Revenue Sharing In Sports Leagues

The effects on talent distribution and competitive balance.

Revenue sharing in sports leagues. The amount of money distributed to a visiting team can significantly impact a team s total revenue which in turn affects the team s ability to attract and pay for talent and resources. Minnesota state university mankato mn 56001 usa. In this paper i examine how gate revenue sharing may serve to coordinate talent investments within these cartels. It is felt that teams with larger revenue streams are able to afford more talent over the long run.

The authors argue that in all subgame perfect nash equilibria the team with the highest reservation price will get the player that revenue sharing will not alter the outcome of the game unless the proportion taken from high revenue teams is sufficiently high that a revenue sharing system that rewards quality low revenue teams can alter the outcome of the game while requiring a lower proportion to be taken from high revenue teams and that the revenue sharing systems can improve. Individual revenues depend on both talent demand and competitive balance. The impact of revenue sharing in a professional sports league. We employ a model of n heterogenous profit maximizing clubs to analyze the impact of revenue sharing in professional sports leagues on competitive balance.

In a series of papers szymanski 1 szymanski and késenne 2 and szymanski 4 henceforth sk showed that in the standard theoretical model of sports league competition gate revenue sharing allocating a fixed percentage of ticket revenue to the visiting team has the perverse effect of increasing competitive imbalance i refer to this as the sk result. In professional sports leagues revenue sharing commonly refers to the distribution of proceeds generated by ticket sales to a given event. We show that when the teams engage in competitive bidding to attract talent in an isolated league the league s optimal choice is full revenue sharing resulting in full competitive balance. I show that sharing revenues has the potential to raise cartel profits because it decreases the incentive to invest in playing talent.

Revenue sharing in sports leagues. Revenue sharing is used in sports as a way to improve competitive balance. On the contrary revenue sharing reduces competitive balance if only clubs relative qualities play a role for revenues or if only two teams are considered. In the new plan in markets with less than 1 million television viewers the team contributes only 15 of its net local revenue and receives a full share from the fund 1 30th of the revenue in the fund.

The revenue effect reduces talent demand of each club because a part of the revenues is generated by competitors. We identify three effects of revenue sharing.