4. What are the benefits accruing to elite EPL clubs from appearing in the UEFA Champions League competition? This is a revenue source for individual clubs outside the EPL governance structure and from playing many non-EPL clubs. What are the challenges t

Thomas O’Connell

Assignment 4

1. Compare and contrast the architectures of the NFL and the EPL as regards the role of the central league in the business models of their individual clubs.

The NFL and the EPL are similar in the fact that they both generate a ton of revenue, and there models aim to generate this revenue mainly through television broadcasting deals (Metral, 2013). Although similar in the way they make money, the National Football League and English Premiere League are distinctly different in the fact that one league is closed and the other open (Metral, 2013). The NFL has the same 32 teams every year, no matter who the winners or losers are, while the EPL takes a different approach. The lowest performing teams in the Premiere League are replaced with the highest performing teams in the Champions League. This makes a huge difference between the leagues and the way teams are distributed money. No matter how teams in the NFL perform, the revenue amongst the league is distributed evenly between the 1st place and last place team, while teams in the EPL are responsible for making their own revenue individually, and can be hit hard financially if their club is relegated to the lower league (Metral, 2013). The NFL business model is also different because the teams within have the ability to move their teams to city’s that give them a better chance to generate more revenue, as the most recent move is seen with the Rams moving from St. Louis to Los Angeles after 21 years (Metral, 2013). This is unheard of in soccer as fans make a strong connection to their team and their city, so the EPL needs to help their teams find other ways to generate more revenue, because moving is not really an option.

 

2. Consider the system of relegation and promotion. What are the positives and negatives of the system (relative to the NFL system of 32 fixed teams)?

The positives to this system are that teams will never settle for a losing season because they want to stay in the top league and it keeps all games in the Premiere League competitive and exciting (Cummings, 2011). In relation to the NFL, the EPL has a better format because in the NFL teams with lower records get higher picks in the next year’s draft. This can cause teams to lose at the end of the season when there is no more hope of making the playoffs, to get first grabs a better talent to improve their team for the following year (Metral, 2016). Other then keeping competitiveness consistent throughout the season, promotion is also a huge positive for teams in the Champions league who make it to the Premiere League. These teams see a huge jump in revenue due to the increased coverage of the Premiere League (Taub, 2013). The NFL keeps revenues consistent with their closed systems of teams, so teams that have a greater following or a great season will still receive the same revenue as an underperforming team (Metral, 2013).

The negatives of the system are that the teams that come in the last three places of the Premiere League take a hit financially, and these teams are usually the ones that were recently promoted to the Premiere league in the previous year. It is hard to get a foothold in the Premiere League right away, as it is a very competitive league, and the teams who were just promoted are usually the favorites to go back down (Taub, 2013). The NFL allows all it teams to stay relatively competitive with their closed system where the last place team gets the first pick in the next years draft, and so on in that order. Allowing the lesser teams to get the better talent from the draft keeps competitiveness steady within the league and fans excited for the offseason with the draft and the possibility of their teams being competitive in the future.

3. In just one paragraph, describe the difference in how NFL media revenues are distributed relative to EPL media revenues.

The National Football League has its revenue streams put into two categories, which are national revenue and local revenue (Eckstein, 2019). The national revenue, which is revenue made from TV, merchandising, and licensing deals, is divided evenly amongst the 32 teams that make up the league (Eckstein, 2019). The teams themselves earn the local revenue, which is made up of tickets sales, concessions, and corporate sponsors (Eckstein, 2019). The English Premier League distributes only their international TV rights equally among all the clubs in the league (Sapscience, 2020). In regards to their domestic TV rights, only 50% is distributed equally amongst clubs. The other revenue is distributed through merit fees and facility fees which make up 25% each. The merit fees depend on where the team finishes up in the league that year, with higher performing teams getting a bigger cut, and facility fees, where teams are paid depending on how many times they show up on television (Sapscience, 2020).

 

4. What are the benefits accruing to elite EPL clubs from appearing in the UEFA Champions League competition? This is a revenue source for individual clubs outside the EPL governance structure and from playing many non-EPL clubs. What are the challenges to the NFL creating additional revenue streams that are similarly generated from playing non-NFL clubs?

The benefits to elite English Premier League appearing in the UEFA are not only for making the tournament and winning the league, but the possible financial gain that happens once you make it into the tournament (Darwen, 2019). For one, winning one game in the Champions league earns a club 2.7 million euros, and 900,000 euros to each club if the game ends in a draw (Darwen, 2019). According to Darwen, in 2018 each club took home 15.25 million Euros from the pooled revenue of 488 million euros just from group play alone, and the numbers only increase as you go further in the tournament with a promise of 19 million euros to the champion (2019). Since the National Football League is a closed league, it would be hard to open up the league in theory to play games against other teams like in Canada. First the talent would be very different as all the best players play in the NFL, as well as it would be hard creating the awareness to get the viewership of the games to where the NFL can make money. The UEFA Champions League is an already and widely known and followed league, and the open leagues of the soccer teams in Europe allow for these leagues to flow and make money easily (Darwen, 2019).

 

5. In your opinion, which model is the most effective for the long-term growth of a league? Discuss the reasons for your choice.

I think the National Football League model is the most effective for long-term growth because of equal revenue distribution, the closed system of the league, and the ability of teams to change their location in pursuit of more revenue. The equal revenue distribution of the league I think is very effective for long-term growth, because all 32 teams are growing together. Although each team wants to have individual success, the league sharing the national revenue has each team rooting for each other in the sense that they want each other to succeed, and I think these will continually to help the NFL grow as this model makes it an entire team effort. The closed system of the league is also very important for long term growth, because the teams at the bottom of the league always have a chance to bounce back the next year with early round draft picks to improve their teams instantly. These teams don’t have to worry about getting knocked to a lower league, and can focus on being competitive the following year, which helps the overall competition of the league stay consistent. It also makes it harder for teams to repeat or consistently win, when lower teams get to recruit the better talent first. Changing the location of teams I think is going to be a big part of the future growth of the league. The ability of a team to change locations when they are getting enough revenue from a certain area, allows for teams to relocate and make more possible revenue in the future. This revenue that helps the individual teams also helps the overall league itself, because the success of one team leads to the success of the others.

References:

· PowerPoint “spg306Kane Understanding Sports Revenue”

· PowerPoint “spg306Kane Understanding Sports Expenses”

Cummings, M. (2017, August 19). English Premier League: Should the EPL Scrap Relegation? An American's Take. Retrieved September 17, 2020.

Darwen, C. (2019, September 27). How much money does the UEFA Champions League generate? Retrieved September 17, 2020.

Eckstein, J. (2020, August 28). How The NFL Makes Money: TV is King, Streaming and Gambling on Horizon. Retrieved September 17, 2020.

Fried, G., DeSchriver, T. D., & Mondello, M. (2020). Sport finance. Champaign, IL: Human Kinetics.

Metral, M. (2017, May 17). Football vs Football: Two opposing models. Retrieved September 17, 2020.

Sapience, S. (2020, July 30). How does the English Premier League make money? Retrieved September 17, 2020.

Taub, J. (2017, September 30). EPL Promotion and Relegation: The Good and the Bad. Retrieved September 17, 2020.