By Robbie Butler

Pick up any standard microeconomics textbook for undergraduates and you will meet a chapter explaining the theory of the firm. Readers will be introduced to issues like profit maximisation, marginal revenue, average costs and marginal costs, amongst other things.

Embedded in the theory is an explanation of "shutting down" and "exiting" the market. The former is regarded as temporary closure, while the latter is permanent. Because of this distinction, the short-run decision (shutdown) and long-run decision (to exit the market) differ for the firm. If a firm shuts down, it loses all revenue from the sale of its product, but must still cover all fixed costs. Therefore, the firm will shut down if the revenue it would get from producing is less than its variable costs of production. The firm will only exit the market if total revenue from the sale of its product is less than the total cost of production (all costs).

Sky Sports have a lovely insight to this today thanks to an interview with Tranmere chairman Mark Palios. Football clubs have essentially "shut down" in recent months - with no fans at games. The variable cost of fans (security, light, heat, insurance, health and safety, policing, etc.) have largely disappeared. However, the reopening of stadia will bring these costs back. The fixed costs never left e.g. player salaries.

Palios explains the problem this is for clubs. 
"If you just come down the tiers to 2,000 fans [tier 2], our season tickets are 3,000. So actually cash-wise we are probably worse off because if we have fans in the ground, I know the costs would be about £10,000 to open up. We'd have all the gates open for social distancing, and all the turnstiles on. As a consequence of that, we wouldn't get anymore cash and we'd have to spend £10,000 a match. If it stayed like that, in the context of about a further 18 matches, it's nearly £200,000 of costs. And if you were allowed in 4,000, it's only for the extra 1,000 of general attendance [on top of 3,000 season ticket holders], but we'd still have the costs. It would be pretty minimal, with regards any excess for us."

A lovely illustration of fixed costs, variable costs and total revenue, and the problems facing clubs that rely on match-day income as their primary source of revenue.

By Robbie Butler

In August 2018 I wrote a short piece here about the newly formed Nations League. I have to add, more than two years on, I still struggle with the competition structure and what it might mean for future qualification.

In the original piece, I wrote the following: 

"The good news for the minnows is that they not only get to play one another, and therefore have a golden opportunity to register a rare international win, the winner of this group also qualifies for the 2020 European Championships. This poses an obvious question? Is a country better-off targeting a place in Group D rather than Group C? This logic can apply to Group C/B and Group B/A."

As far as I can tell, UEFA qualifying for World Cup 2022 is based on the current standings in the Nations League. Play-off spots will be available to the two highest finishing teams that fail to finish 1st or 2nd in their qualifying groups. This encourages team to win.

What I don't now get is qualification for Euro 2024.

If the same rules hold as for Euro 2020, are Northern Ireland now better off than the Republic of Ireland? The North were relegated to Group C last night, while the Republic survived in Group B with a 0-0 draw at home to Bulgaria. 

It should be noted, neither team will play at Euro 2020, having been in Path B play-offs. Yet Scotland will be there having been seeded in Path C.

My question remains. Is a country better-off targeting a place in Group C rather than Group B?  Surely, losing can't be better than winning. Can it?

​By Robbie Butler

On Saturday afternoon, as I was watching Crystal Palace play Leeds United, I was struck by a comment from the match commentator that this was the home teams' 8th consecutive season in the Premier League.

Those that are familiar with English football will know that Crystal Palace are somewhat of a yoyo club, and have 5 different spells in the Premier League. That means 4 relegations and 4 promotions (they were in the league in 1992/3 for the first season). Their 8-year stint is by far their longest spell in England's top flight. 

Crystal Palace's current stay in the top flight was thanks to a promotion at the end of the 2012/13 season through the play-offs. The play-offs are for teams that finish the season in places 3/4/5/6 and involve semi-finals (two legs both home and away) and a final at Wembley.

The Championship Play-off Final - which Crystal Palace have incidentally won more than another other club (4 times) - is often referred to as the 'richest game in football' or the 'richest game in the world'. This is because of the enormous revenue streams that can be generated from playing the Premier League through broadcasting, sponsorship, matchday operations and merchandising. 

