Sport is the Art of Balance: The Impact of Employment Law on the Financial and Competitive Balance in Professional Sports. A Comparison of the National Hockey League and the Barclays Premier League

AuthorTyson Hallen
Pages87-120
S.S.L.R. Sport is the art of balance
87
Vol.2
Sport is the Art of Balance: The Impact of
Employment Law on the Financial and Competitive
Balance in Professional Sports. A Comparison of the
National Hockey League and the Barclays Premier
League
Tyson Hallan
his paper examines the impact of employment law on the business
economics and competitive balance of professional sports. Through
comparing and contrasting the employment structure of professional ice
hockey in the National Hockey League (NHL); under a collective bargaining
agreement (CBA), to that of English football in the Barclays Premier Football
League (BPL), which operates on the basis of the open labour market and lose
regulation model. The author contends that the NHL collective bargaining
agreement facilitates greater financial prosperity and competit ive balance
between franchise clubs and across the league as a whole. The author
examines the system of collective bargaining; detailing its operation and
special legal status that exempts it from antitrust (competition) laws. The
paper then analyzes through the use of both empirical evidence and academic
literature, three aspects of employment between both leagues: team and
player salary, player contracts and free movement of workers, comparing how
each aspects operates to facilitate financial and completive balance within the
context of the respective employment structure.
The author submits that the NHL collectively bargained employment structure
has created more competitive and financial balance among clubs and across
the league, where as the employment structure of the Barclays Premier
League, has promoted financial destabilisation and competitive disparity. The
paper finds that the NHL CBA model has not righted all of the financial and
competitive imbalances experienced within the league, yet the 2005 CBA will
be renegotiated in September 2012, and changes will be made to reflect the
industry’s renewed priorities. The paper establishes that although there are
institutional and possible legal barriers to the implementation of a similar
CBA employment structure in the BPL, the author contends that in light its
unique business model, and the legal framework of the EU, these barriers can
T
[2012] Southampton Student law review
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be overcome. The paper concludes that although it is unlikely the BPL could
ever adopt a mirror image of the NHL employment model, it should move
towards organising its employment structure based upon a singular unified
employment agreement. This should be done to protect the long term viability
and integrity of this business and sporting entity.
Introduction
Sports and competition serve an important cultural, social and entertainment
purpose across all societies. They develop certain attributes and epitomise the
values of competition and fair play. However, these values that underpin the
ethos of sporting culture take on an entirely different connotation when
talking about professional sports. The inescapable reality is that professional
sport is a competitive business. Each franchise within a given sports league is
its own business entity, but also forms part of the larger business that is the
professional league.
1
The success or failure of a business is largely dependent on its ability to
perform and compete relative to other firms in the market, and to remain
profitable and viable in the long term, a business must increase its share of
market revenues.2 Professional sports teams, and their respective leagues,
generate revenue from a number of sources that include: television broadcast
rights, merchandising, ticket sales and advertisement.3
Franchises operating as individual business entities compete against one
another to increase their respective share of those revenue streams outlined
above.4 And so, inter alia owing to the combination of market forces, as well
as geographical location, demographics and competition from comparable
entertainment entities, certain franchises will achieve different levels of
1 Harry Arne Solberg and Kjetil K Haugen, ‘European club football: why enormous re venues are not
enough’
(2010) 13(2) Sport in Society: Culture, Commerce, Media, Politics 329,338
2 Simon Bishop and Mike Waller, The Economics of EC Competition Law: Concepts, Applications and
Measurement (University edn, 2010 Sweet & Maxwell) 1, 15-16
3 Mike Ozanian, ‘The Business of Hockey: Team Values Hit All-Time High’ F orbes.com (11
November, 2011) 1
of-hockey/> accessed 5
February 2012
4 Tony Keller and Neville McGuire, ‘The New Economics of the NHL: Why Canada Can Support 1 2
Teams’
(2011) Mowat Centre for Policy Innovation University of Toronto 1,3 -11
S.S.L.R. Sport is the art of balance
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financial success than others.
5 Therefore, it will always be the case that an
imbalance between professional clubs exists because of disparities in the
possession and allocation of resources.6
Professional sports differ from traditional business models in that with any
other business, there is usually no cause for concern when other firms in
industry are less efficient or profitable than others. 7 The feature that
distinguishes professional sports from other industries is that individual
franchise success is dependant on other clubs being both competitive and
financially balanced.8 However, the competition amongst teams to develop
their own product has drastically altered this position.
Dietl, Duschl and Lang note that ‘the position of a team in ranks is closely
related to the team’s financial success because teams with a better position
receive more attention from the fans, the media, sponsor, etc.’9There exists a
strong correlation in Premier football between what a team spends on player
salaries and their on field performance. 10 This has lead to a significant
escalation in player wages, and has resulted in the financial and competitive
imbalance between football clubs.11
The literature establishes that ‘teams tend to overbid each other for playing
talent until they are close to bankruptcy,’12 and in many professional sports
leagues, this has created a two tiered structure of have and have not teams.13
A similar situation occurred in North America, 14 and in response to rising
player wages and the growing financial and competitive imbalance,
5 Keller and McGuire (n 4) 3-11
6 Bishop and Waller (n 2) 15-16
7 John J. Binder and Murray Findlay, ‘The Effects of the Bosman Ruling on National and Club Teams
in Europe’
2011 Journal of Sports Economics 000(00) 1-23 1,14
accessed 1
February 2012
8 Binder and Findlay (n 7) 14
9 Helmut M Dietl, Tobais Duschl and Markus Lang, ‘Executive Pay Regulation: What Regulators,
Shareholders, and
Managers Can Learn from Major Sports Leagues’ (2011) 13(2) Business and Politics 1, 5
10 Deloitte and Touche Sports Business Group, ‘Highlights: Report Annual Review of Football Fina nce
2011 (9th
June 2011)
http://www.deloitte.com/assets/DcomUnitedKingdom/Local%20Assets/Documents/Industr ies/
Sports%20Business%20Group/uk_sbg_arff11_highlights.pdf> accessed 2 February 2012
11 Stefan Kesenne, ‘The Salary Cap Proposal of the G-14 in European football’ (2003) 3(2) European
Sport
Management Quarterly 120, 120
12 Dietl, Duschl and Lang (n 9) 5
13 James D. Whitney, ‘Bidding Till Bankrupt: Destructive Competition In Professional Team Sports’
(1993) 31(1)
Economic Inquiry 100,113

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