The Media as a Policy Instrument in Influencing the Business Model of Professional Soccer: Evidence From Italy

Abstract

Italian soccer clubs in the first division have individually sold broadcasting rights for their home matches, until new laws imposed pooling and joint-selling those rights through the league and established a mandatory sharing rule to redistribute revenues in order to improve on-the-pitch competitive balance (CB). This article compares the two institutional designs. While reducing revenue inequality, the new regime distorts allocative efficiency and informational rent appropriation, opens up costly ex post renegotiations and antitrust litigations, and does not improve CB.

Notes

¹This evidence appears counterintuitive, but is justified on two accounts: (a) Eager as it was to enter the Italian market, SKY invested a lot in sports, making them the centerpiece of its subscription packages; and (b) SKY adopted a more effective scrambler device that made illegal decryption of the signal more difficult, thus securing its revenues. In 2003, SKY inherited from Stream and Tele+ a market of around two million subscribers. By the end of September, 2011, SKY reached five million subscribers.

²We do not directly address another issue central to the literature on CB—the number of competitors—but note that a championship with 20 clubs is preferred by all clubs to the alternatives with 16 or 18 clubs because there are more matches and they earn more from the media. On the contrary, a championship with 16 clubs would be less demanding on the players and perhaps even more interesting from a sporting point of view because it is more balanced.

³The 2005 through 2006 season is the only one for which we have a complete dataset on all the media, and that is why we prefer a cross-section to the alternative of working with a panel dataset on satellite TV only. Note also that with a panel dataset, the relegation process would cause the bottom quantile to be full of missing values because, once relegated to Serie B, the club will probably stay out for a long time—for sure, in the next season.

⁴A finer partition at the top, by adding the .70 and the .80 quantiles, would have been more respectful to track the admissions to the European Cups, but would have meant moving just two clubs. We ran quantile regressions with that specification, too, but differences were even more negligible than those in Table 2.

*p = .10.

**p = .05.

***p = .01.

⁵Welfare evaluations on inequality easily get economic efficiency entwined with moral implications, among which are those regarding economic freedom.

*p = .10.

**p = .05.

***p = .01.

⁶Contrary to the average Italian soccer clubs, whose expertise is more on picking players rather than on marketing management, the media outlet focuses on its clientele and invests in marketing knowledge (information system) to better know customers' tastes and preferences. Note also that the league outsourced to an intermediary the negotiations with the media.

⁷This rules out the accusations that the broadcaster may pursue its own strategy in picking matches selectively, thus creating differences in the levels of club exposure (to the ultimate effect of influencing their popularity).

⁸The promotion to Serie A will improve the TV subscription rate for the club. The broadcaster can estimate this increment from data collected on clubs with similar histories of promotion. This leaves room for the possibility of a forecast error, which is, in any case, lower than the error the league would make.

⁹In the past, the broadcaster faced a trade-off between losing one club (and selling an incomplete season) versus leaving more money on the negotiation table to the newly promoted clubs. We speculate that the latter route was chosen.