On the 27th of May 2013, former England and Sunderland striker Kevin Phillips, scored a penalty in added time of first half extra time to beat Watford in the 2013 Playoff Final. Crystal Palace have reaped the rewards since. Each season the clubs stays in the Premier League, the more value this goal become. Phillips, now 47, is long since retired and played his last game in 2014 for Leicester City.

However, there is a more valuable goal. A year before at Wembley West Ham United beat Blackpool in the 2012 Playoff Final.  Portuguese player Ricardo Vaz Tê - currently playing with Portimonense following spells in Turckey and the Chinese Super League scored the winning goal, 3 minutes from time, as West Ham won by two goals to one. 

West Ham have remained in the Premier League ever since. Every club to win the Playoff prior to 2012 have been relegated at least once from the Premier League. Vaz Tê's goal unlocked nine seasons of the Premier League and counting. Just like Kevin Phillips' goal a year later, the longer West Ham and Crystal Palace survive in the English Premier League, the more valuable these individual goals become. 

With the 2020/21 season well underway it seems very likely both clubs will see an 9th and 10th season in the Premier League. By then Phillips will be 48 and Vaz Tê 35. The impact both had on their respective clubs lives on. 

By Robbie Butler

There is a story in football circles that when a Premier League club was bought by an overseas investor in the late 2000s the new owners were unaware of the concept of relegation. Within a couple of seasons their new club had suffered just that - relegation. 

When news broke yesterday of yet another attempt to launch a European Super League I was reminded of this story. It was no surprise to me that Liverpool and Manchester United were yet again driving this concept in England. I think this is less down to the fact that they are the two most successful clubs, and the most supported globally. For me, the common denominator is that they both have American owners.

The difference in the style of ownership is stark and clear to see. In one city the owners are probably regarded as liberators that have returned a club to its full glory. In the other, the very opposite is probably the view held by many supporters. And while on the pitch their competition is fierce, off the field, their co-operation is clear to see. 

The establishment of a European Super League could be a further Americanization of European football. While details are still emerging, one thing this new league could do is remove the threat of relegation. This would effectively "close" the league and make it operate more like the NFL, MLB, MBA or MLS.

This is the crucial difference between US and European sports leagues and shifts the bargaining power from players and supporters towards owners. The  European super league would likely become an monopsony (own buyer of talent) and not punish entrants with the threat of relegation. The recently failed 'Project Big Picture', whilst not eliminating relegation, had argued that it should be reduced to just 2 teams in season in the EPL. 

To remove relegation would undermine 140 years of league football in England. Promotion and relegation are part of the fabric of the game. As it is in football leagues right across Europe. 

Take Luton Town for example. Since 2004-05 the club has enjoyed 4 promotions but has also experienced 3 relegations. The table to the right explains this.

At the start of the 2005/06 season Luton played in the 2nd highest tier of English Football (The Championship). The club then experienced three successive relegations, to League One, League Two, and in 2008/09 the Conference Premier Division (outside of the Football League). 

However, over the course of the past decade, the club has managed to make it back to the second tier of English football, just one tier away from the English Premier League. The revenue and resources that are on offer from reaching the Premier League are motivation enough to keep clubs like Luton Town dreaming.

I am sure this was as strong as ever during the years 2009-2013 when the club wasn't even playing in the Football League. 

If Luton ever reach the ELP, what a turn around that will be. A European Super League - without promotion or relegation - would limit the possibilities of most clubs.  While great for the lucky few, it would kill the dream for most. That's not European football and it never has been.

By Robbie Butler,

In the summer of 2017 I was asked to contribute to the Cork City FC match day programme. With University College Cork as the main sponsors of the club it was a nice fit and a chance to engage with the wider community in Cork.

I decided to touch on the general issue of championship uncertainty and the unique place that the League of Ireland holds when it comes to competitive balance. Within the article, which appeared in the match-day programme on the 9th of July 2017, I said the following:

"Often league success has been followed by a period of gradual decline, ending in financial distress and in some cases even relegation. The cycle of champions to relegation could take less than a decade to be complete. This rarely happens in other European leagues where followers will probably know Bayern Munich have just won their fifth consecutive league title, Juventus secured a sixth Seria A title, while Celtic have also been crowned champions for the past six seasons, and finished the current campaign unbeaten."

