Wednesday, January 27, 2016 // The Statement
6B

MONEYBALL: 

by Karl Williams, Managing Statement Editor

F

rom the standpoint of an economist, it’s 
often difficult to measure the financial 
performance of a company in relation 

to the quality of its product. But sports offer a 
remarkably clear competitive market — there’s 
no ambiguity whether a team wins or loses.

While the performance of the players on the 

field determines a team’s success, thousands of 
economic factors determine how those teams 
get their players. Unlike in the American sports 
industry — with the exception of Major League 
Baseball — where teams share revenue through 
a salary cap, European soccer clubs lack such 
a system. The system, inevitably, leads to 
inequalities among teams — only a handful of 
teams dominate their respective leagues. These 
teams, in turn, dominate the most prestigious 
European competition, the UEFA (Union of 
European Football Associations) Champions 
League.

Research into what makes teams succeed 

and fail — both on and off the field — continues 
to grow. Various factors, such as players, stadi-
ums, revenue, debt, taxation, regulation and so 
on, all determine whether or not a team will be 
able to compete.

Kinesiology prof. Stefan Szymanski has been 

one of the leading researchers in this growing 
field. His research, which can be seen in books 
such as “Soccernomics” and his latest book 
“Money and Soccer,” attempts to explain on-
field performance through the lens of finance.

Though born in Nigeria to a Polish father and 

English mother, Szymanski has spent most of 
his life in London, with the exception of his col-
lege days in Oxford, where he studied politics, 
philosophy and economics, and his time as a 
professor at the University. Growing up in Eng-
land, Stefan Szymanski has always been a soccer 
fan (his favorite team is Scunthorpe United), but 
it wasn’t until he began graduate school at the 
London Business School that he began to seri-

ously study the economics of the game.

“What I was really doing was research about 

markets and industries, so really understanding 
how firms relate to each other in an industry, 
how competition works between firms, what 
makes for better outcomes or worse outcomes, 
how to evaluate policy and those kind of things,” 
Szymanski said. “And I really got into it through 
a group of us who were trying to find out how 
certain groups were successful.

Soccer, he added, seemed like a good exam-

ple because there were many clubs, but few 
with continous success. “We were trying to 
understand that,” he said. “With sports though 
it’s actually crystal clear — you know who won 
the league, how many people went to watch the 
game, so in that sense it’s actually much easier 
to tie in financial performance with visible met-
rics of performance which reflect consumer 
interest.”

Szymanski began his research into the 

industry’s economics right when things were 
beginning to change within it, especially in the 
U.K. During the 1980s, soccer was not a partic-
ularly profitable sport, and Margaret Thatcher, 
then prime minister, even considered banning 
the sport because of hooliganism and stadium 
collapses. Many believed the industry was one 
of decay, not growth. Since then, profits have 
soared, and the industry has become incredibly 
lucrative.

How did such a drastic change occur? 

According to Szymanski, because of a collec-
tion of fortunate circumstances. First of all, the 
broadcasting environment changed — Premier 
League clubs’ revenue increased through deals 
with television broadcasters.

“The Premier League was able to generate 

very large increases in revenues from domestic 
viewers who wanted to watch this as the rights 
were given to cable TV,” Szymanski said.

Furthermore, over the last 20 years or so, 

international broadcasting, which is distributed 
equally among teams, has become an increas-
ingly important part of revenue, approaching 
nearly half of the total.

But the change in broadcasting was not the 

only factor to change the game’s financial land-
scape.

“Other factors are that there was a lot of 

interest from overseas in investing in English 
soccer clubs, and partly that had to do with the 
fact that the U.K. is a relatively easy place for 
foreigners to invest in,” Szymanski said. “It’s 
been a relatively welcoming environment for 
that.”

He added that the clubs’ global recogni-

tion also played a role. “It’s also to do with 
that the U.K. soccer clubs have global recogni-
tion. That’s partly because of the old empire, 
and people knew about soccer going back a 
hundred years. And the other thing is the time 
zone — people can follow English soccer games 
because the times they’re played at make them 
accessible both in the Far East and the United 
States. And, again, that’s a real advantage if 
you’re trying to sell a sport.”

While in America one can expect a certain 

level of parity among teams in most leagues — 
which is mostly due to the salary cap that most 
leagues employ — European soccer leagues are 
almost shockingly unequal. For example, over 
the last 25 years in Spain, either Barcelona or 
Real Madrid has won La Liga, the Spanish soc-
cer league, 21 times. No American league — not 
even the MLB — features such dominance by a 
few teams. Although there are many giants of 
their sports, such as the Yankees and Lakers, 
there are no clubs that win with such little com-
petition. While the best teams succeed with lit-
tle to stop them, those near the bottom face the 
threat of capitulation. Such disparity, according 
to Szymanski, forms a model of dominance and 
distress.

But perhaps, as Szymanski notes in his lat-

est book “Money and Soccer: A Soccernomics 
Guide,” relative equality among teams is not 
a necessity. In fact, Szymanski argues that “It 
is simply not clear that fans want a balanced 
competition.” In other words, inequality is not 
a problem. The dominance of a few teams has 
done nothing to discourage fans from watching.

In fact, soccer has been more successful than 

ever in generating revenue and interest in the 
game. As Szymanski writes, it’s almost para-
doxical how this works.

“It may seem counterintuitive at first, but 

open competition with unlimited freedom of 
entry has created a system in which only a few 
clubs can win consistently. The market works 
relatively efficiently, in the sense that money 
buys success, and improving teams generate 
increasing revenues because they attract new 
fans.”

Yet many still believe that inequality is bad 

for the game.

“There is this common folk wisdom that 

unless a league is balanced, unless all the teams 
have a reasonable chance of winning, the league 
will become predictable and people will lose 
interest, so the league will die,” Szymanski said. 
“That folk myth is clung to by an enormous 
amount of people, probably most people in the 
world think that’s true, but it just factually is not 
the case. Leagues can be attractive even if they 
have massive amounts of inequality.”

Recently, Szymanski has worked with FIF-

Pro, the world soccer players’ union, on anti-
trust litigation that challenges the transfer 
system, a system in which teams buy the rights 
to players and currently gives players little 
agency. A successful suit would change the way 
the game is run financially and, thus, how the 
product comes together on the field. But no 
matter how the game changes, Szymanski will 
be there to explain it.

University professor studies the 
intersection between sports and finance

Illustration by Emilie Farrugia

