III. Research Methods and Constraints
3.3 S CENARIOS OF P OTENTIAL D EVELOPMENTS OF THE C ONFLICTS
executive body have often a difficult time to detach themselves from their clubs or personal situation.191
With the current structures being only consultative and not able to effectively represent their interests is not surprising the top clubs feel their voice is not being heard and keep insisting in exercising pressure through a lobby group such as G-14 in order to pursue their objectives. This is why the main current objective of clubs is to have “a voice in the game and a word in its management.”192 To address this issue, G-14 presented a proposal for a new structure that suggests the creation of a specific body193 within UEFA’s structure that would govern European club competitions with UEFA and clubs working together.194 Thomas Kurth confirmed that the idea would be to replicate the same structures we are seeing at national levels:
“Ideally, it will be under the umbrella of UEFA. It will mirror the situation at the national level. In England you have the FA but you also have the Premier League, and the Premier League is in charge of running the club game at the highest level. And you have the Football League which is running the second division, Division 1. And in Germany you have the DFB and you have the DFL,195 and in France and Italy the same. So I could imagine that at an international level, the same structure could make sense as well.”196
The proposal, however, does not specify how exactly this body would be composed to take into consideration the variations in terms of the clubs participating in the competitions197 or how it will interact with UEFA to assure an adequate balance between national and international football and between national team football and club football. This proposal will most likely face resistance from UEFA that intends to keep a strong hold on the game and would be reluctant to implement a project coming from an external body such as G-14 that according to some lacks of real legitimacy.198
developing “global” technology and a persistence of a local culture, often enhanced precisely in reaction to the globalising tendencies of technology and the economy. Social structures, types and attitudes are coins that do not readily melt. Once they are formed they persist for a long time.199 Football has been Europeans’ favourite sporting “pastime” since the early 1900s, and its popularity is being diligently built for generations and generations. In simple terms, this means that it will take a long time for football to permanently feel the consequences of any mistaken decisions made today.
This, from on one side, makes it more difficult to design scenarios for European football based on the conflicts we are seeing today, because we have to think in a very long term. From the other side it gives to some of the more unadvised actors in the production of European football the dangerous feeling of comfort, that everything is well, because the symptoms that something is wrong usually will only appear when it is too late.
But although it is tricky to try to foresee the future outcomes for the conflicts between G-14 and UEFA it is always a useful exercise in the sense that it stimulates debate about choices on future movements and helps to develop strategies resilient against a broad range of futures.
We will build scenarios in two main areas of conflict intrinsically connected with each other competition format and revenue sharing. The first is a proxy for the size of the pie, and the second represents the slicing.
3.3.1. THE “COLD WAR” OF EUROPEAN FOOTBALL
Before we enter into the design of the scenarios, it may be interesting to understand their delimitations and boundaries. Both UEFA and the top clubs have shown their teeth and presented their final weapons of mass destruction in a way that resembles the relationship between the USA and the USSR in the apices of the cold war. Both possessed nuclear weapons with sufficient strength to annihilate the enemy at the push of one button. But neither one ever intended to actually use that power since using it would also represent their own destruction. But the simple fact of letting each other know that they could use their power if the situation reached a certain limit was enough to generate respect and bring the parties closer to a compromise.
In the first corner we have the G-14 with the ultimate weapon of the breakaway league. In the opposite corner we have UEFA with the ultimate weapon of sending the clubs out of orbit to an unknown planet outside the traditional structures of the Football Family. The breakaway league would hurt UEFA by leaving it without its main source of funds for the development of European football, but it would also theoretically hurt the top clubs by leaving them without the fundamental daily bread of the domestic activity. But it is all a matter of opportunity cost for the clubs. Depending on how hard UEFA imposes its conditions down to the clubs, they may realise that the options outside the official structure may compensate for the losses they might face by leaving the official structure. And the clubs have an extra advantage. At this point, no one can affirm for sure that even in the event of a breakaway movement from the part of the clubs, UEFA would be allowed by the competent authorities to make
199 MARKOVITS & HELLERMAN, Offside – Soccer and American Exceptionalism, Princeton University Press, 2001, p.14
use of its weapons to its full extent. In that sense, some lessons can be learned from the failure of FIBA, the International Basketball Federation, to impose sanctions on clubs, players and officials for participating in the Euroleague, a breakaway league outside the official structures. In a meeting of Euroleague’s representatives with members of the European Community Parliament, the later expressed that “any obstacles to establish the Euroleague would threaten the law and the community spirit.”
