Competitive balance and consumer demand in the English football league

Competitive balance in sports leagues is often used to justify revenue sharing agreements. The logic of that justification is that outcome uncertainly due to competitive balance leads to higher attendance and higher attendance generates more revenues. Thus, many professional leagues develop a revenue sharing model. By sharing revenue, small market teams can afford to pay for high quality talent, assuring more equal distribution of that talent and increasing competitive balance.

Using data from the top English football league (currently the Premiership) from 1898 through the 2014 season we examine multiple measures of competitive balance and their relationship to league attendance. We calculate the Gini Coefficient (Schmidt & and Berri, 2001), HHI and 4-Firm concentration ratios for each year using both 3-1-0 and 2-1-0 point systems. Unlike US professional leagues English football operates under a system of relegation and promotion so that at the end of each season the worst perfoming teams are "relegated" and the top performing teams in the next level down are "promoted". This may serve as a counter to revenue sharing to maintain competitive balance. There was no football during both world wars and no changes associated with the "Premiership" approach, all of which provide for useful breaks in the data.

We find that, counter to related work in US sports leagues, competitive balance in English football is negatively associated with attendance. This is particularly true in the case of the Premiership era, wherein only five teams have won the championship and in the past 10 seasons, the top 4 places of the championship has been dominated by 7 clubs, yet attendance has steadily increased. This result raises questions about the utility of revenue sharing in increasing attendance.