THE IMPACT OF THE HORIZONTAL DISTRIBUTION OF MEDIA RIGHTS REVENUES IN SPORTS LEAGUES ON COMPETITIVE BALANCE

Dejan Trifunović and Bojan Ristić

Chapter 12 in Shaping Post-COVID World – Challenges for Economic Theory and Policy, 2023, pp 263-285 from Faculty of Economics and Business, University of Belgrade

Abstract: There are two possibilities for selling media rights in sports: either each team sells media rights individually, or the league sells them in a package. In the latter case, teams act as a cartel. This cartel is justified if the individual sale of media rights would make spectators worse off. The negative effect of the cartel is reflected in the higher price of media rights. The positive effect is that small teams can obtain higher revenues than if they sell media rights individually. Thus, the collective sale of media rights enables maintaining a certain level of competitive balance (equal strength of teams) in the league. The European Commission allows the collective sale of media rights at auction if the league sells at least two media rights packages to different media houses for a certain number of seasons. Revenues from selling media rights are divided vertically between the monopoly sports organisation and teams and horizontally between the teams themselves. The horizontal distribution of revenue can be such that teams share revenues equally, based on the historical results or based on the number of fans. These criteria can be combined in the allocation of revenue. In this paper, we will analyse sports leagues with different criteria for revenue distribution and determine how they affect competitive balance. The level of competitive balance is measured using the adjusted (unbiased) normalised HHI index. In the leading football leagues, there is no clear relationship between the method of revenue distribution and competitive balance.

Keywords: SPORTS LEAGUES; MEDIA RIGHTS; COMPETITIVE BALANCE (search for similar items in EconPapers)
JEL-codes: L41 Z28 (search for similar items in EconPapers)
Date: 2023
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