This may now become all too true for Cork City [again]. It has not taken a decade, but rather three years. The club remains bottom of the Premier Division in Ireland, and while relegation is still very much avoidable, less than 3 years ago the club won a historic league and cup double.

How can you go from double winners to relegation candidates in less than 36 months?

​In few (of any) other European league does a team that wins the domestic double face relegation 3 years afterwards.  And it is not the first time. Why does it happen here?

I have previously explored the issue here and here. One of the figures in the links is presented again below. It demonstrates how quickly League of Ireland champions can go into a spiral of decline 1 to 4 years post winning the league. ​Cork City's decline is even more rapid.

The rate of decline is even more apparent when compared to other European league winners from 2017 - the last time Cork City were champions.

The official UEFA 2017 Roll of Honour lists the league and cup champions that year for each nation member.

Should Cork City be relegated, the League of Ireland will be the only UEFA member where the 2017 league champions are no longer in the top division of their national league. This is an ongoing problem, and on which seems to be uniquely Irish. There is a need for the entire competition structure of the League of Ireland to be changed.

​As I have said previously, the removal of promotion and relegation would be the first positive step in helping what was once infamously called "the problem child" of Irish football.

By Robbie Butler

In May 2019 Irish national radio station Today FM broadcast its final episode of Premier League Live. The radio station had provided live coverage of a Saturday 3pm kick-off to radio listeners, and no doubt countless others online, for 21 consecutive seasons. I must admit, despite often listening to the show on the radio, I did not become aware of the decision to end the broadcast until the start of the 2019-20 season. 

I was both disappointed and surprised that the show had come to an end. For me, it was something that I habitually listened to on Saturday's and acted as a reference point in both my week and calendar year. As I reflected on the ending of the show in the weeks ahead, my surprise at the decision declined, but my disappointment remained. However, the game has changed over the past 21 years and the decision to end Premier League Live probably reflected this - and all of this before Covid-19. 

When I think of my consumption of the show it primarily occurred while I was in a car. I wonder how many others were in the same position? If I didn't happen to drive on Saturday afternoon, I probably didn't listen. 

A second issue must have been the television schedule that has become more and more important in recent seasons. The 3pm Saturday kick-off is now the home of many of the lesser games during the season. The 'big' fixtures generally take place at lunchtimes on Saturdays, on Sunday afternoons or Monday evenings. I wonder how much demand for listening was impacted by the games taking place.

The arrival of a 3pm game on television - the blackout does not apply in Ireland - was no doubt another blow to the radio show. Sometimes the game on TV was the same as that broadcast on radio. Of course, the televised game was behind the paywall, but could be viewed in most pubs.

And one has to wonder if the show would have survived this season, had it not been cancelled. The continuation of football behind closed doors means almost every game has a different kick-off time. Every game is broadcast on television, making the radio an inferior good. Well for most anyway.

With television today effectively having a match on numerous times a day, every day of the week, radio broadcasts may soon be a thing of the past entirely. 

By Robbie Butler

Just like John in the post before this one, I too watched Stage 5 of the Tour de France. However, unlike John, my motivation was not to watch the cycling but rather the route in southern France that finished in the small town of Privas.

Most people (French people that I have met included) have never heard of Privas. With a population of less than 10,000 people it is easy to understand why. However, the town is a commune of France, and capital of the Ardèche department, the smallest administrative centre of any department in France. The reason I know is Privas is because I was lucky enough to visit the area 5 times during 2010-2013 while completing my PhD. It was fantastic to see the sprint finish into the town, along it's narrow streets, a far cry from the Champs-Élysées where the tour will finish.

And turning to Paris, where the Tour will end on the 20th of September, one can imagine that the Champions League loss is still fresh in the memory of Parisians. The end of the Tour might be a welcome distraction for many. The club's first appearance in the showpiece European game did not work out as expected. And while the champion of the Tour de France will always be crowned in Paris, the Champions League trophy has never been to the French capital.

