If you are going to price gouge, do it to the other team’s fans!

January 11, 2013

The media has been abuzz this week with discussion over the price of tickets for the away section at the Arsenal vs Manchester City match in London this weekend.  Arsenal, decided to raise the price of the tickets in the away section to £62 (about $99 U.S.), which has made many supporters of Man City and the media very angry.  Manchester City actually returned 900 tickets to Arsenal of the several thousand that they were given for their fan section, as supporters of Man City have refused to pay so much to go travel to London to watch the game.

Which might have been a smart thing, as I believe it is now 35 years since Man City has beaten Arsenal at Highbury or the Emirates. (Yes, I’m an Arsenal supporter, and I keep track of these things…)

Notably, Arsenal and other teams in England have begun using multi-tiered pricing where different games are priced differently based on the opponents and other factors.  This practice means big games like Man City vs Arsenal will garner a high price, while QPR vs Norwich will be rather cheap.  It is also a practice which is not new to fans in North America, where many of the sport leagues use variable ticket pricing to try and capture greater consumer surplus.  Economists have begun to examine this practice of price dispersion, and research studies looking at similar practices in Theaters have found that it has boosted revenue for organizations.  Which means it seems only natural for sport organizations to copy this behavior.

But Arsenal fans are also unhappy, and have complained to the club this week because of the high prices.  They noted that in other countries across Europe, tickets often run between ten to twenty Euros.  I think with the growing nature of the business that is the Premier League, fans will only be disappointed in the future as ticket prices continue to soar, especially for matches with top tier opponents.

 


Man Utd to IPO… in the U.S.

July 4, 2012

Manchester United, one of the worlds biggest brands and highest valued sport franchises has decided that they will pursue an Initial Public Offering to raise $100 million  in the U.S.  This isn’t probably that strange of a thought, as the team is owned by Americans, the Glazer family to be specific, who also own the Tampa Bay Buccaneers.  However, I can see that many individuals will be quite unhappy in England, as there has already been a lot of backlash against Premier League teams being bought up by foreign investors.  Now with stock being sold on the U.S. stock exchange, I believe that there will be another wave of criticism.

Another question arises in, whether it would be worth the money to buy stock in Manchester United.  Certainly the franchise has a high value, but many football clubs in Europe have been running large debts, and it doesn’t seem like a sure thing that this stock will make quick money for anyone.  As a long-term investment it may make sense.  That said, I already know several people who live in the U.S. who are rather excited, as they love the prospect of being able to own a piece of their favorite club.

The Glazer’s were also hoping to sell of a good chunk of stocks on the Singapore markets as well, however the volatile nature of the Asian markets has caused the $1 billion Singapore IPO to be put on hold for another day.  CNN notes that this comes after Formula One also put a halt to their IPO in Asian markets because of too much uncertainty.


Did the “Beckham Experiment” work for the MLS?

November 22, 2011

On Sunday, the Los Angeles Galaxy won 1-0 in the Major League Soccer (MLS) Cup final over the Houston Dynamo.  The Galaxy are lead by U.S. international Landon Donovan, as well as England’s David Beckham and Ireland’s Robbie Keane.  Notably, the game is the last before Beckham’s 5 year contract ends with the MLS.  Now the MLS is a curious league, as it is operated as a single-entity organization where the league holds all the player contracts.  This was done to originally keep costs in check so as to not repeat the failures of the North American Soccer League (NASL).  The strict salary cap rules were relaxed to allow players like David Beckham come to play in the league, with each team given the same number of exceptions in regards to players who do not count under the salary cap.  This has allowed players such as David Beckham, Theirry Henry, Robbie Keane, and many others to come play in the MLS near the end of their career.

I don’t think there is any doubt that David Beckham has had a significant impact on the MLS, but the question is whether Beckham was worth the large salary he was paid by the league.  This exact question was the focus of a research paper in the International Journal of Sport Finance by Robert A. Lawson, Kathleen Sheehan, and E. Frank Stephenson in 2008, entitled “Vend it Like Beckham: Beckham’s Effect on MLS Ticket Sales” (volume 3, p. 189-195).  In this paper, the authors conclude that Beckham increased attendance at stadiums by around 55%, and that he was probably worth the investment.  While it seems likely that MLS recouped the salary they paid Beckham, I wonder if the MLS has really just boosted the popularity of soccer in America, and not necessarily the league.

I point again to Sunday, a day when Liverpool played Chelsea and the MLS Cup final was held.  Not only were fans able to watch Liverpool vs Chelsea live early in the morning, but they could also watch the replay on Fox in the earlier afternoon, at the same time as the NFL was playing its early games.  The day was filled with sports, finishing with the MLS Cup occurring the same time as Sunday Night Football.  The numbers show that the MLS didn’t do very well in terms of ratings, even with David Beckham and other big names playing in the game.  USA Today noted that the Liverpool vs Chelsea replay had double the viewers as the MLS Cup Final.

