International sports is currently going through a revolution and is in a transitional phase with many problems, conflicts of interests, and dilemmas. Sports is as much about global economy and politics, as it is about sports itself. After all, sports is just a reflection of the real world around it. Let’s go back to the year 1989. That was the year that the Berlin wall fell and the collapse of the Communist system in Eastern Europe. Until the fall of the Berlin wall, sports was transparent and clear. There were basically two models: The American one, and the European.
1-AMERICAN vs EUROPEAN MODEL
ORIGIN OF THE CLUB: a) Europe: Many European clubs have their roots in a specific identity. For example, the club would represent a certain religious group, an ethnic minority, a specific region, social class, or political group of the society. b) USA: In the USA the professional teams do not have this strong tradition or identity. For example, the Los Angeles Lakers originally came from Minneapolis. That is where the word “Lakers” comes from.
FAN BASE: a) Europe: The bonding and solidarity within that specific group identity were very strong and games against other clubs were seen as a war against other tribes. As a result, the fan base of these clubs was mainly men of fighting age, and it partially explains the phenomenon of hooliganism. In essence; sports in Europe had a tribal element and was masculine by nature b) USA: In the USA the tradition, the identity, and the loyalty to the group, or geographical location, was much weaker and the fan base of the clubs consisted out of entire families who were on a day out. Professional sports in the USA had a strong social element and a more feminine nature.
THE GAME: a) Europe: In Europe, sports was a war between two tribes. The only thing that mattered was winning. Sports in Europe was result oriented. b) In the USA the family wanted more than only winning. The game had to be spectacular and fun to watch. In essence, professional sports in the USA is entertainment oriented.
LEGAL FRAMEWORK: a) Many clubs in Europe were “Foundations” who worked with many volunteers. The structure was not always transparent and there was no clear individual accountability. Professional clubs in the USA are corporations with shareholders. They work with paid, and qualified, professionals. The structure is transparent and there is a clear individual accountability.
FINANCING: a) Many European clubs depended on donations. For example from their fans, corporate sponsorships, or government money. These donations served to protect the existence of the club and its identity. Much more so than a commercial agreement between the parties. The revenue depended very much on the results of the team and was instable. b) In the USA the professional clubs had a commercial policy in which the money was created from merchandising, TV rights, and other revenues. In other words, the clubs were generating their own money and the source of income was stable and to a certain degree predictable.
GOAL: a) The goal of European clubs is to win games and championships. At all costs b) The goal of professional clubs in the USA is also to win, but also to make money.
2-THE END OF COMMUNISM
With the fall of the Berlin wall, the cold war between the Capitalist West and the Communist East ended. No more communism, or socialism. Only Capitalism. That system had won. As a result, Europe (and in particular the European Union) adopted the market economy and one of the effects of that was globalization. Nobody realized at that time, that the old European sports model died and was being replaced by the American commercial model. We are still going through this transitional phase and it has caused a lot of chaos, frustration, and tension on every level imaginable. European sports has been affected in two very important areas: Financial and legal.
FINANCIAL: With the end of the cold war sports lost its role as a tool of propaganda, and Politics started to withdraw from professional sports. With the withdrawal of politics from European sports, the clubs also lost their main source of income. Also, because the EU didn’t want professional clubs to be “sponsored” by governments anymore. Instead, they should generate their own income just like commercial companies. As a result, many European clubs have financial problems and the gap between the rich clubs and the poor clubs has become enormous.
LEGAL: In the past, international transfers of players was very complicated and sometimes even forbidden. Even domestic transfers from one club to another, were sometimes not possible so the European sports market was a closed and protected one. The EU and the effects of globalization changed that. In the EU the principle of free movement of goods, services, and money is a fundamental one and the EU will fight anything that looks like protectionism. At the end of the last century, the European sports market broke open as it was decided that all EU athletes should be regarded as “domestic players” in every EU country, rather than “foreigners” or “imports”. It basically meant that a team could no longer be restricted to having only two foreigners. No, it could now have as many foreigners as it wanted, as long as they were players from other EU states. This was revolutionary. It meant that expensive and protected domestic players now had to compete with cheap players from other parts of the EU. As a result, the price of overpaid domestic players dropped dramatically, while that of underpaid players from other EU countries started to rise. At the same time, it also meant that the richest clubs in Europe could buy all the best players. It provoked a huge sports migration from North to South, from Small to Big, and from Poor to Rich.