And Paris is not alone in this regard.

One my second trip to Privas in 2010 I spent the entirety of my TGV journey from Paris Charles de Gaulle to Valence (south of Lyon) reading the wonderful Soccernomics by Kuper and Szymanski. I couldn't put it down. It was one of those rare books that I had to stop myself from reading, so as to have it for just a little longer. One of the earlier chapters recalls the success of club football teams in the European Cup. It is somewhat remarkable how so few clubs from Western capital cities have won the competition. PSG and Paris remain in this list.

The Table below lists the number of times the European Cup/Champions League trophy has been won by capital cities and regional cities in Western Europe. Just two other countries have clubs teams that have won the cup - Romania and the Former Yugoslavia. In both cases the teams were from the capitals (Steaua București (1986) and Red Star Belgrade (1991). Both were under dictatorship communists government at the time of their success. 

Berlin, Edinburgh, Rome and Paris are all devoid of success. This is not to mention Athens, Bern, Brussels, Copenhagen, etc. who will probably never boast the winner. Instead the power lies in the regional cities. Places like Munich, Milan, Liverpool, Manchester, Barcelona and Turin. And historically in cities like Birmingham, Nottingham, Hamburg, Rotterdam, Eindhoven, Glasgow, Porto and Dortmund.

Kuper and Szymanski hypothesize why this might be the case, and why capitals like Paris could emerge as winners in the not too distance future. But for now, Neymar and co. will have to wait. 

By Robbie Butler

Since football almost everywhere has been forced to play behind closed doors many aspects of the game have come on the radar. One such area of concern has been player salaries. This is acutely true for lower football teams where match-day income, particularly gate receipts, are a main source of income. This income has disappeared and might not return for some time as it is unlikely supporters will be allowed to attend matches in the normal fashion in the near future.

In response to the erosion of many English Football League club's primary source of income, the 2nd, 3rd and 4th tiers of the professional game have proposed the introduction of a salary cap. Such a move is largely unprecedented in recent times (in 1901 the FA introduced a salary cap that would remain until 1963) and would mark a power shift, back towards club owners. This would break the trend of the past 50+ years where players have become more and more powerful. 

Salary caps are not unusual in other sports around the world. North American sports employ salary caps quite effectively. All of the major sports in the US, with the exception of Major League Baseball (MLB) use salary caps. MLB instead uses a luxury tax.

In theory, there are two main benefits derived from salary caps. The first is that it brings greater parity between teams or competitive balance. The second is that is encourages teams to live within their means and avoids costs spiraling out of control.

Of course, not everyone is happy. The Professional Footballers' Association (PFA) - the players union - have voiced their concern. Formed on 2nd December 1907, the PFA is in its own words "the world’s longest established professional sportsperson’s union".

The union has come a long way since the "retain and transfer" system which effectively tied players to clubs, not unlike baseball's reserve clause.  For example, in 1959, George Eastham refused to sign a new contract with his club, Newcastle United, and requested a transfer. This request was declined. The source of the problem was Eastham disputing whether the house the club had supplied him was habitable and the unsatisfactory secondary job that the club had arranged. Eastham refused to play for Newcastle United in the 1960-61 season. Unable to leave, the player went on strike in early 1960. However, in October 1960, Newcastle United finally agreed to transfer the player to Arsenal for £47,500. 

As Eastham later recounted:
 “Our contract could bind us to a club for life. Most people called it   the "slavery contract". We had virtually no rights at all. It was often the case that the guy on the terrace not only earned more than us – though there's nothing wrong with that – he had more freedom of movement than us. People in business or teaching were able to hand in their notice and move on. We weren't. That was wrong”. Rebels for the Cause (2004).

Backed by the PFA, Eastham brought proceedings against Newcastle United in the High Court. In the case, Eastham v. Newcastle United [1964] Ch. 413, the judge ruled partly in Eastham's favour and the retain and transfer system was never the same again. 

It will be interesting to see how the hard fought gains since 1963, which culminated in the European Bosman Ruling in 1995, will be impacted by any such salary cap. Might we be moving back in the direction of the owners?

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

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.