Competitive Balance in the English Premier League
ECON 4500
Introduction:
Competitive balance is an extremely important topic in the world of sports. Not
only does it allow fans to see exciting games and seasons, but it has an effect on team
and league revenues, player salaries, and the overall demand for a sport. Competitive
balance is imperative to the success of any league, and almost every professional sport
has had some attempt made to alter the competitive balance in an effort to increase the
success of that league. Although competitive balance and the severity of its impact on a
league vary from sport to sport, the underlying principle of the uncertainty of outcome
hypothesis is universal.
The uncertainty of outcome hypothesis states that fans are most interested in
games when the home team has a 60 to 70 percent chance of winning.1 Ultimately, a
more competitively balanced league, one where the most teams have an equal chance
of winning, will be more successful in the eyes of owners and fans alike. This paper will
attempt to analyze the competitive balance of the English Premier League and how it
has changed over the last three years, from 2006/07 to 2008/09. After reviewing other
findings on the subject of competitive balance, I will measure the competitive balance of
the EPL for each three seasons, determine whether balance exists or not, and then
assess the factors attributing to these results.
Literature Review:
Many academic papers and journals have been written about competitive
balance, most likely as a result of its importance in the wide world of sports. From fan
1
Leeds, Michael A, and Peter von Allmen. The Economic of Sports . 3rd ed. Boston, MA:
Pearson, 2008. 149. Print.
attendance to media revenues, competitive balance is a factor that cannot be ignored.
Considering the effect it has on the demand for a sport, competitive balance plays a
crucial role in fan attendance of any league. In regards to the English Premier League,
Stefan Szymanski believes the EPL offers a natural experiment for measuring the
relationship between competitive balance and fan interest. Because teams
simultaneously compete in both the EPL and FA Cup matches, the trends of fan
attendance are comparable. He found that income inequality between divisions had
grown, implying that the FA Cup was becoming more unbalanced than the EPL.2 As a
result, fan attendance steadily declined for same-division matches. In summary, the
more unbalanced a league is the less fan attendance they will see.
According to Michie and Oughton, there are different aspects within competitive
balance that must be understood in order to fully comprehend its effects on the league.
Mentioned earlier, the uncertainty of outcome is important to competitive balance,
particularly to spectators and TV viewers. When the outcome is predictable with a
degree of certainty, spectators decrease compared to when the outcome is less certain,
thus revenues are lower and the league is less successful. Long-term domination is also
an important aspect of competitive balance. During the first 12 years of the EPL, one
club (Manchester United) won the title 8 times, and two clubs (Man U and Arsenal) have
won 11 titles.3 From a rank-order perspective, the EPL seems to be very unbalanced.
Finally, there is seasonal uncertainty, where the uncertainty of outcome as to who is
2
Szymanski, Stefan. "Income Inequality, Competitive Balance and the Attractiveness of
Team Sports: Some Evidence and a Natural Experiment from English Soccer." Economic
Journal 111.469 (2000): 4. W eb. 18 Nov 2009.
<http://ideas.repec.org/a/ecj/econjl/v111y2001i469pf69 -84.html#provider>.
3
Michie, Jonathan, and Christine Oughton. "Competitive Balance in Football: Trends and
Effects." SportsNexus (2004): 9. W eb. 18 Nov 2009.
<http://www.sportsnexus.co.uk/resources/12028/assets/football/CompetitiveBalance.pdf>.
going to win the championship is central.4 Simply put, the chance any team will win is
determined throughout the season. If the championship outcome was determined early
on in the season, the later games would be less important and demand for those games
would decrease.
Measurements:
For my analysis, I measured the competitive balance over 3 seasons of the EPL
using within-season variation. To do this, I found the win percentage for each team and
calculated the standard deviation from the mean win percentage (.500).5 Results show
first, that the league was much more balanced in the first season (2006/07) than in
recent years. From 2006/07 to 2007/08, the standard deviation increased by about 27%,
a fairly significant jump. Second, while the lower positioned teams seem to be
somewhat mixed, the same 4 teams are at the top of the table each year. At first glance,
the EPL seems to have very poor competitive balance.
I found the standard deviation for the 2006/07 season to be .177. While this
number alone means very little other than it is a relatively small deviation, when
compared to the later season it can explain quite a bit. For instance, the standard
deviation in 2007/08 was .226, as noted earlier a 27% increase. Competitive balance
was severely reduced. However, balance improved in the most recent season (2008/09)
with a standard deviation of .207.5
4
Michie, Jonathan, and Christine Oughton. "Competitive Balance in Footb all: Trends and
Effects." SportsNexus (2004): 9. W eb. 18 Nov 2009.
<http://www.sportsnexus.co.uk/resources/12028/assets/football/CompetitiveBalance.pdf>.
5
See attached Excel tables
Within-season variation is only one of many measures of competitive balance.
