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Football, Finance and the Future: A Bubble About to Burst?
How has top flight football become big business?
The Premier League was formed in 1992, when the biggest English clubs broke away from their previous links with the rest of the professional game, in order to earn more revenue from TV coverage of the sport. Since then the top clubs have become multi-million pound businesses. By removing themselves from the rest of the professional English game, the largest clubs were able to control
the supply of 'top quality' football to the TV market, thereby enabling a premium price to be charged. This was facilitated by the entry into the marketplace of Sky Sports and a reduction in the number of teams in the top flight of English football to twenty.
By forming an organisation comprising twenty members rather than the ninety-two previously seen, the Premier League was able to speak with one voice in TV negotiations, effectively limiting the supply of this premium product. In economic terms, they caused a shift in the supply curve to the left (as shown in the diagram above). When this happens there is an increase in the price
level in the marketplace. In subsequent years this has been reflected in a rapidly rising payment made by the successful TV bidding organisation to the top clubs.
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