MARKET SIZE AND WINNING: HOW LARGE IS THE BIG-CITY ADVANTAGE IN SPANISH FOOTBALL? José M. Sánchez Pablo Castellanos Jesús A. Dopico University of Corunna

2 PRESENTATION STRUCTURE MOTIVATION OF THE RESEARCH METHODOLOGICAL APPROACH DISCUSSION OF THE RESULTS CONCLUDING REMARKS

3 MOTIVATION OF THE RESEARCH To find an answer to the following questions: –Do big-cities teams have some inherent advantage due to the markets they serve? –How large is this advantage? –Does this advantage impede to get an acceptable level of competitive balance? Special relevance of these questions for Spanish Football League: –Spanish framework: –Professional teams competing in First and Second Division are located in areas with very different drawing potential –Spanish League is a win (utility) maximizing league (the large-market teams are more dominant in win maximizing leagues than in profit maximizing ones) –Opened players’ market –These features arise the possibility of a strong unbalance between large and small markets teams

4 METHODOLOGICAL APPROACH Theoretical framework: –Relationship between market size and sports performance: derived under both the profit maximization and win (utility) maximization models (Rottemberg, 1956; Sloane, 1971, Scully, 1974 and Kesenne, 2006): Main hypothesis: –Given that teams are located in areas with different drawing potential, profit and utility incentives operating in a free competitive labor market will lead to a situation in which, on average, strong-drawing areas have stronger teams, and weak-drawing areas have weaker teams.

5 EMPIRICAL APPROACH Reference: Bradbury (2007) –Case of study: MLB –Conclusion: Although big-market teams may have an advantage over small-market teams, the advantage appears to be slight and virtually meaningless Our regression analysis: –Dependent variable (Y): playing success Proxy of playing success: long-term sports performance index (seasons from 1995 until 2007) –Independent variable (X): local market size Proxy of local market size: adjusted provincial population

6 Teams sorted by their local market size (X)

7 Teams sorted by their observed performance (Y)

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9 REGRESSION ANALYSIS (Linear specification, WLS estimation)

10 METRICS à la BRADBURY PREDICTED PERFORMANCE: Sports performance that the teams should have based solely on their local market size –Predicted performance = ·Population POPULATION-ADJUSTED PERFORMANCE: The estimated sports performance of Spanish Football teams due to factors other than local market size –Pop.- adj. performance = Observed perfomance – ·Population PERFORMANCE ABOVE/BELOW PREDICTED: The difference between observed (actual) sports performance and predicted performance

11 Teams sorted by their predicted performance

12 Teams sorted by their performance above predicted

13 DISCUSSION OF RESULTS (i) Data about predicted performance allow us to estimate threshold values (the minimum values required to achieve a particular success level if the sports performance were determined solely by the team local market size) –These figures confirm that factors other than local market size (management, coaching…) play a meaningful role in sports success, because we can identify teams located in areas with population below those thresholds and that, however, are able to reach levels of success above predicted. Data about observed performance: –Dominance of ‘large market’ teams, that is, teams located in a large city combined with a large fan base (i.e. Barcelona, R. Madrid, Valencia). Comparison between predicted performance and observed performance: –There are several teams with similar predicted performance and with very different observed performance (i.e. Real Sociedad-Jaén, Mallorca-Elche, Betis-Zaragoza…). Even we can find teams that exhibit higher observed performance than others in spite of having a lower predicted perfomance (i.e. Deportivo-Real Madrid, Ath. Bilbao-At. Madrid…)

14 DISCUSSION OF RESULTS (ii) –Comparison between observed performance and population-adjusted performance: Without their big-market advantage, teams located in largest markets (Real Madrid, Barcelona and Valencia) would exhibit a substantial reduction in their playing success. Teams with the best adjusted-population performance don’t serve the largest markets; however, over the last decade these teams have attained some playing success (Deportivo, Real Sociedad, Betis, Villarreal…) –Comparing the population-adjusted with observed performance for every team over the past decade, it is possible to measure how well teams performed above/below the levels predicted by local market size Group A: Big markets with a relative poor performance (At. Madrid, Español, Hércules, Rayo Vallecano, Córdoba…) Group B: Big markets with a relative good performance (Barcelona, Real Madrid, Valencia, Ath. Bilbao, Betis…) Group C: Small markets with a relative poor performance not attributable to market size (Algeciras, Badajoz, Logroñés, Pontevedra, Castellón…) Group D: Small markets with a relative good performance (R. Huelva, Osasuna, Alavés, Salamanca, Eibar…)

15 CONCLUDING REMARKS –The empirical evidence derived from the present research allows us to gain a greater understanding of the influence of local market size on Spanish football teams’ playing success. –Big-market teams have a clear advantage over small-market teams; however, the market size-sports performance relationship seems to be less strong than the theoretically anticipated one. –The big-city advantage is meaningful but doesn’t impede that teams that are not located in areas with the largest market size have at least periodic opportunities of success. –Any prolonged under/over performance by specific clubs might be the result of factors other than market size. –The results suggest that the long-run Spanish League viability is not in serious danger because of the observed dominance by a group of very few teams.