BROADCASTING AND TEAM SPORTS

Date01 July 2007
DOIhttp://doi.org/10.1111/j.1467-9485.2007.00422.x
Published date01 July 2007
BROADCASTING AND TEAM SPORTS
Roger G. Noll
n
Abstract
Television rights are the largest component of revenues for major sports in large,
rich nations. Among these nations, the market structure for rights varies due to
different competition policies toward sports and television. This essay examines
how game coverage, revenues, and competitive balance are affected by competition
in commercial television and sales of rights. It argues that consumers are better off
if television is competitive and leagues do not centralize rights sales. We conclude
that centralization of rights sales does not improve competitive balance or benefit
financially weak teams. Finally, while digital telecommunications are making
television competitive, ending centralization of sales by leagues requires policy
intervention.
I Intro ductio n
Among high-income nations, television broadcasting is an important source of
revenues in all of the most important professional sports. In the largest nations,
the percentage of total revenue that each major sport derives from television has
grown to half or more. In most cases – including football in Europe – this
revenue growth has occurred only in the past 10–15 years.
1
Despite lucrative revenue flows, professional sports leagues view television
with some skepticism, worrying that broadcasts reduce attendance in the short
run and overall fan interest, through overexposure, in the long run. Government
officials express concerns about sports broadcasting, worrying whether pay-TV
should be allowed to capture rights to events that historically have been
broadcast on free-to-air stations, whether rights to team sports should be sold by
leagues or by teams, and whether a single buyer should be permitted to acquire
all of the rights to a major sport. Reflecting conflicting views about these issues,
different leagues around the world have adopted different policies and practices
regarding the sale of broadcast rights and the distribution of the revenues from
rights fees among their members.
n
Stanford University
1
For data about television revenue in football in several European nations, see Ascari and
Gagnepain (2006), Baroncelli and Lago (2006), Barros (2006), Buraimo, Simmons and
Szymanski (2006), Dejonghe and Vanderweghe (2006), Frick and Prinz (2006), and Gouguet
and Primault (2006).
Scottish Journal of Political Economy, Vol. 54, No. 3, July 2007
r2007 The Author
Journal compilation r2007 Scottish Economic Society. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA
400
This article examines three aspects of the economics of broadcasting of team
sports. First is the demand for sports rights: what determines the willingness to
pay for rights to games in a league among television broadcasters, and how is
demand affected by ongoing changes in the structure of the broadcasting
industry due to new technology? Second is the supply of sports rights from the
perspective of both teams and leagues, including the consequences of
centralizing the sale of rights in leagues. Third is policy: how do national
broadcast and competition policies affect the performance of both the
broadcasting and sports industries, and how has advancing technology altered
the economic effects of government policies?
The broadcast and team sports industries, despite their interdependence, have
sharply contrasting operations. Broadcasting is part of the information
technology sector, in which both technology and public policy have undergone
revolutionary change in the past two decades. These changes are radically
altering the structure of the broadcasting industry, which in turn is causing a
substantial increase in demand for broadcasting rights. Meanwhile, team sports
stress history and tradition, and pride themselves on rules that inhibit changes in
technology and the organization of a sport.
While this analysis focuses on team sports, much of the underlying economic
forces apply to individual sports as well. The commonality between individual
and team sports arises from changes in the broadcast industry. The most
popular individual sports – golf and tennis – have experienced the same growth
in demand and revenues from rights fees as team sports. An example of the
influence of television on sports is its role in inducing North American leagues to
expand to cities in the South and West in order to make national television rights
more attractive to broadcasters (Jones, 1969).
The analysis focuses on television rights. Although radio broadcasters
participate in the sports rights market, television broadcasters are the dominant
participants and exercise far more influence on the operation of the sports
industry.
II The Deman d for Sports Broadcasting
The natural starting point for an analysis of the economics of sports
broadcasting is the demand for program content by broadcasters. Ultimately,
the demand for sports television rights is derived from the final demand for
broadcast services. The nature of the demand for program content is extremely
complex because of heterogeneity among broadcasters in sources of revenues
and, as a result, objectives and strategies. In addition, sports events, even in the
same sport, are differentiated products that are not perfect substitutes among
buyers.
The demand side of the market for program content includes broadcasters
that can be distinguished in three ways. First, some potential buyers are for-
profit firms, while others are ‘public’ broadcasters that are either government
agencies or non-profit private entities. Second, potential buyers differ according
to how they reach viewers: terrestrial over-the-air broadcasts, direct-to-home
BROADCASTING AND TEAM SPORTS 401
r2007 The Author
Journal compilation r2007 Scottish Economic Society

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