"The league will maximize revenues when teams from large, rich, and fan intensive cities win more often" Zimbalist (2002). European football clubs have historically not had a great competitive balance. According to one study done in 2006, of the previous 10 seasons, the champion and runner-up from the premier leagues from Greece, Italy, Spain, Germany, France and England were the same top two clubs in those countries two-thirds of the time. The typical European premier league has 20 teams. Thus, 10% of the league accounts for 66% of the final match appearances, while 90% of the league account for the remaining 34%. Thus historically, European football does not enjoy much competitive balance at all.

One recent trend has been for extremely wealthy owners to buy clubs and immediately transform a clubs fortunes. One great example of this is the ownership of Manchester City, now in the hands of Abu Dhabi United Group, which purchased the club from the former prime minister of Thailand for over EUR 220 million. Manchester City instantly joined the fray of teams who could afford to and were willing to spend big-time money on big-time players. While, this has allowed a few additional teams to become instantly competitive, it still does not create or foster a competitive balance, rather it simply shifts the balance of haves and have-nots by one additional club.

This has led to significant problems for clubs who have tried to compete with the more wealthy clubs and are unable to. In Spain's premier league, La Liga, the top two teams are clearly Barcelona and Real Madrid. Other teams, like Valencia and Villarreal who have tried to compete, end up in financial trouble with tremendous debt and sometimes unable to make payroll.

This is the essence of a lack of a competitive balance, where to try to compete casues financial ruin.

Foreign Players and Domestic Economy in European Football

The European leagues have blossomed in the last 15-20 years. Revenue has increased exponentially as broadcasting rights have afforded the leagues greater revenue and exposures. This has created a free market for the best players in the world within the European leagues. The larger teams, such as Arsenal, Manchester United and Chelsea from England's premier league have dominated the league in two inter-connected aspects in recent memory: League success and foreign-born players. Often times, the premier foreign players are non-whites from Africa, South America and Asia.

The league trends are obvious and concrete, larger and richer teams can more readily sign foreign-born talent because they have more money. This influx of superior talent keeps these teams near at the top of the standings. The team success creates additional revenue by way of merchandise, ticket sales and television money. The teams with more money can afford the best players…Therefore, a repeating cycle and self-perpetuating cycle is created which works against the notion of competitive balance. Currently, there is a wide gulf in the value of the most and least valuable teams.

Putting it all Together- Economic Impact of Racism on Football

Football's Current Economy- European Champions League

It is clear that big-time football is a big money sport. In the most recently completed UEFA Champions League season (2008/09), the 32 participating teams divided up a total purse of over EUR 580 Million, with each team receiving at least EUR 6.8 million, but most receiving well over twice that. An additional EUR 28 million was provided to the national associations of the European countries who have clubs participating in the UEFA competitions. Another EUR 33 million combined was paid out to the teams participating in the 2008/2009 UEFA Cup completion.

The high payouts stems from lucrative TV contracts and UEFA's recently devised centralized marketing scheme which divides the TV money among the teams that reach the quarterfinals of the Cup competition, based on the value of each teams TV market. This system has been in place and has proven to be an enormous success for the UEFA and all of the clubs that participate in its Cup competition. UEFA has announced plans to introduce the centralized marketing revenue plan into the Champions League effective with the 2009/10 season.

The overall economic picture is even brighter in many cases. Research commissioned by the league's official sponsor, MasterCard, reveals that clubs with the largest fan bases, such as Manchester United FC and FC Barcelona, the figure rises to EUR 46.14million, with the league champion earning...

This figures are higher than the ones quoted by UEFA above as result of adding in the ticket sales; commercial and marketing revenues, including sponsorship and sales of merchandise, food and beverages; and increased squad value.
MasterCard's researcher, Professor Simon Chadwick said: "In uncertain economic times, sport's universal appeal remains strong, making it one of the most lucrative industries to be involved in. The competition continues to be an important source of revenue and commercial activity for clubs, especially for those that qualify for the knockout phase of the competition."

This inevitably makes a significant contribution to the annual turnover of the clubs involved. Moreover, revenues earned from UEFA Champions League football will be especially important to clubs as the moment, given difficult operating conditions across the world."

Television revenue and media coverage of the sport continues to be on the rise. In May of 2009, the UEFA Champions League final garnered more TV viewers (109 million) than that year's Super Bowl of American football (106 million) for the first time ever and in so doing, became the most-watched sports event of the year.

One of the main reasons for this appears to be UEFA's having better attracted viewers from Asia and the Pacific region of the world. The NFL viewership remains overwhelmingly domestic (i.e., within the U.S.), while the UEFA draws huge ratings from around the world outside of Europe.

Football's Economic Impact- the World Cup

The 2006 World Cup, played in Germany, provided tremendous revenue for the country's economy. The four-week tournament grossed EUR 399 million in revenue, added EUR 2 billion to German retail sales and produced over 50,000 new domestic jobs. Ticket sales generated EUR 40 million for the German treasury and even the German football associations reaped EUR 56.5 million. Germany welcomed 15 million more visitors to the tournament than original estimates suggested.

FIFA, the Federation of International Football Associations, is the governing body of international football, including the world's most prestigious competition, the World Cup. It received a payout of EUR 40 million from the Germany as its portion of the World Cup proceeds.

Combating the Racism Economically

The economic impact that racism has on football in Europe and elsewhere is very hard to measure. A cursory review shows that there is little or no impact on the sport at all. The popularity of the sport is rising throughout the world and the impact of greater television ratings and viewership is only adding to the sport's coffers. The measures being taken to combat racism are relatively benign at the moment. Generally, punishments consist of very small fines, in light of the revenue numbers cited above are being doled out to the clubs of the offending fans, and there is always talks of penalizing clubs by having them forfeit in points and play 'closed' home games, which means allow no fans to be present.

There is an inherent problem with really solving problem: The bodies which would be enforcing a code of conduct would suffer financially if the most practical and effective punitive measures were taken. As is evident from the MasterCard study above, the single greatest factor in the financial health of most European Football clubs is their inclusion in the Champions league. If clubs were hindered in their ability to qualify for or advance in this league, the economic impact to them would be devastating.

There are several ways to use this principle to eradicate racist behavior among fans. Clubs with offending fans can be required to play a reduced number of home games, be allowed to sell less tickets, not be allowed to sell UEFA or FIFA sanctioned merchandise, be penalized Champion league points or be ineligible for Champion League or UEFA cup play. When these sanctions are regularly and strictly enforced, club owners closely scrutinize the makeup of their fans for the sake of their own financial well being. This approach is not new to civil rights history or to football- one of the main factors causing the end of apartheid in South Africa was FIFA's refusal to include them in World Cup play due to apartheid.

However, it is very doubtful that the governing body of European football will take these extreme measures because everyone of them requires UEFA to make a severe financial sacrifice as well. As a result, it is probably necessary to resort to the traditional, and in this case mostly ineffective,…