By: Mads Skauge
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Making Sense of Sport Economics
For someone having ‘only’ read Soccernomics of sport economics, I probably find myself in Wray Vamplew’s target audience for his book Sports Economics for Non-Economists. As a (sport) sociologist, my reading of a (sport) economist must be taken as some kind of sociological critique from an outsider’s viewpoint.
As a scholar concerned with football culture, spectatorship and fandom, I will in my discussion emphasise chapter 7 on attendances and audiences, and chapter 9 on tournaments and leagues, more than some of the rest, such as mass participation, commercial amateurism, gender economics, labour relations, objectives of owners and entrepreneurs, sponsorship, stadiums and subsidies, the economics of sport mega-events, global sport economy, sport economy and the third sector, corruption and the post-pandemic future.
A Different Sport Business
The book is logically organised, starting with a kind of introduction to the introduction to sport economics, offering a brief history of sport and explaining the economic foundations of the contemporary sport world, from local leagues to mega-events, from grassroots to professional sport. Sport economy issues such as player transfer market, the rise of women’s sport, sport institutions’ corruption and the spending behaviour of fans, are convincingly covered.
Especially, I find the three first chapters very much fruitful to think with (apply as a lens) trying to follow Vamplew’s reasoning throughout the book. In other words, some definitions, concepts and basic ways of thinking are helpful – and sometimes highly necessary – to get a grip on right from the start, to serve as a toolbox when various cases are played out and put under scrutiny.
Some of these introductory lessons to be learned are for instance that the sport business differs from that of business generally (‘real’ business). Thus, these two must be taken as different creatures, it is argued. The rationality for such a distinction is that maximising profit is not necessarily the main goal within the sport industry, Vamplew reminds us. As far as my understanding goes, this is the whole legitimacy of sport economy as a subject, going back to the birth of sport economics as a subdiscipline of mainstream economics in the early 1970s: Although much of the economics associated with sport is conventional – funds have to be raised, wages have to be paid and resources have to be allocated to the production process – sport and especially spectator sport in many respects have peculiar economics. Let us look at some of them.
A Tool Kit of Concepts and Numbers: When Imperfect People Meet Imperfect Markets
Vamplew applies horse racing as an example, presumably because it was this part of the sporting field that he first studied. Owners often possessed racehorses as a status symbol, Vamplew recalls. The horses were consumption goods rather than profit-oriented investments. Then, as he began to analyse ownership in football and cricket clubs, he found that they too were often motivated by forces other than profit. The sometimes-colliding logics of sport (winning) and traditional economics (profit), are the key to the utility theory, in which winning in sport is deemed more important than making money. Both soccer and cricket clubs were found to be dependent on the distribution of revenue from owners to keep afloat, and therefore these clubs are most often in heavy debt. When it comes to horseracing, it existed only because owners were prepared to treat it as a hobby rather than a business. As he concludes: Little seems to have changed!
Football (the biggest sport, greatest cultural phenomenon of our time and one of the most significant businesses) has a far larger and far more emotionally, socially, (sub)culturally and financially invested audience.
My immediate response to this is that there is a substantial difference between football, cricket and horse racing. Football (the biggest sport, greatest cultural phenomenon of our time and one of the most significant businesses) has a far larger and far more emotionally, socially, (sub)culturally and financially invested audience. It implies that the football public are inclined to oppose developments they do not like, of which commodification is key (cf. the abandoned European Super League).
Does not winning lead to larger crowds, greater revenue and profit? Not always. In fact, the objectives can require distinct economic behaviours from stakeholders. Vamplew introduces a to-stringed typology in this regard. First, we have the profit-maximisers, aware that profit is determined not by revenue but revenue minus costs. Second, we have utility seekers, looking for cups and championships (or simply beating rivals), willing to spend their income on team improvement (sport-related investments). The latter represents the concept of satisficing behaviour which infers that profit-maximising is not the aim of the enterprise. While all clubs in the Premier League can be winners in terms of profit-maximising, for instance in the wake of an economic boom, there can only be one champion of the sporting contest.
Another distinguishing feature of sport economics compared to that of the non-sport world, is that while most non-sport manufacturers sell the certainty of their output as being reliable, the uncertainty of the result is a bedrock of sport. Sport is a product whose result or quality cannot be guaranteed by statistical formulas and pure economic logics. Obviously, Vamplew hits the mark when stating that the uncertainty of outcome in sport is indeed much of its selling point. The more unpredictable a contest, the greater the attendance is likely to bee. And the greater attendance, the greater the attention and thus more money circulating, and eventually the more appealing for sponsors and potential future owners (a self-reinforcing positive spiral).
This brings in two related, and often (according to Vamplew) conflated concepts: uncertainty of outcome and competitive balance. The former refers to the potential result of any individual match within a league or tournament and, by extension, to the competition as a whole, whereas the latter is usually considered as having teams or competitors of equal playing ability.
