Why joint consumption suggests pressure for a Soccer Super League will grow

Soccer clubs have traditionally not even attempted to maximise profits. Their principal motivation has been to maximise costs.

So argues Paul Ormerod in his latest article.

The furore over the European Super League seems to have killed off the proposal. But economics suggests this is merely a pause. Sone form of consolidation around elite teams is inevitable.

Professional football clubs in Europe are an unusual sort of beast from the perspective of economic theory.

Economists agree that companies act to maximise profit. The concept is not defined completely clearly. A pricing policy, for example, which exploits customers and increases profits in the short term may eventually prove disastrous.

But soccer clubs have traditionally not even attempted to maximise profits. Their principal motivation has been to maximise costs.

Spending more money means getting better players. The correlation between the total amount a team spends on its players and its league position is not perfect, but it is very high. It is the principal reason for success.

The new generation of American owners of England’s top clubs bring with them a completely different attitude, one which is completely normal in corporate life.

Success continues to be vital, as in any sphere of business activity. But a key purpose in America is for the club to generate profits for the owners, just as with any other business.

This profound cultural difference does not by any means that soccer fans are embracing socialism.

They have very few qualms about the stupendous amounts of money which the top players can command. For example, Marcus Rashford of Manchester United has a contract reportedly of £10 million a year.

Rashford is very good, but he and others like him are not so much better than the huge number of professional players who get paid peanuts in comparison. How can this be explained?

A brilliant article by the American economist Sherwin Rosen in 1981, entitled “The economics of superstars”, tells us why.

Rosen argued that activities such as watching a sport or going to a film involve what economists call “joint consumption”.

If I am watching United, say, on the television, it does not matter how many other people are viewing at the same time. The game is still available for me to watch. In contrast, if I book a table at a popular restaurant or a particular seat on a flight, no-one else can use it.

Rosen, writing well before the internet, argued that advances in communications technology such as radio and television increased enormously the potential size of markets involving joint consumption.

Being physically present at a live performance, whether opera or sport, is a different experience from watching it live on TV or streamed. True fans value the former, but the producers make money from the latter. It is the physical fans who cut up rough, but ultimately the global audience is far more important.

These fundamental points in economic theory mean that the pressure to form organisations such as the Super League will grow rather than decline.

Poor King Canute is wrongly believed to have tried to order the tide to stop coming in. Attempts to supress some form of elite soccer competition emerging will eventually prove just as futile.