Krisztina András Business elements in sports, through example of football Ph.D. Dissertation Department of Business Economics Supervisor: Dr. Attila Chikán Copyright © 2003 by Krisztina András Budapest University of Economics Sciences and Public Administration Business and Management Ph.D. Programme Business elements in sports, through example of football Ph.D. Dissertation by Krisztina András Budapest, 2003 Contents CONTENTS __________________________________________________________________________ 2 LIST OF TABLES ____________________________________________________________________ 4 LIST OF CHARTS____________________________________________________________________ 6 ACKNOWLEDGEMENTS ___________________________________________________________ 8 1. EXAMINED PROBLEMS AND THE STRUCTURE OF THE DISSERTATION __ 10 2. TERMINOLOGICAL AND CONCEPTUAL BACKGROUND ____________________ 13 2.1. SPORTS COMPANIES IN PROFESSIONAL FOOTBALL _____________________________ 14 2.2. THE INTERPRETATION OF THE MARKETS_____________________________________ 18 2.3. OPERATIONAL MODELS _________________________________________________ 22 2.3.1. The interpretation of operations_______________________________________ 22 2.3.2. The specialities of operations in football ________________________________ 25 2.3.3. The state and business models ________________________________________ 27 2.3.4. The business model_________________________________________________ 28 2.3.5. Researches in the field of Football Economics ___________________________ 30 3. THE MARKETS OF FOOTBALL_________________________________________________ 35 3.1. VALUES IN FOOTBALL __________________________________________________ 35 3.1.1. The evolution of football to business ___________________________________ 36 3.1.2. Products with values in professional football ____________________________ 37 3.1.3. The values of football enterprises and players____________________________ 39 3.1.4. The value driving factors of the operation of the football enterprises __________ 40 3.2. THE CONSUMER MARKET OF PROFESSIONAL FOOTBALL _________________________ 41 3.3. THE PLAYERS MARKET OF PROFESSIONAL FOOTBALL___________________________ 45 3.4. THE MARKET OF BROADCASTING RIGHTS OF PROFESSIONAL FOOTBALL _____________ 54 3.5. THE SPORTS SPONSORSHIP MARKET OF PROFESSIONAL FOOTBALL _________________ 60 3.6. THE MERCHANDISING MARKET OF PROFESSIONAL FOOTBALL ____________________ 64 3.7. THE RELATIONSHIP OF THE MARKETS_______________________________________ 67 3.8. FOOTBALL AND BUSINESS GLOBALISATION __________________________________ 69 4. THE MAIN FACTORS INFLUENCING THE OPERATIONS OF PROFESSIONAL FOOTBALL _________________________________________________________________________ 71 4.1. THE STAKEHOLDERS OF FOOTBALL COMPANY ________________________________ 71 4.1.1. Internal stakeholders of the football company ____________________________ 73 4.1.2. External stakeholders of the football company ___________________________ 78 4.1.3. The civil sphere of football ___________________________________________ 83 4.2. FIFA _______________________________________________________________ 85 4.3. UEFA ______________________________________________________________ 88 4.4. THE EUROPEAN UNION AND THE PROFESSIONAL FOOTBALL _____________________ 91 4.5. G-14________________________________________________________________ 94 2 5. THE OPERATIONS OF HUNGARIAN PROFESSIONAL FOOTBALL __________ 99 5.1. THE OPERATIONS OF HUNGARIAN PROFESSIONAL FOOTBALL_____________________ 99 5.1.1 The organisational structure of Hungarian professional football _____________ 99 5.1.2. The marketable products of Hungarian professional football _______________ 103 5.1.3. The business operations of the professional division ______________________ 110 5.1.4. The business operations of the Profi Liga Kft. ___________________________ 112 5.2. THE BASIS OF BUSINESS OPERATIONS ______________________________________ 114 5.2.1. Customers interest towards professional football ________________________ 115 5.2.2. The brands of Hungarian football ____________________________________ 120 5.3. INVESTIGATION OF DOMESTIC FOOTBALL COMPANIES _________________________ 122 5.3.1. Inter-corporate analyses____________________________________________ 122 5.3.2. Sector analysis ___________________________________________________ 127 5.3.2.1. The financing of the Hungarian football clubs in the past _______________ 127 5.3.2.2. The results of the case-studies ____________________________________ 129 5.3.3. Business modelling ________________________________________________ 137 5.3.3.1. The applied method ____________________________________________ 139 5.3.3.2. Presentation of the business strategy of the investigated prototype________ 142 5.3.3.3. The general casemaps of the model ________________________________ 147 5.3.3.4. The detailed casemaps of the model _______________________________ 149 5.3.3.5. The result of the analysis of the business model ______________________ 167 6. SUMMARY ______________________________________________________________________ 172 BIBLIOGRAPHY___________________________________________________________________ 176 SELECTED LIST OF PUBLICATIONS ON THE TOPIC OF THE DISSERTATION _____________________________________________________________________________________ 185 APPENDIX _________________________________________________________________________ 187 NOTES _____________________________________________________________________________ 196 3 List of tables Table 2.1. Elements of the description of the markets discussed in the dissertation______________ 19 Table 2.2. Comparison of the two operation models of football _____________________________ 28 Table 2.3. The main fields of researches in the football economics __________________________ 30 Table 3.1. The consumers market of the professional football ______________________________ 41 Table 3.2. Products, services and sports consumers______________________________________ 44 Table 3.3. Summary of the main characteristics of the players market _______________________ 46 Table 3.4. Most expensive transfers of all times _________________________________________ 48 Table 3.5. Comparison of the transfer balances and transfer volumes in the BigFive countries ____ 50 Table 3.6. Categorisation of the BigFive countries based on transfer balances and transfer volumes 51 Table 3.7. Proportion of professional football players according to their nationality ____________ 52 Table 3.8. The proportion of EU and non-EU players ____________________________________ 52 Table 3.9. The proportion of non-EU players by regions __________________________________ 53 Table 3.10. Figures of the transfer period in summer of 2003 ______________________________ 54 Table 3.11. The market of broadcasting rights of professional football _______________________ 56 Table 3.12. The development of prices of broadcasting rights in different market structures ______ 57 Table 3.13. Summary of the main characteristics of the sponsorship market___________________ 61 Table 3.14. Summary of the main characteristics of the merchandising market of professional football _______________________________________________________________________________ 64 Table 3.15. Football clubs with protected trademarks via WIPO in Hungary __________________ 66 Table 4.1. Number of new listings on stock market_______________________________________ 74 Table 4.2. Comparison of financial and strategic investors ________________________________ 75 Table 4.3. Media companies with significant shares in football companies, as of autumn 2000 ____ 76 Table 4.4. Types of investors in football and their respective aims __________________________ 77 Table 4.5. Characteristics of the Classic and New Spectators ______________________________ 79 Table 4.6. The typical stakeholders of a football companies and their interests ________________ 83 Table 4.7. The Stakeholder-Matrix of the Football Club __________________________________ 83 Table 4.8. The most well known club partnerships _______________________________________ 96 Table 4.9. The legal forms of the G-14 clubs ___________________________________________ 97 Table 5.1. Broadcasting fees of football events on MTV__________________________________ 106 Table 5.2. Viewing figures of the games transmitted by Magyar ATV _______________________ 107 Table 5.3. The development of the financial results of the professional division between 2000 and 2002 ______________________________________________________________________________ 111 Table 5.4. The revenue and cost structure of the Profi Liga Kft. in 2001-2002 ________________ 113 Table 5.5. The amounts of re-organisational credits at the teams of NB I ____________________ 114 Table 5.6. How often do you watch it on TV? __________________________________________ 116 4 Table 5.7. The average attendance figures at the home matches ___________________________ 117 Table 5.8. Average exploitation of stadia capacity ______________________________________ 118 Table 5.9. Viewing figures of football games in Hungary_________________________________ 119 Table 5.10. Registered trademarks of football clubs in Hungary ___________________________ 120 Tables 5.11.-5.12. Ranking of football clubs with the highest revenues 1996/97-1999/2000______ 124 Table 5.13. The other fields of activity of the Hungarian professional football companies _______ 130 Table 5.14. The average operational revenues of all the football companies together between 2000 and 2002 ______________________________________________________________________