Factors Influencing a Competitive Balance in Sports

Factors Influencing a Competitive Balance in Sports Following the American Psychological Association’s Guidelines Frank Thurber Concordia University-Chicago Abstract The structures of revenue sharing, the player draft, reserve clause and salary caps across the professional sports landscape are all efforts or were efforts to maintain a sense of competitive balance in the industry.Leagues go about revenue sharing and the question of a salary cap in different ways depending on the sport, but all are intended to either generate as much revenue as possible through teams gaining a axiom amount of interest on the part of their respective markets or keeping a level playing field.

A high appeal on the part of teams to fans creates a multitude of avenues for increased revenue from an ownership perspective. Teams drawing a positive, ample following are likely to have high merchandise, concession, gate and sponsorship revenue.Fans want to wear the Jersey of an established player on the team competing for a Lombardi Trophy in football. Those who can afford the often high price of admission want to be in attendance for intra-divisional rivalry game tit an unbeaten season at stake.

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An accounting firm wants to gain exposure by having its name and/or logo behind home plate when a high percentage of homes is desirable, in many cases, without a club’s ability to compete and remain competitive.Some fan bases, such as those of the Pittsburgh Steelers, Cleveland Browns, New York Yankees and Boston Celtic do not rely as much on consistent success. However, the aforementioned holds true for the majority of sports organizations across the United States. Moreover, leagues adapt and build off of prior efforts to maintain competitive balance. Old schools of thought have evolved to keep the balance while keeping up with the current times. This is especially true in free agency.

Revenue sharing is common in professional sports where the league offices negotiate the television contracts.For example, the National Football League has exclusive broadcasting contracts with CBS (AFC members), NBC (Sunday Night Football), FOX (MFC members), NFG Network (Thursday Night Football, league subsidiary) and ESP. (Monday Night Football).

Regardless of which teams play week o week, games will be on a set station based on one or more of the following factors: conference, day of the game, visiting team and time of the game. And, regardless of the television arrangement, all teams will split the season’s revenue stemming from the broadcast rights. Attendance, season results or size of a respective market have no bearing.The same does not hold true for member teams in Major League Baseball and the National Basketball Association. These teams negotiate their own television and other broadcast arrangements, subsequently possessing exclusive rights to the venue as a result of such agreements. The league offices have neither the authority to negotiate these agreements, nor the rights to allocate the revenue among member clubs. According to Lawrence (2005), about 67% of the Neff’s revenue comes from the television contracts.

As of the 2005 season, teams also made upwards of $2. 5 million in revenue per game in gate receipts.This revenue is also shared, and is split, with 40% going to the visiting team and 60% staying with the home team. Revenue sharing would help teams in leagues with no salary cap the ability to remain nominative.

The multi-million dollar funds would make a higher payroll possible, reflecting those of larger market teams with the financial ability to be viewed as attractive to an increased number of skilled players. On the contrary, broadcast revenue allows teams in leagues with salary caps to come much closer to the cap number. The league determines this number on a yearly basis.Various baseball teams, among those in other leagues, have felt the effect of the absence of revenue sharing given a smaller market, a lack of success and low television ratings. Salary APS vary from league to league in terms of calculation, structure and the amount for which each player accounts. These ceilings place a limit on the amount each team can spend on player salary, prohibiting financially able teams from dominating the market despite possessing ample funds to potentially do so.

While the salary cap places a strict limit on how much teams can spend, clubs with the ability to surpass the cap may do so at an expense.In the National Basketball Association, teams make economic decisions when addressing the question of whether or not they want to raps the salary cap number at the price of the luxury tax. While salary caps give smaller market teams and/or teams with an inelastic payroll a better chance to compete, they also hinder financially stable clubs from reaching an even higher level of success. The means by which teams reach such desired Reserve Clause, first implemented by professional baseball in the late sass, permitted clubs to retain five players for the duration of their careers.These teams had the exclusive rights to the players at the execution of their contract plus one ear, during which the team could re-sign the player to another long-term deal. This led to free agency, a key component of keeping competitive balance. According to Howard and Humphreys (2008), the Reserve Clause served as a basis for today’s restricted free agency, where a team has the rights to a player based on the amount of time he has been his or her specific league.

Teams may offer a restricted free agent a contract, which the old club can match.If the club decides not to match the new contract, that club is compensated with certain draft picks based on where the layer in question was drafted. With regard to unrestricted free agency, the highest bidding team wins the rights to the player, unless the player decides to play elsewhere at a lower price for whatever reason. All of these components to the leagues’ respective Collective Bargaining Agreements (Cabs) contribute to creating or attempting to create a competitive balance within each sport.

Competitive balance drives the market as a whole and makes for revenue streams from across the market, opposed to Just a select few avenues.