Academic journal article National Institute Economic Review

Benefits to Their Communities from Small Town Professional Football Clubs

Academic journal article National Institute Economic Review

Benefits to Their Communities from Small Town Professional Football Clubs

Article excerpt

Many small town professional clubs operate on the border of viability and threats to their survival are often real. But their activities may generate benefits that they are unable to capture in ticket sales; for example they provide a focus of interest even for some residents who do not attend the stadium. The paper presents results from applying contingent valuation methodology in two towns with clubs in the bottom-tier of English professional football. Collective willingness-to-pay for the survival of the clubs through taxation proved to be significant relative to the revenues the clubs were able to generate through ticket sales. There appears therefore to be a case for local governments to consider intervention in some circumstances where a club's survival is in question.

Keywords: football; contingent valuation; willingness-to-pay

JEL Classifications: D62, H41, L83

Introduction

Although most attention, and revenue, in football accrues to clubs based in major cities and playing in premier leagues, the majority of professional clubs in Europe play in smaller centres and in lower divisions. Many such clubs operate on the border between viability and non-viability (Szymanski, 2014). Sometimes, their survival may depend on explicit or implicit public subsidies (for example, through relief from local property taxes or, as is common in Spanish football, provision of a rent-free municipal stadium) or other public policy interventions (for example, protection through planning laws against acquisition of stadium sites by property developers). This paper asks whether civic authorities should in fact be concerned over whether their communities are represented in their national professional football league. If a club were to collapse or else forced to become amateur, would that be a legitimate matter for concern from a local public policy perspective? If the revenue of a club is insufficient to cover the costs associated with playing in the professional league, is it ever appropriate for local government to override the 'market solution' ? Is it that there are additional benefits to a community from the existence of its professional football club that are not captured by the revenue the club collects at the stadium? Is it possible to measure these community benefits which lack a corresponding revenue stream? Are they potentially large enough to justify intervention if ticket revenue fails to cover the costs necessary for the club to maintain its professional status?

This paper addresses questions such as these through investigation of two examples of clubs in the fourth (i.e. the lowest) tier of the English professional league structure. The English game offers one of the largest professional structures in the world, organised as four divisions, of which the top is the English Premier League, all linked with each other by a system of promotion and relegation. In principle, of course, any member club could slip down into the bottom tier. But, in practice, it consists largely of small town clubs, consistent with the finding in Buraimo et al. (2007) that the position of a club within the hierarchy of the 92 English professional league clubs is determined largely by size of local population.

It is true that small-town clubs demonstrate impressive resilience. We looked at all of the clubs which played in the Football League eighty years ago and, while several subsequently failed or were demoted from the League, only three were not reformed and all the rest are still competing at some level of the game today. (1) In the modern era, Szymanski (2014) notes that there were 67 cases of insolvency during 1984-2010 but all the clubs present in the League at the beginning of the period were still active at the end albeit eight of them were outside the professional structure.

So, history suggests that clubs seldom die but that they do drop out of the professional league into the amateur and semi-professional structure, either because they experience financial collapse (as with Maidstone United in 1992) (2) or because their weak finances lead to inadequate playing performance and demotion to the minor leagues (for example, towns such as Barrow and Southport proved incapable of sustaining a club at the professional level). …

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