A third distinction between sport and conventional business relates to monopolistic and monopsonic behaviour in which a single seller or a single buyer dominates the market. Becoming a monopoly is not an objective for clubs or individuals in sport, whereas in the business world, a firm can prosper if it can eliminate all competition an become a monopoly supplier, as this will allow raising prices and increased profit. Such a position in sport would be self-defeating since, unlike in conventional business, firms and individuals in the sport industry need a competitor before a saleable product is available. No other type of commerce requires (yes, fully demands) rivals to work together to produce a saleable product. Keep this in mind when reading further.
A Commodified Sporting Scene
Economics is the study of the use of scarce resources by producers and consumers of sport. Given that resources are limited, these individuals must make choices as to what sport they can afford the time and money to play or watch, what methods of production to use, and what quality of output to aim for.
For the purpose of economic analysis, sport is treated as a commodity. This occurs when consumers are willing to pay to play or watch it. ‘Indeed, merchandise has become the main by-product of football club operations in an attempt to further capture the utility of their fans, many of them global supporters who may never attend a game, but seek to identify with a team’ (p. 16). Surprisingly and somewhat disappointing from a sport historian (or to his defence, he describes himself as a person educated in history, but trained in economics), he does not link the commodification of sport to the Norbert Elias and Allen Guttman oriented concept of sportification, encapsulating much of what Vamplew coins sport commodification: To become a product, the game requires formalisation by the introduction of rules and institutionalisation with the organisation of competitions, served by governing bodies.
The demand for sport is structured (affected) by a range of variables, Vamplew notes, for instance: income and wealth (as income and wealth rise, there is more money left for spending), and prices (as the price comes down, more will be bought). Population is also important. The demand for different types of sporting activity can be influenced by the age distribution of the populace. One example comes to (my) mind here: A trend in European football is the age composition (shifting demographics) in the stands. From 2004 to 2014, the average age of Newcastle’s season ticket holders increased by ten years, that is, an increase of ten years in ten years. This means that it is the same people who go to the games and that there has been no new recruitment. Finally, time is relevant. The coming of the Saturday half-day for most workers was a breakthrough for the mass spectator sport sector, and those working on Saturdays secured the mid-week half-day. That is how Sheffield Wednesday got its name, Vamplew tells us.
From 2004 to 2014, the average age of Newcastle’s season ticket holders increased by ten years, that is, an increase of ten years in ten years.
Sport has both a user value (its intrinsic worth to participants) and exchange value (a price at the marketplace). From the 1960s onwards, commercialism in sport began to reach new levels. Media development helped bring new audiences, making sport an attractive proposition for advertisers. With the development the last 30 years, we have now – Vamplew claims – reached a stage of hyper-commodification. Sport has been penetrated by market forces to an unprecedented extent. Elite clubs have been organised as corporate bodies in which profits are given higher priority within the enterprise over social and cultural considerations. Some clubs have become brands as much as sport clubs. In the commodified world of sport, supporters are regarded as consumers, and if they cannot afford to attend, someone will take their place: ‘The working out of free-market forces means that Joe and Josefine Public are being priced out in favour of the ‘prawn sandwich’ brigade’ (p. 23).
What Makes a Contest Attractive?
What I find most interesting, is the assumption of competitive balance and uncertainty of outcome as key features for the attraction of a tournament or league, that is, the interplay of competitive balance and uncertainty of outcome when designing an optimal contest, for instance measured in stadia attendance and TV subscribers.
According to Vamplew, most sport economists believe that crowds will be larger the more equal the contest and the less predictable the result. Vamplew is not convinced of the logic of the uncertainty of outcome and competitive balance hypotheses. Neither am I. It is uncertain whether competitive balance is the cause of the effect uncertainty of outcome, due to other variables such as the phenomenon of home-ground advantage, suggesting that the most unpredictable fixtures would be weak home sides against stronger away teams. ‘There are as many ways to measure competitive balance as there are faults in my golf swing (this from someone with the maximum allowable handicap).’ (p. 55).
I follow this reasoning; the hypothesis can hardly be confirmed, but on the other hand (and for the same reason), it cannot be rejected. It seems difficult to compare sport genres when it comes to uncertainty of outcome, as their characteristics differ. I often say that football is the most popular sport in the world not despite the fact that few goals are scored, but because few goals are scored. On average, about 2,7 goals are scored per game in most top divisions. This makes the outcome less given than in goal-rich sports, partly because luck plays a bigger role. Football is the sport where the underdog (David) most often beats the bookmakers’ (odds) favourite (Goliath), and this has to do with the few goals scored. In handball and basketball, it is no tragedy for the favourite if they waste a scoring chance, because they get many opportunities to correct the mistake. A single goal in football can (and often will) determine the outcome of the match. Therefore, football holds a special position when it comes to uncertainty of outcome, and it seems like the literature does not take such consideration into account.
