Undercover Economist

How to level the playing field

‘It costs something like a billion quid to turn a bottom-half Premier League club into one of the best teams in Europe’

They have dominated their national football league, winning 17 times in the past 50 years, far more than any rival. Indeed, only 10 other teams have managed to win the league at all since 1965. Can you guess the club?

You might be thinking Real Madrid — but no, Real have won 21 times in the past half century and Barcelona are not so far behind. Juventus would be a better guess — they have won 19 titles in the past 50 years, with rivals AC Milan boasting 10. Manchester United have 14, just ahead of Liverpool with 12.

But no. I am thinking of Havnar Bóltfelag. Affectionately known as HB, they are the Real Madrid of the Faroe Islands. The club is 111 years old — just a couple of years younger than Real — and just as dominant, albeit on a smaller stage. If Havnar Bóltfelag were ever to play Real, the entire population of the Faroe Islands could rattle around inside Real’s Bernabéu stadium with room to spare for some home fans.

The curious thing is that most European football leagues show a similar pattern of dominance. As sports economist Stefan Szymanski explains in his book Money and Football, looking at just the distribution of wins — typically 18-22 for the leading team over the past 50 years, and 11 or 12 champions in total — it is hard to tell the European leagues apart.

There are some exceptions (the French and Irish leagues have been more competitive, and the Scottish and Dutch leagues less so) but the regularity is striking. That might seem surprising given that the average revenue per top-tier club in England, Germany, Spain and Italy is more than $100m, while that in the Faroe Islands and Luxembourg is less than $1m. And, in case you were wondering, Luxembourg fits the pattern perfectly. The Real Madrid of Luxembourg (or should that be the Havnar Bóltfelag of Luxembourg?) is Jeunesse Esch, also just over a century old. It has won 20 titles in the past 50 years.

So what explains this widespread pattern in which one or two teams tend to dominate? Not the cost of fielding 11 players, certainly. As Szymanski points out, there are plenty of football teams around. Running a football club does not demand scale, like a mobile phone network or a nuclear power station. It’s more like running a soft drinks company: anyone can do it at any scale but Coca-Cola somehow manages to be the biggest around. (Coincidentally, Coca-Cola’s global market share is the same as Real Madrid’s share of the past 50 La Liga titles and Pepsi’s is the same as Barcelona’s.)

Here is a hypothetical question that might shed some light: why don’t Havnar Bóltfelag borrow some money and hire superstars such as Lionel Messi and Cristiano Ronaldo? Let’s assume that a sufficiently gullible bank could be found — the nearest banking centres, Reykjavik and Edinburgh, suggest that anything is possible.

The answer is that Havnar Bóltfelag is not the best place to showcase the talents of the world’s most expensive players. Partly this is a question of geography. But partly HB’s problem is its reputation: it doesn’t have one. Until the club had more name recognition, good players would be reluctant to join, and would have to be given extra financial incentives. Sponsors would feel the same. And while football spectators do like to watch big names playing attractive football, they are also loyal to their old clubs. Even if Real Madrid and Barcelona were somehow to become feeder clubs for Havnar Bóltfelag, it would take a while for their support to ebb and HB’s to grow.

Now apply the same logic to smaller clubs in large leagues, and the reason for big club dominance starts to become clear. Clubs such as Rayo Vallecano in Madrid or West Ham in London face no geographical handicap in challenging Real Madrid or Chelsea. But they would have to pay over the odds to attract players, staff and fans while simultaneously earning less from advertisers and global TV rights.

It is possible to bridge this brand-name gap if you are willing to lose enough money. “It costs something like a billion quid to turn a club from a bottom-half Premier League team to one of the best teams in Europe,” says Szymanski. Manchester City, Chelsea and Paris Saint-Germain have been transformed into top-flight clubs. They are all now in a position to make money — or at least, to lose no more money than any other top club — but nobody expects their owners to recoup the cost of that transition, at least not through the business of football.

The clubs with a large fan base, long history and global name recognition are the clubs with the most to gain from spending a lot trying to win football matches. For anyone else to challenge them requires very deep pockets. That is why winners keep winning.

But should we care about this sporting dominance? Szymanski points out that European football with its lopsided leagues has far outgrown American sports, which are carefully engineered to ensure competitive balance. Apparently, the global army of fans of Real Madrid, Manchester United and Bayern Munich don’t mind if they win a lot.

Written for and first published at ft.com.