Fox’s taped Chelsea-Liverpool soccer game Sunday afternoon drew an overnight TV rating that nearly doubled the rating for ESPN’s primetime MLS Cup Sunday.

Fox’s soccer got a 1.5 overnight, which translates to 1.5% of households in the 56 urban TV markets measured for overnights. ESPN’s Los Angeles-Houston MLS title game, which included stars David Beckham and Landon Donovan, drew just 0.8% of households.

This is not a good sign for the MLS, though their timing and placement of the finals was probably not the best.  Scheduling during the same time as a prime-time game between the Giants and Eagles.


Manchester City’s New Record Losses!

November 18, 2011

Manchester City has announced that they have achieved a new Premier League milestone, they have posted the worst losses for any club in a single year, at a sum of £194.9 million.  The team owned by Sheikh Mansour currently sits on top of the Premier League table, and seems to show that better performance (and potentially championships) can be won by just dumping money into a team.  UEFA has now implemented a “Fair Play” financial rule requiring teams to be more financially responsible if they are to be allowed to play in confidential competitions such as Champions League and the Europa League.  Man City’s losses would have gotten them banned in future years, but because the losses come before the accounting window begins, they are safe for now.

The ESPN soccernet article linked above did note that the change in financing has taken consistently mid-table Man City to top of the table, and while costs have increased, so has revenue.

The Blues are also pointing out that commercial revenue has risen 49.7% to £48.5 million and TV rights, thanks to the club’s third place Premier League finish, winning the FA Cup to end a 35-year trophy drought and a run to the last 16 of the Europa League, have increased 27.4% to £68.8 million.

The question is, will Man City be able to keep up their performance in future years with more limited ability to spend money because of the “Fair Play” rules.


Promotion & Relegation out in the EPL? In for NCAA Football?

October 17, 2011

The influx of foreign investment into the EPL has been widely discussed on this blog by several authors.  I am also currently teaching a class that is a comparison of domestic (North America in my case) and international sport environments.  One of the biggest structural differences which we have between North American and European leagues is the concept of “promotion and relegation” used in Europe.  That is, European leagues tend to demote a few of the bottom teams to a lower league, and replace them with the top teams from the that lower league.  In this, the European leagues can be considered “Open” leagues where the composition of franchises changes from year to the next, while the North American leagues are “Closed” (or static) leagues where the teams do not change, except in the rare case of expansion or contraction.

It seems a lot of the foreign investors in the Premier League are not happy with this current structure, and want to get rid of promotion and relegation.  This is quite understandable, as buying a Premier League club is not cheap, and these investors are buying these clubs because of their association with the Premier League.  If they were to get rid of promotion and relegation, this would mean that they would have a lot more safety and certainty in protecting their investment.  Who close are we to this becoming a big issue?  I think pretty close, as League Manager’s Association leader has said:

“There are a number of overseas-owned clubs already talking about bringing about the avoidance of promotion and relegation in the Premier League. If we have four or five more new owners, that could happen.”

That’s right, a few more people and they may be invested in changing the system to mimic the closed systems of North America.  I am against this, as a closed league would take a lot of interest out of the bottom of the table battles for relegation, which hold fan interest in even some of the poorer teams in a league.  There are lots of implications here, this would change the competitive balance in the league, potentially across several leagues, and it could mean that teams at the bottom of the Premier League could field weak teams with low payroll, and continue to collect the big revenue from Premier League media contracts.  In this, I am against a change in the system.

In other news, Mark Titus, writer for Grantland, has said they should realign college football in a big superconference that uses the promotion and relegation system.  Simply, he wants college football teams put into divisions which are tiered levels, and then have them able to move up and down between divisions using promotion and relegation.  Personally, I don’t think college football fans or North American audiences are too receptive to this type of system, and that it would have a hard time being implemented and succeeding.  Possibly one of the biggest issues would be scheduling and traveling, as a superconference could have Alabama playing Boise St. one week, and then Wisconsin the next.  That would be a tough travel schedule.  That said, I do like that the promotion and relegation systems are entering the mind of the North American sport fans and media.  It is a system that is not perfect (neither is the static/closed leagues), but it does have some advantages that are worth meriting a look.

H/T to IJSF blogger Brian Soebbing for sending me the Grantland link.


