Disadvantages of Black Friday Sales (Deep Discounting)
In the previous article, we have already seen what Black Friday sales or deeply discounted sales are. We also know the economic rationale behind such sales. Some of the benefits which are derived from these sales have also been discussed in the previous article. However, it would not be appropriate to say that deeply discounted […]
The Panaya Acquisition
If mere numbers are considered, Panaya is a small blip on the radar of the global Information technology behemoth Infosys. The deal is valued at only $316 million dollars which is not even 1% of the valuation of Infosys. However, this Panaya acquisition has shaken the company to its core. It has created a rift […]
Sweeping – Meaning, Need and Types
We are already aware that commercial banks are offering several liquidity management services to their clients. In the previous article, we have already studied how notional pooling can help corporations better manage their liquidity. However, notional pooling is not the only option. In fact, there is another option called “sweeping” which is used by the […]
Managing Revenue Risks in an Infrastructure Project
Equity and debt are the most commonly used sources of funding when it comes to infrastructure financing. However, in many cases, revenue is also an important source of funding. This is because, in many cases, revenue from previous phases of the project is used to fund the construction of newer phases of the project, thereby […]
Impairment in Sporting Franchises and Player Contracts
In the previous two articles, we have already established that the sporting industry has this unique practice of recognizing human players as intangible assets on their balance sheet. We also know that the value of these intangible assets is also routinely amortized just like other intangible assets. In short, the player contracts are treated exactly […]
There are a large number of sporting leagues around the world. However, when we study all the leagues, we find that each of them has around 10-20 members who are playing in the top professional class of leagues.
There are very few events such as the FIFA World Cup soccer where 50+ teams participate in the first round of the tournament.
The FIFA World Cup is an exception and can hold viewer interest since it happens once in four years. If it was an annual event, it would have been difficult to sustain viewer interest with so many teams participating.
This is true across all geographical regions are sports be it basketball or baseball in North America, club-level soccer in Europe, or cricket in Southeast Asia. There are often hundreds of different clubs which are playing these games. However, the number of spots in the top league remains restricted. This is because of several financial factors which impact the organization of the league.
In this article, we will have a closer look at some of these financial as well as organizational factors. These factors have been described in detail below:
In many European football leagues, there are leagues that have a six-layer hierarchy. However, in most parts of the world, a two or three-level hierarchy exists. The hierarchy of leagues is important for multiple reasons. One of the reasons is that it allows people with different levels of interest to view the game.
Viewers who have a very high level of interest have the opportunity to watch a large number of games as lower hierarchy levels play.
On the other hand, there are other viewers who only watch important matches and hence view the professional league. The hierarchy of leagues also allows the players to progress and get relevant exposure before they play at a professional level.
Players who are performing well at the lower levels of the league are given the opportunity to play at the higher levels. This is beneficial for everyone since a good player has a higher revenue-generating potential at a higher level and hence higher-level clubs are willing to acquire them at a higher price. As a result, there is a financial benefit for both the clubs as well as the players.
In most parts of the world, the area under the jurisdiction of sporting leagues is such that it becomes impossible to have more than twenty geographical regions that the clubs represent.
It is financially not viable to have more than one club represent the same area. Similarly, the viability of sporting clubs gets reduced if they are not affiliated with or represent a particular region.
For a sporting event to be successful, it needs to have a decent interval between the games. This interval is necessary to prevent the loss of viewer interest.
At the same time, if they are eliminated from the event at an early stage, their viewership numbers decrease even if they have a few matches left. If the number of matches is too large, the individual probability of a team making it to the next round will be quite low and also will be difficult to predict. It is for this reason that leagues that have a very large number of teams do not exist in the world.
Some of the teams would have a lot more money and resources as compared to other teams. As a result, their ability to win matches will also be considerably higher than many other teams. This will result in a series of one-sided matches. Also, there will be issues with the pricing of tickets since viewers may not be willing to pay a huge amount to view such games.
The fact of the matter is that sporting leagues across the world have tried various formats and have come to the conclusion that having ten to twenty teams of similar capabilities is the best way to ensure the financial success of the league.
Your email address will not be published. Required fields are marked *