Based on my calculations, the competitive balance of the EPL seems to be good and
fairly stable as of late, but it is hard to say when there is no base for comparison. A
comparison across sports or leagues can be done using the ratio of actual standard
deviation to the ideal standard deviation.6 For example, when comparing the EPL to
Major League Soccer (MLS) one can calculate the ideal standard deviation by dividing
.5, which is the 50% chance each team has to win, by the square root of the number of
games played by each team. This allows comparison because it provides the base
(ideal) standard deviation for each sport/league.
Another useful measure of competitive balance can be done using betweenseason variation. Also known as turnover or team-specific variation, it is distinguished
from within-season variation in that it measures the relative positions of teams in the
standings each year rather than in one given season.6 This takes into account that each
year a team has a chance to move up in the standings. However, this measure does
have one flaw in that it does not allow for a standard comparison like within-season
variation does.
Finally, the frequency of championships also can be used to measure
competitive balance within a league. It is based on the same principles as the previous
measure, but uses championships rather than league standings to compare balance.
For example, the three seasons of the EPL used in this analysis show that the “Big 4”
(Liverpool, Man U, Chelsea, and Arsenal) make up the top four teams all three years.
6
Leeds, Michael A, and Peter von Allmen. The Economic of Sports . 3rd ed. Boston, MA:
Pearson, 2008. 149, 156, 158. Print.
With the same teams always at the top, the league seems to be very unbalanced.
Considering that in 12 years of the EPL only two teams won 11 of the championships,
the balance in the EPL seems to be nonexistent.
Altering Competitive Balance:
There are many actions leagues can take to preserve competitive balance,
including revenue sharing, salary caps or luxury taxes, and a draft system. The EPL has
a revenue sharing plan in place where each club gets $44.4 million from the TV
broadcasting deal each year.7 While the exact impact the revenue sharing deal has on
the competitive balance in the league is difficult to determine, it is almost certain that the
league is more balanced than without it. With revenue sharing, less wealthy teams are
provided a better chance at higher-priced, better quality players, in turn promoting the
competitive balance within the league.
Salary caps work almost in reverse order as revenue sharing does, in that they
restricts the wealthier teams’ ability to buy all of the top talent. Without a salary cap,
teams in the league can spend as much money on players as they would like, and those
more well-off teams will have better opportunity for the better players. This decreases
competitive balance as it increases the chances of the better, more expensive players
being on the same team. Currently, the EPL does not have a salary cap in place and
teams can offer any amount of money to entice a player to sign with their team. For
7
"EPL Teams Earn Almost $1.59B As Part Of Payout From TV Deal." Sports Business
Daily 16 May 2008: n. pag. W eb. 18 Nov 2009.
<http://www.sportsbusinessdaily.com/article/120914>.
example, Manchester City purchased Carlos Tevez for €35 million from Manchester
United, while James Collins went to Aston Villa for only €6.7 million.8
Finally, a draft, especially a reverse-order entry draft, can help promote
competitive balance. A reverse-order entry draft allows teams to choose incoming
players in the reverse order from their finish in the previous season.9 By allowing the
worst teams the first choice in the draft, more wealthy teams’ have restricted access to
these players which helps balance the league. Rather than a draft, the EPL uses a
transfer window, where there are certain times during the season in which teams may
pursue players and purchase or loan players across teams. Because this does not
hinder the more wealthy teams from buying all the talent, it does not do well at
promoting competitive balance.
Conclusion:
Competitive balance is crucial in the success of any league. It allows a maximum
number of fans, ultimately maximizing revenues for the league. While there are many
measures of competitive balance, no one is better than another. Rather, depending on
the scenario or league in question, one measure may be more useful than another.
Based on the within-season variation calculations and analysis of the factors of
8
"Football: English Premier League transfers in 2009/2010 season." Sports Betting
Information. 2009. W eb. 18 Nov 2009.
<http://www.betinf.com/england_transfer.htm>.
9
Leeds, Michael A, and Peter von Allmen. The Economic of Sports . 3rd ed. Boston, MA:
Pearson, 2008. 149, 156, 158, 163. Print.
competitive balance, the EPL does not seem to be competitively balanced. With the
same four teams in the top four positions over the three seasons considered, no salary
cap in place, and no useful draft system, the competitive balance is likely far from what
it could be.