How a landlady may have changed the face of Broadcasting sport in Europe

October 7, 2011

This is a story of a landlady for a Portsmouth pub in the UK, who bought a satellite television decoder from another European country to show Premier League games.  Karen Murphy, the landlady for the Red, White and Blue pub in Portsmouth bought a Greek decoder card to show Premier League games, the key point in all of this is the decoder card is cheaper than paying to show the games on BSkyB, as most establishments do in the UK.  This case made it all the way to the European Court of Justice (ECJ), where a ruling was made yesterday against Ms. Murphy who will be allowed to continue broadcasting games using the decoder.  The ECJ states that prohibiting:

“import, sale or use of foreign decoder cards is contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums”

However, the ECJ said that this area does fall under copyright protection in the UK which means that while Ms. Murphy lost because the card is used for broadcast to the public, it does open the door for private use of the cards.  The Guardian article notes:

However, the ECJ said live match coverage itself was not covered by copyright protection, although the Premier League could claim ownership of FAPL-branded opening video sequences, theme music, on-screen graphics and highlights of previous matches.

This means that as long as the FAPL and BSkyB ensure that match coverage includes enough copyright elements pubs will not be allowed to show foreign broadcasts.

The big implications of this case, is for individuals.  The ruling basically counter acts the territorial region-by-region rights which the Premier League sells.  It is now possible for fans to go out and get the cards and get Premier League for cheaper.  This means that fans could potentially try and get around paying the high BSkyB fees, which BSkyB can’t be a fan of as they paid over one billion pounds for the broadcast rights in the U.K.  The big implication is that the Premier League may be forced to change the method in which they sell broadcast rights from regional, to a single Pan-European package.

The Premier League had this to say:

“The areas of law involved are complicated and necessarily we will take our time to digest and understand the full meaning of the judgment and how it might influence the future sale of Premier League audio-visual rights in the European Economic Area.”

The Premier League will have to wait for some further court rulings in the UK high courts in regards to this case, but they are probably worried.  They are said to make a billion pounds for their non-UK television rights this year, and are receiving around 1.6 billion pounds for UK rights from BSkyB.  How they will potentially switch their sales of broadcast rights is an important question, with big financial implications for the league as well as fans and consumers alike.  As a side note, the Guardian had a poll, and almost 75% of people said they would now try to buy the foreign decoder cards to watch Premier League matches.


Trouble Brewing in the Arsenal Takeover Bid?

April 12, 2011

Greetings IJSF blog readers.  Just a bit of background before I start this post.  I am a big supporters of Arsenal, and have been for many years now (maybe it has something to do with Arsene Wenger have a degree in Economics).  Additionally, I also live in Columbia, Missouri which just happens to be the home of Stanley Kroenke, the most recent foreign investor attempting a takeover bid of another top Premier League club in England.

Yesterday news began to sprout around the sport websites that Stanley Kroenke was moving forward in an attempt to takeover Arsenal Football Club.  In moving to buy more shares, Kroenke hit the 62.89% ownership of the club mark, meaning that he now has the controlling stake of the club, and must make a cash offer to all the remaining share holders.  Kroenke’s takeover bid has hit a bit of a snag, as Russian oligarch Alisher Usmanov has refused to sell Kroenke his 27% stake of the club.  Rather, on the SkySports blog they are reporting that Mr. Usmanov tried to make a counter against Kroenke’s takeover, supposedly offering Lady Nina Bracewell-Smith a £13,000 pound per share offer, more than what she had agreed to with Kroenke for her shares.  All of that said, Lady Bracewell-Smith refused the offer, as she already had a full agreement with Mr. Kroenke.

With news of Usmanov’s defiance, the Arsenal Supporters Trust, a group of about 1,800 supporters announced that they would also not be selling the few shares of Arsenal which they held.

What does this all really mean?

In order from Kroenke to fully takeover the club, he needs to hold 90% of the clubs shares, and at that point it would force all the remaining shareholders to sell their stake to Kroenke.  However, with Usmanov sitting on 27% and trying to fight back, it seems that this is not likely to happen.  Usmanov’s hopes of countering Kroenke, and having himself takeover seem an even more unlikely happening, so Arsenal may now be facing a battle of two owners causing headaches for each other.  Kroenke’s offer for the remaining shares would have made Usmanov a nice profit, but from the look of things, it looks like Usmanov may be digging in for the long-run.

This whole episode does bring up two other interesting points.

First, many seem worried about club debts, and the use of Premier League clubs as debt servicing for rich foreign owners, as has been done by Malcolm Glazer and Manchester United.  Kroenke in his bid made sure to note that this takeover was not going to be done by taking out loans, but that he would be making cash offers for the remaining stakes, and that Arsenal would not be saddled with any of the debt.  Still, it seems that many really reject the idea of Kroenke fully taking over Arsenal, and that leads into my second point.  Currently 10 of 20 Premier League clubs are fully owned or have a majority of their stake owned by foreign investors.  Notably all of the “big” clubs have been taken over by foreign investment, with the top 4 teams in the table (Man U, Arsenal, Chelsea & Man City) all being owned by foreigners.  While many will probably not care as long as their team is doing well, there are some who are probably most likely worried about non-UK owners slowly taking over more and more of the most popular league in the world.


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