As explained by one of our interviewees with a large knowledge in the EU procedures:
‘In the case of a breakaway movement, the EU would have to analyse if there are economic interests involved, to make sure the case falls under its jurisdiction. If it does, the EU will first analyse whether the new competition fulfils the requirements of competition law, if it follows the rules. Secondly the EU will analyse the proportionality of the retorting measures taken by the governing body. What kind of measures are being taken and if they are appropriate and proportional. It is a matter of common sense.’200
So UEFA cannot act in a despot way because if that limit is reached, as mentioned before, UEFA risks losing its main source of income.
In fact, UEFA seems to show that it understands well the situation. When the first threat of a breakaway league appeared in 1998, idealised by the Italian media group Media Partners, where top clubs would play in a super league with a foreseen €3.2 billion to be distributed among them backed by a guarantee from J.P. Morgan,201 besides showing its weapons and threatening clubs with expulsion from the system, UEFA took swift action and reformulated its Champions League for the following season, 1999/2000, expanding it to 32 teams and creating the two group stages. We have shown the financial effect such a move had in the finances of the clubs. From a total of CHF 206 million (~€140 m) in 1998/99, the clubs shared a total of CHF 616 m (~€410 m) in 1999/00, an increase of almost 200% from one season to the other,202 immediately raising the switching cost for the clubs. If we add to that figure, the fact that an European Super League would certainly cannibalise some of the value generated by the domestic leagues, currently estimated in € 6.6 billion,203 we will conclude that with that move, UEFA decreased by a large extent the attractiveness of the breakaway league for the clubs.
Two reasons lead us to conclude that a breakaway league would cannibalise value from the domestic leagues. The first is linked with calendar issues.204 A league between top clubs would mean that the top clubs would play a larger number of matches in the European scenario, necessarily having to reduce their participation in the domestic leagues. A domestic league with reduced participation of the top clubs would lose part of its attractiveness to the media, consequently losing value. The second reason is linked with investment limitations. If broadcasters would be willing to pay €3.2 billion for a
200 Our source asked to remain undisclosed
201 Interview with Rodolfo Hecht, Media Partners CEO.
202 See Figure 3.5, p.76
203 See Figure 1.3, p.17
204 Refer to Figure 1.7, p.26
European Super League, they would have to divest some of the money they are currently spending in the domestic leagues. It is a natural trade-off.
A league outside the traditional governance structures would face other collateral damages such as the end of a unified international transfer system, as explained by Freddy Rumo:
Clubs need to make transfers and protect their assets. If Zidane who costs over a CHF 100 million to Real Madrid is not protected by an international system of transfer anymore, a club like Neuchâtel Xamax could go tomorrow and take Zidane away! What authority would this league have over me? ‘‘205
Finally, against the idea of a breakaway league, there is the strong suspicion among industry specialists whether a closed-league in the moulds of the American system would appeal to the European fans.
Having analysed the limits and options of each actor we will now go on with the design of the scenarios for competition and revenue sharing.
3.3.2. COMPETITION
The issue of competition is a complex one because it deals with the limitation of the calendar. There is a fixed number of matches that a club can play every season even if we do not take into consideration how much football the fans are willing to consume. Under this immutable constraint, if we consider that the players need four weeks of vacations and four weeks of pre-season preparation, and if the year has fifty two weeks, we end up with forty four weeks to allocate competitions. According to Johan Cruyff, former leader of the “brilliant orange” the Dutch team that enchanted the world in 1974, a professional athlete is capable of playing one and a half matches per week without compromising its physical health.206 That gives us a limitation of 66 match dates per season to be divided among the several competitions a player may be required to play. Currently in the top level, that means mainly the domestic league, the domestic cup, the UCL and a national team competition. By looking at the current calendar, we see that there is already an excessive number of match dates. The example of England in the last season shows that a top player could be requested to play more than 80 matches in a season: 38 in the Premier League, 10 in the FA Cup, 17 in the UCL, 7 in the World Cup, 8 in the qualifications for the Euro, among others.207 And the result of this excessive number of matches is already been seen in the rising number of injuries verified in top players during the last FIFA World Cup where in 64 games there were more than 170 injuries, of which 27% in situations where no physical contact occurred.208
The top clubs will pressure UEFA and FIFA to reduce the number of national team competitions to free space for friendly matches internationally in developing football markets with a great economic potential such as Asia and the US. But the greatest focus of pressure against UEFA will be in the
205 Interview with Freddy Rumo
206 CRUYFF Johan, Mi piace il calcio ma non quello di oggi, Sonzogno Editore, 2002, p.84
207 See Figure 1.7, p.26
208 www.fifa.com
sense of creating the conditions for the top teams play the top teams in Europe more often. We have mentioned before that the latest change in the format of the UCL will most likely cause a reduction in the number of such matches. UEFA may cede to the pressure and revert back the format of the UCL but this might have negative consequences to the game as explained by Rodolfo Hecht from Media Partners:
Even for hardcore fans, this is too much. They don’t have time to digest the result of one game that another one is already played… It also forces the clubs to have rosters of around 30 players, a crazy condition with all the financial difficulties that clubs are already facing at the moment.209
The other alternative for UEFA is to rethink the eligibility system of its elite competition to guarantee that there will be a higher number of matches played among top clubs. This remodelled eligibility system would have to take two things in consideration. The first is the guarantee that it is built upon a system of technical performance. We believe that a system based on the distribution of wild cards to top clubs would compromise the long term demand for the sport in Europe. The second is that the system should maintain a certain degree of inclusiveness to proportionate the chance of clubs coming from outside the ‘big-five’ leagues to have a taste of European football at the highest level. There will be one extra challenge to be overcome by the governing body in this scenario. In a championship where there are a larger number of top teams playing, UEFA will face some pressure against the redistribution of income generated by that championship to actors not directly involved in the competition. If it cedes to the pressure, this will mean a further concentration of income with the top clubs, diminishing UEFA’s funds to invest in development and solidarity. Apart from those points, we see no harm in providing for the top clubs to play each other more often.
