knockout format be the solution? It served us well for more than 100 years and could be employed for a one-off event under these unprecedented circumstance. 

If straight knockout is introduced, the chances of a shock winner will increase. Less traditionally successful teams would only have to beat one of the "big" counties once to end their season. The likes of Dublin, Kerry, Kilkenny and Tipperary will only get once chance. It could result in winners like Galway, Wexford, Mayo or Waterford. The latter two are waiting a combined 130 years to regain the titles that last one.  

For example, in 2004 Wexford shocked Kilkenny to win the Leinster Championship. Waterford did the same in Munster to win only their seond title since 1963. Under the old rules both would have reached the semi-finals and competed with Antrim and Galway. One, if not both, would have almost certainly made the Final. Neither was in the All-Ireland Final. Instead Cork played Kilkenny, both of which had lost their respective provincial finals.

What excitement a return to a straight knockout would bring. Competitive balance may be the biggest winner of all.