GLOBAL EFFECT: European teams from non-EU countries now found themselves at a disadvantage if they could only have two foreign players and had to play against an EU team that could have as many as it wanted. As a result, the teams from non-EU countries also decided to “open their borders” and allow foreign players. Soon enough, clubs and leagues from all over the world would follow. Many leagues now have practically no restrictions on foreign players.
Since we are living in a system of a market economy and since sports clubs have lost their “special protected status” they are rapidly moving in the direction of the American sports model. Some clubs understand this and have started to adjust to the new situation, while others are still trying to hold on to the old European model. Indeed, many European clubs have now transformed into corporations and have shifted their goals to a more commercial model, rather than only a result driven one.
Very few players who now play for their clubs, actually come from that city. Instead, they come from all over the world. Bamberg, the Bundesliga champion of 2011/2012, had an American coach and no German players in the starting line-up.
With the commercialization and Americanization of European sports clubs, the fan base is also changing from tribal/masculine to social/feminine.
Germany is a good example of that. Many games in the Bundesliga are sold out, despite the fact that the home team is not always winning. The fans in the arena are no longer exclusively men and of fighting age, but entire families. The games are no longer a tribal war, but a mix of a social event, a family day, networking opportunity, and entertainment. It is a deliberate choice. After all, a family spends much more money together than one single warrior. It is a natural evolution for a club that adopts the American sports model.
3-AMERICAN BUSINESS MODEL FOR PROFESSIONAL SPORTS
If the European sports model is transforming into the American one, then we need to look at the American business model to understand the process, and why the transition is so painful and turbulent. There are three important factors at the base of the business model of American professional sports: a) Economic hinterland b) TV rights c) Merchandising
ECONOMIC HINTERLAND: The USA has 300 million inhabitants and 30 NBA teams. That is 10 million inhabitants per team. It depends a little bit on the sports, and specific regional aspects, but in general as a rule of thumb, one can say that a professional team needs an economic hinterland of 5-10 million inhabitants to be commercially successful. This is a big problem for small countries. They often have too many professional teams. In economic terms; There is too much supply and not enough demand.
TV RIGHTS: The NBA can sell the TV rights to an internal market of 300 million people and to a global audience that is many times bigger. No European country can do this at the same level. They have a much smaller domestic market and almost no global appeal, so the revenues from the TV rights are only symbolic compared to the American.
MERCHANDISING: Selling of T-shirts, souvenirs, posters, etc. is another money maker for professional teams in the US for the same reason as the TV rights. A very big domestic market and an even bigger global appeal. European countries have the same problems here as they have with the TV rights.
CONCLUSION: Many countries are too small to successfully adopt the American business model. At least on a NATIONAL level, but on an INTERNATIONAL level, it is another story.
With the breakup of the former Yugoslavia, the top teams there found themselves in a position that their “hinterland” shrunk. Many clubs struggled and some went bankrupt. Each country would be dominated by only one or two teams, the national league was boring and predictable, and financially everybody took a free-fall. The top teams were unchallenged in the domestic championship but couldn’t compete internationally. Each country had the same problem and their solution was to come together and form a regional league called the Adriatic league. This Adriatic league was a success and practically saved basketball from a total collapse in the former Yugoslav republics. Every Adriatic League team now has a “market” that is many times bigger than their domestic one, games are competitive, the media coverage is much better, and in turn, the commercial potential is also higher. On an international level, the teams started to be competitive again. Partizan Belgrade broke the attendance record in Europe with 23.000 spectators at a game, and even qualified for the Final 4 of the Euroleague. During the 2012/2013 season, Maccabi Tel Aviv from Israel also participated in the Adriatic league and Szolnok from Hungary will do so during the 2012/2013 season. Both these teams (and Nymburk from the Czech Republic that participated in 2010/2011) are not seriously challenged on a domestic level. They are too big for their own small countries.
A similar development has taken place in North Eastern Europe where the Baltic league was formed. Now, they have taken a further step and formed the VTB league which includes many top teams from the former Soviet Union! This process will continue until there is a true Pan-European league, which in fact already exists in the form of the Euroleague. A place where all the talent, media coverage, and money is concentrated. Domestic leagues will be second rate and will only serve as a way of qualifying for the Pan-European leagues. A typical example of Globalization. The winners are the top teams in each country with international ambitions. The losers are all other professional teams.