The Economics of the European Super League

The idea of a European Super League has been called off, much to the joy of football fans (including me!) around the world. But why did 12 clubs even consider this idea? The answer is of course money.

By Dr Hans H. Sievertsen and Dr Babak Somekh


HHS: In the early 1980s, the economist Sherwin Rosen published “The Economics of Superstars” in the American Economic Review. Rosen analysed why there are some professions where a small number of people are paid a lot more than the rest (like in football or show business). We call them superstars. One thing that characterises these professions is that the technology allows “the product” to be broadcasted to a lot of users at the same time. The fact that I watch Manchester City play against Real Madrid on TV does not affect your ability to watch the same game on your TV. This is much just like the non-rivalrous aspect of public goods that you might have learned about in microeconomics. In contrast, if I get surgery by the best doctor, you cannot get surgery by the same doctor at the same time (which is why don’t observe the superstar phenomenon in medicine, at least not to the same degree). Because we all can enjoy Manchester City play against Real Madrid at the same time, and only a few of us watch Exeter play against Plymouth if they play at the same time. Consequently, the players in the big clubs are paid a lot more than the players in the small clubs.

Now back to the European Super League. Although the demand for watching Manchester City and Real Madrid is high and the technology is there, these two teams rarely play against each other. Manchester City play more games against Sheffield United and Real Madrid play more games against Celta Vigo. We could make the superstar effect even stronger if we changed this. And that is what they tried with the European Super League. A European Super League would ensure that all big teams would play against each other every season. The fans would be able to watch more big team fixtures at the cost of small team fixtures. The big teams would get more money.

BS: US teams in major sports do not have the possibility of relegation. They also have the added incentive to fail from the draft of young athletes into the league. In US sports your pick in the draft is either fully based on how badly you placed in the regular season (NFL and MLB), or how badly you do increases your odds of ending up at the top of the draft (NBA and NHL). This means that teams that have no chance of making the playoffs start resting their good players and in many cases seemingly intentionally losing games. This is called “tanking”, playing badly to lower your team’s standings and increase your draft odds.

The NBA has changed its drafting rules several times since they implemented the lottery in 1985 (coincidentally the New York Knicks won the 1st pick in that draft in that first year, prompting many to develop some conspiracy theories about the efficacies of the draft).

The most recent changes have happened over the last two years. The draft odds were changed two years ago to give the three worse teams equal and slightly worse (than they had in previous years) odds of getting top picks and flattening the probability distribution.

The second major change happened in the NBA bubble last March (the season was played from a complex attached to Walt Disney World in Orlando). They changed the playoff rules from having the top 8 (out of 16) from each conference (two conferences) make the playoffs. Now the 7th through 10th place teams have a play-in tournament. This keeps more teams in the playoff hunt for longer.

These two changes seemed to have had a major impact on competitiveness. I can’t remember another year where so many teams were still playing this hard so late in the season.

HHS: But why have these clubs pursued a European Super League now? The pandemic has been hard on the economy. Many fans have lost their jobs and a lot of small football clubs are facing financial difficulties. The timing of the announcement of the European Super League, therefore, seems very inappropriate. While there has been talk about a European super league for decades, the pandemic has emphasised the superstar effect value of money from broadcasting (as stadiums are empty). The big clubs are also facing financial challenges, and a secure income over the next many years would be a nice outlook. It is a lot easier to borrow money if you can guarantee that you will get broadcasting money from the Super League forever in the future.

However, the risk of relegation or not qualifying for the Champions League is what makes football exciting. It is often stated that the English Premier League is so popular because it is very competitive. We don’t observe just one team winning every year (like Bayern München in the German Bundesliga), and many teams are fighting for the four Champions League spots. One potential explanation for why the league is more competitive than, for example, the Spanish league might be the way the broadcasting revenues are split more equally among the teams. The idea of a European Super League would reduce the competitiveness and likely lower the quality in the longer run. Moreover, big clubs are often reliant on smaller clubs to develop talents. For example, Kevin De Bruyne played for Genk, Werder Bremen, and Wolfsburg before he reached superstar status at his current club, Manchester City. It is unclear how players would develop in a setting with an elite Super League. We know of Super Leagues from other sports in other countries. But these leagues typically have very different histories, recruitment systems and payment schemes.

Post-match analysis:

  • Talent development: Young players start in smaller (lower-division) teams. These lower-division teams have an incentive to play well (to get to the next level), and they develop many talents. The US setting is very different: there are college sports, drafting, and the “super” leagues
  • In association football, every team has an incentive to win every game. When Fulham play Manchester United, they both want to win. Fulham (currently) want to avoid relegation and Manchester United want to qualify for the Champions League and push Manchester City in the pursuit of the Premier League title
  • Competitiveness: In rugby union’s Six Nations tournament, there is no relegation and Italy have lost the last 30 matches or so. It, therefore, gets less interesting and the Italy games are not watched by many… it is slightly different because it is an international tournament. There remains a continual debate around the need for a promotion and relegation arrangement in the Six Nations, whereby Italy and Georgia (or Russia/the Netherlands/Romania/Spain etc) might enter into a play-off scenario in order to qualify each year. However, this situation has not been properly entertained by decision-makers in the game. Europe’s ‘second tier’ of rugby union nations already play in a similar secondary/inferior tournament but there is no opportunity to move up into the Six Nations; arguably this lack of top-level competition affects the long term development of the second-tier nations.

BS: There may be methods to get around the issue of competitiveness in the way that the NBA has, by allowing more teams to make the Champions League tournament and adding in more playing-in tournaments. But this may not be feasible given the year-round schedule that already exists for European football teams.

The point about having development leagues is very interesting. The NBA has created a sub-league called the G-league. This is currently mainly for players that are out of college but are not currently good enough to be part of the NBA, it does not really compete with college. But this year they created an elite team within the G-league that are made up of players that are not eligible to join the NBA yet but are considered NBA ready (the NBA requires young players to wait 1 year after turning 18 before they can enter the draft). They are starting to position the G-league to serve as a feeder system into the NBA, and as an alternative to going to college or playing abroad in Europe or Australia.

There is no possibility of relegation to the G-league for NBA teams. My impression was that this is similar to what teams like Real Madrid have, junior teams that raise and incubate young talent in preparation for joining the professional club.