Appendix
2006/07 Standard Deviation:
Team
Wins
Losses
Total
Win %
(Win % - .5)
Squared
Man U
28
5
33
0.848
0.348
0.121
Chelsea
24
3
27
0.889
0.389
0.151
Liverpool
20
10
30
0.667
0.167
0.028
Arsenal
19
8
27
0.704
0.204
0.041
Tottenham
17
12
29
0.586
0.086
0.007
Everton
15
10
25
0.600
0.100
0.010
Bolton
16
14
30
0.533
0.033
0.001
Reading
16
15
31
0.516
0.016
0.000
Portsmouth
14
12
26
0.538
0.038
0.001
Blackburn
15
16
31
0.484
-0.016
0.000
Aston Villa
11
10
21
0.524
0.024
0.001
Middlesbrough
12
16
28
0.429
-0.071
0.005
Newcastle
11
17
28
0.393
-0.107
0.011
Man City
11
18
29
0.379
-0.121
0.015
West Ham
12
21
33
0.364
-0.136
0.019
Fulham
8
15
23
0.348
-0.152
0.023
Wigan
10
20
30
0.333
-0.167
0.028
Sheffield
10
20
30
0.333
-0.167
0.028
Charlton
8
20
28
0.286
-0.214
0.046
Watford
5
20
25
0.200
-0.300
0.090
Sum
0.627
Std
Deviation
0.177
2007/08 Standard Deviation:
Team
Wins
Losses
Total
Win %
(Win % - .5)
Squared
Man U
27
5
32
0.844
0.344
0.118
Chelsea
25
3
28
0.893
0.393
0.154
Arsenal
24
3
27
0.889
0.389
0.151
Liverpool
21
4
25
0.840
0.340
0.116
Everton
19
11
30
0.633
0.133
0.018
Aston Villa
16
10
26
0.615
0.115
0.013
Blackburn
15
10
25
0.600
0.100
0.010
Portsmouth
16
13
29
0.552
0.052
0.003
Man City
15
13
28
0.536
0.036
0.001
West Ham
13
15
28
0.464
-0.036
0.001
Tottenham
11
14
25
0.440
-0.060
0.004
Newcastle
11
17
28
0.393
-0.107
0.011
Middlesbrough
10
16
26
0.385
-0.115
0.013
Wigan
10
18
28
0.357
-0.143
0.020
Sunderland
11
21
32
0.344
-0.156
0.024
Bolton
9
19
28
0.321
-0.179
0.032
Fulham
8
18
26
0.308
-0.192
0.037
Reading
10
22
32
0.313
-0.188
0.035
Birmingham
8
19
27
0.296
-0.204
0.041
Derby County
1
29
30
0.033
-0.467
0.218
Sum
1.022
Std
Deviation
0.226
2008/09 Standard Deviation:
Team
Wins
Losses
Total
Win %
(Win % - .5)
Squared
Man U
28
4
32
0.875
0.375
0.141
Liverpool
25
2
27
0.926
0.426
0.181
Chelsea
25
5
30
0.833
0.333
0.111
Arsenal
20
6
26
0.769
0.269
0.072
Everton
17
9
26
0.654
0.154
0.024
Aston Villa
17
10
27
0.630
0.130
0.017
Fulham
14
13
27
0.519
0.019
0.000
Tottenham
14
15
29
0.483
-0.017
0.000
West Ham
14
15
29
0.483
-0.017
0.000
Man City
15
18
33
0.455
-0.045
0.002
Wigan
12
17
29
0.414
-0.086
0.007
Stoke City
12
17
29
0.414
-0.086
0.007
Bolton
11
19
30
0.367
-0.133
0.018
Portsmouth
10
17
27
0.370
-0.130
0.017
Blackburn
10
17
27
0.370
-0.130
0.017
Sunderland
9
20
29
0.310
-0.190
0.036
Hull City
8
19
27
0.296
-0.204
0.041
Newcastle
7
18
25
0.280
-0.220
0.048
Middlesbrough
7
20
27
0.259
-0.241
0.058
WBA
8
22
30
0.267
-0.233
0.054
Sum
0.854
Std
Deviation
0.207
Sources
"EPL Teams Earn Almost $1.59B As Part Of Payout From TV Deal." Sports
Business Daily 16 May 2008: n. pag. Web. 18 Nov 2009.
<http://www.sportsbusinessdaily.com/article/120914>.
"Football: English Premier League transfers in 2009/2010 season." Sports
Betting Information. 2009. Web. 18 Nov 2009.
<http://www.betinf.com/england_transfer.htm>.
Leeds, Michael A, and Peter von Allmen. The Economic of Sports. 3rd ed.
Boston, MA: Pearson, 2008. 149, 156, 158, 163. Print.
Michie, Jonathan, and Christine Oughton. "Competitive Balance in Football:
Trends and Effects." SportsNexus (2004): 9. Web. 18 Nov 2009.
<http://www.sportsnexus.co.uk/resources/12028/assets/football/Compe
titiveBalance.pdf>.
Szymanski, Stefan. "Income Inequality, Competitive Balance and the
Attractiveness of Team Sports: Some Evidence and a Natural
Experiment from English Soccer."Economic Journal 111.469 (2000): 4.
Web. 18 Nov 2009.
<http://ideas.repec.org/a/ecj/econjl/v111y2001i469pf69 84.html#provider>.