Numbers: Competitive Balance within Europe’s Top 5 Leagues

By: Jan | August 8th, 2007

The German subdivision of Ernst & Young publishes a yearly study that takes a closer look at the financial situation of the Bundesliga. While it’s Bundesliga centric, parts of the studies always consist of comparisons between the top 5 leagues in Europe (Premier League, Primera Division, Serie A, Ligue 1 and Bundesliga). The study can be downloaded as a PDF for free, if you think your German is up to the task.

This year they took a look at the Competitive Balance in each league. I won’t repost everything here, but instead cherry picked some results I found interesting. For those of you who aren’t so much nerds for numbers, here is a quick summary: France’s Ligue 1 is the most balanced, followed by (tada!) the Bundesliga. Premier League and Primera Division: not so cool. Serie A: difficult to say with all the manipulation scandal stuff, those results have to be taken with a grain of salt, but it would come in third. More in depth results after the wrap.

There are different ways to measure the competitive balance within a league. E&Y decided to use the total amount of points for their study - alternative measures could be e.g. the number of victories, or the final position in the league table. In a theoretical perfectly balanced league each team would end up with the same amount of points at the end of the season.

A high competitive balance is desirable and it helps maximise attendance numbers in stadiums and TV ratings. E&Y also identifies three additional negative possible outcomes in an unbalanced league: 1) danger of bankruptcy for the smaller clubs 2) big clubs could separate themselves to form their own league 3) a growing financial gulf between the rich and the poor and tendencies to overinvest money in players.

E&Y combined two components to come up with their competitive balance ranking for the big five leagues: a) the season component and b) the team component.

Season Component
The season component compares the deviation in points between the best five teams of a league compared to the rest. The higher the average amount of points the lower the competition. E&Y looked at two time periods, as they relate the overall decreasing competition in all leagues to the influence of higher Champions League revenues for the clubs after 1999.

Seasons 2000/01-2006/07 (1993/94-1999/2000)

Ligue 1 13 (12,6)
Primera Division 15,4 (14,1)
Bundesliga 16,3 (14,1)
Premier League 21,1 (16,5)
Serie A 21,2 (16,5)

Team Component
The team component compares the amount of points each of the best teams accumulates over a couple of seasons. A bigger deviation in points per team hints at a higher fluctuation and thus competition in the top five of the table.

Seasons 2000/01-2006/07 (1993/94-1999/2000)

Serie A 10,0 (7,7)
Bundesliga 8,3 (8,9)
Premier League 8,0 (7,7)
Ligue 1 7,2 (8,1)
Primera Division 6,7 (7,0)

Competitive Balance
E&Y concludes that a competitive league should ideally combine a low season component and a high team component. They put the two in relation to each other to come up with their final competitive balance ranking - where 1 = perfect balance.

Seasons 2000/01-2006/07 (1993/94-1999/2000)

Ligue 1 0,56 (0,64)
Bundesliga 0,51 (0,63)
Serie A 0,47 (0,48)
Primera Division 0,44 (0,49)
Premier League 0,38 (0,47)

Again it needs to be pointed out that the Serie A values were slightly distorted through the whole manipulation scandal that culminated in point deductions and a forced relegation.

Overall a very good showing by France’s Ligue 1, despite the fact that Lyon won 6 out of 7 championships during the time period chosen for the study. The Bundesliga comes in a respectable second. E&Y argues that France’s and Germany’s good results are due to their solidarity based central TV marketing, that spreads out the income more evenly among clubs. In Spain and Italy clubs are allowed to market their TV rights individually which produces a huge imbalance between the bigger and the smaller clubs. Yet, this doesn’t explain why England’s Premier League, who markets the TV rights centrally as well, finished last place by some distance. E&Y argues that this correlates with the recent wave of takeovers and the subsequently big amounts of money pumped into the clubs by their new owners. They also point at the Champions League as one possible factor in the declining competitiveness within the domestic leagues as a whole. Clubs that reach the Champions League can gain a big monetary advantage over their competitors, allowing them to further improve and strengthen their squads and thus performing more consistently in the league. Something that is also especially true for the so called big four of the Premier League. It will be interesting to see, whether the massive new TV deal for the Premier League will help the smaller clubs become more competitive again. Y&E suggests that the Champions League needs reforms so that it no longer pumps the same amounts of money into the clubs as it does now.

Further Discussion
While the E&Y study only looked at the domestic leagues, it might be interesting to get a similar competitive balance ranking for the European club competitions. Incidentally the two leagues with the lowest CB score are the two highest ranked leagues in Europe right now. E&Y tosses around a couple of ideas how a more level playing field could be achieved throughout Europe. First of all it would be mandatory that all leagues market their TV rights centrally. Serie A is actually on a good way to reintroduce that model in the coming years. That means it’s up to Spain to follow suit as well. Something that will be a bit more difficult to achieve would be salary caps like in the big American sports leagues. It seems that introducing this model on a European cross-national basis is very tricky and unlikely to happen. And you can’t expect that national leagues will self-impose a salary cap, as it would put them at a big competitive disadvantage. Although it could also help them achieve a higher level of competition within their own league. Some good news for France and Germany is, that the UEFA will introduce a unified European wide licensing procedure in 2008/2009. This is good news, because France and Germany currently have the strictest national licensing and already comply with the new UEFA standards, while the clubs of the other leagues will be forced to do their finances a bit less artistically to say it that way.