Also, various sports hold various audience identities and attachment forms. Sociology of football research has applied a spectator taxonomy, distinguishing among market-oriented globalised fans (what Vamplew refers to as ‘global supporters’) from supporters, having a more critical and embodied (and often lifelong) relationship with the club. I find it reasonable to assume that supporters’ – being identity-wise and emotionally more invested in the club – stadia attendance can be expected to be less affected by the quality of the team, than fans’. If so, the uncertainty of outcome as a concept of attraction, does not only apply differently to different sports, but also to various spectators. Such a perspective is not lacking in the book, but could (and probably should) be elaborated.
It is also a possible distinction between those considering sport as TV entertainment and those attending games in stadia (seeking the authentic atmosphere). For the former category, the ‘product’ offered may be more important than competitive balance for attraction. Research reveals that supporters look at their own team according to preferences (commitment to the fan community and local identity rooted in a lifelong relationship with the club), but otherwise choose talents and teams at the top of the table when watching football on TV, suggesting that personal relationship is crucial in watching your team, while the ‘product’ (the quality of the teams and individual players involved) is crucial when watching others.
The importance of the game also matters, I think. People often come together in times of crisis, also in sport. People tend to support their team in stadia more (attend more games) if the club are fighting relegation compared to if it is a ‘boring mid-table walker’. When something is at stake, the game becomes more interesting (this may also be why the open league of Premier League is more popular than closed leagues with no relegation nor promotion). For stadia attendance as a variable of attractiveness of a league, season ticket sales also play a role (great expectations before the start of the season lead to good sales, and the season ticket holders will not disappear even if sport-related expectations are not met).
Vamplew argues that Premier League’s attendance figures – a league characterized by a ‘Big Four’ dynasty for decades, but where crowds have not diminished – imply that competitive balance is not so important for attraction as previously assumed. This seems like a simplified conclusion to something complex. Premier League attendance must be seen in a much larger perspective than that of competitive balance, accounting for the coming of increasingly larger stadia (more capacity) and not least more fan tourism in the age of globalisation and global fan identities (Scandinavians have gone overseas to see English football for decades, and more recently especially Asians are emerging).
Finally, I would like to state that there may be even more nuances into what type of outcome is considered. It may be that it is not the final outcome of the season (the table position achieved) or tournament that is important, but rather the outcome of the single match (the chance of winning the upcoming game). The latter type of outcome is still highly uncertain in most of European elite football, although the same pool of clubs often become champions in the long run (Leicester being Premier League’s exception). The concept of uncertainty of outcome is therefore a very multifaceted one, with a lot of reservations and nuances, it seems, and these are somewhat scarcely treated in the book.
It is a fascinating read for a sport sociologist. At least some of Vamplew’s notions and arguments seems to constitute a fruitful way forward for anyone wanting to unpack the complex scene of sport economics.
A Book Worth Reading?
Despite my above-mentioned reservations, I find the book ‘a must read’ for everyone curious on sport economics. More generally, if you have an interest in sport or economics – or at least one of them and especially combined – this book is useful. It is a fascinating read for a sport sociologist. At least some of Vamplew’s notions and arguments seems to constitute a fruitful way forward for anyone wanting to unpack the complex scene of sport economics.
When writing for your peers, there is a chance that only your peers understand your writing, but this book is understandable for everyone. Vamplew’s pedagogical writing style, consequently avoiding textbook approaches of diagrams, formulae and language appreciated only by the cognoscenti which have been indoctrinated into supply and demand curves for years, makes the book welcome for outsiders like myself. Put differently, the manuscript is informative, bringing together insights from an entire academic discipline in an understandable form (avoiding obscure terminology) for those who despair of explanations rooted in mathematics, formulae and graphs.
As Vamplew’s ambition is to cut through the jargon and complicated formulae presenting key concepts in sport economics – introducing the fundamentals in a concise and engaging way to give the reader without a background in economics the tools to apply sport economics in their work – I find the book successful. At least, the framework helped me on my way to a better understanding of the cases Vamplew highlights.
It is difficult balancing, on the one hand, simplification for those who do not have financial insight, with, on the other hand, enough elaboration so that the book can function as a framework for academic analyses. Sports economics for non-economists must not become ‘non-economics for sports economists’. Vamplew balances this well. It takes both courage and not least knowledge to present something complex in a non-complex way.
The book fits any sport science course rooted in the social sciences, perhaps especially sport management and sociology of sport. Vamplew highlights several topics that the sociology of sport deals with, such as globalisation, commercialisation and commodification (and the connection between them), and more generally touches upon the interplay of state, sport and business, both at elite and grassroots level (sport as part of civil society).
Vamplew’s take is a refreshing one. It was a pleasurable read, and I suggest you give it a chance as well.