Another alternative would be for UEFA to work along with the National Leagues, to study the optimal number of participants in a league and, if necessary, reducing it, freeing space in the calendar without compromising the value of the domestic competition.
Whatever UEFA’s positioning, we believe that further changes in the format of European competitions will still happen, since the current solution is not addressing legitimate interests of some major stakeholders.
3.3.3. REVENUE DISTRIBUTION
In sections 2.1.6 about UEFA’s finances and 3.2.2. about revenue sharing, we have shown a recent trend of concentration of European competition income among the top clubs, and a decrease in the values redistributed to other actors of European football to be used in development. If this trend continues, we see two main potential risks for the game as a whole. The first one, as already mentioned, is the increase in the imbalance of the domestic competitions, which in the long run, could undermine the value of such competitions, eventually hurting the top clubs finances. In the current situation, allowing Manchester United to build a team to win the Champions League and use this same team to play the Premier league creates a situation similar to allowing Michael Schumacher to
compete both in Formula 3 and F1 using the same Ferrari. It is no surprise that in the last 11 years Manchester United has dominated the Premier league winning 8 titles. Will that undermine the value of the Premier League in the long run? It is hard to predict. There is a consensus over the idea that competitive balance is one of the factors affecting demand for football, but not even sports economists seem to agree on how much competitive balance alone weighs among the other factors influencing demand for sport, Stefan Szymanski explains:
‘The problem in the literature has been this somewhat obsessive focus on uncertainty of outcome. But the real evidence shows that uncertainty of outcome alone actually does not matter that much in terms of demand. It is much more the demand for success and demand for quality that matters, and that is why even though European soccer is so much less balanced than American sports it is just as popular.”210
The other consequence of the reduction in solidarity at the European level is less evident, and it has to do with the formation of players. After all, a large part of the big clubs’ popularity is owed to the players composing their squad.
But we have seen that a large portion of the top clubs’ best players are formed in small clubs from countries outside the traditional ‘big-five’. Top clubs also form their own stars, as it is the case with Owen or Beckham formed at Liverpool and Manchester United respectively. And it is undeniable that with their global reach they inspire many young boys in their early decisions to become footballers. But how many players starting at the youth division of a club eventually make it to the top ranks? If we take the example of Atalanta Calcio, an Italian Club with a long tradition in the formation of young players, every year the club observes 20.000 kids. Thereof, 213 will join the entry level of the youth divisions, and thereof only 3 will make it to a Serie A team every year. How many of those 3 players will be the goose that lays the golden eggs for the clubs? The formation of top players is a nothing more than a statistical equation. The larger the recruiting basis, the higher the chances of having highly skilled players reaching the top ranks of club football. But maintaining that large basis has a cost that many federations and small teams cannot bear without the solidarity money.
In the end of the day, we must not lose sight of what the real issue is. The real issue is that Football needs redistribution of income to work on the levers of demand for the sport. What group takes ownership of the process of redistribution is less relevant as long as the end results are being achieved. As we mentioned before, we believe that governing bodies and leagues are in an advantage position to carry out this task since they have a more holistic view of the game.
It seems that in addition to promoting its solidarity activities through beautifully designed glossy paper brochures UEFA has to develop a system to show the tangible results and returns of the investments it makes in the development of football in a more systematic way. Once all stakeholders clearly realise their share in the benefits harvested from the solidarity investments the level of conflicts will decrease.
209 Interview with Rodolfo Hecht
210 Interview with Stefan Szymanski
4.