ECON 321 Sports Economics
Using published academic studies, interpret and evaluate the empirical evidence on the effects of live TV broadcasting on match day attendances in sports leagues
Jonty Edmonds
34016988
2,000 Words
Live TV broadcasting has played a major role in shaping the landscape of demand for watching sport, both on television and in the form of match day attendance at stadia. Not only has it been beneficial in increasing the public reach of sports but has also been a vital source of income for clubs from various sports and around the world. For example, the English Premier League football reached a record deal, worth £5.14 billion, with Sky and BT, a 71% increase on the previous deal (Devine, 2017). More and more people are able to now access live coverage of sport through the broadcasting on television, fundamentally because it has increased the potential capacity of viewers from the size of the stadium where the contest is held to a national and, as is more frequently the case, global audience.
The following report will outline the impacts that the live broadcasting of sport has had on match day attendance across a range of different sports to examine how demand levels have changed as a result. The hypothesis is that attendance demand is not affected by the live broadcasting of sports fixtures in major leagues, while also concluding that broadcasting is beneficial as a whole to individual clubs and sport.
A good starting point would be the Premier League in England. As mentioned earlier they signed a record TV rights deal with broadcasters for live coverage of matches. A breakdown of which provider owns which package is provided below:
Figure 1: A breakdown of which broadcasting slots were won by which provider (Simmons, 2017)
Sky won the rights for 5 of 7 packages on offer, paying a total of £4.2bn, while BT paid £960m for the remaining two packages (BBC, 2015).
The topic of live broadcasting of Premier League matches has been hotly debated ever since the inception of the league in 1992. The sale of broadcasting rights in the Premier League has always been done collectively, however this was challenged by the Office of Fair Trading in 1995. They claimed that this placed excessive restrictions on output of matches, with only 60 matches broadcasted per season (Forrest, et al., 2003). The counter-argument from the Premier League was that if clubs were free to sell their matches then this would lead to a reduction in match day attendance. This is where the application of econometric evidence adds high value, as it can ascertain whether this statement is true. An early study carried out by Tim Kuypers of the 1993/94 Premier League season showed no statistically significant evidence that the broadcasting of live matches had an impact on the attendance (Kuypers, 1997). Though the results were compelling it did have some restrictions, for example the fact that some stadia were under construction/reconstruction during the period for the study. This meant results may have been skewed due to varying levels of capacity at stadia during this period.
The study by Forrest et al. used a larger scope than that of Kuypers, collecting data on all league games from the six seasons between 1992 and 1998. A TOBIT regression was performed on a host of independent variables. TOBIT was used as the stadia were always close to, or at, capacity during matches (Forrest, et al., 2003).
The results showed no impact on attendance at matches by the live broadcasting of the fixture. These results are in line with the expectation of impacts that live broadcasting has. There are extra factors to consider other than broadcasting which would impact attendance more, such as fixture scheduling and ticket price. A game played during the week is likely to garner fewer attendees at stadia than those played at the weekend because of the working week.
Ticket price is perhaps one of the major factors that will impact the attendance at a match. The Premier League tends to follow a more inelastic model for attendance demand, due to the high popularity of the league. However, it should be noted that these leagues tend to be more elastic in their attendances in reference to ticket price. In the 2011/12 season, ticket prices increased by 11% year-on-year, while the football league saw an average fall in attendance of 5%, pointing out a possible elasticity issue for attendance demand (Harris, 2013). In addition to this, the broadcast schedule of matches is often released after tickets for matches. This means those who purchase tickets are doing so with no knowledge of whether their team will be broadcast for that fixture. Once the match is selected, attendees already have tickets so this is a constraint to the attendance modelling. Those who have already purchased tickets are unlikely to relinquish them.
The Forrest et al. model focused on Sunday afternoon and Monday night matches. These slots are significant as they are prime broadcasting slots for Premier League matches. The results showed that gate attendances were not significantly impacted by match broadcasting (Forrest, et al., 2003). This supports the idea that live broadcasting does not have an adverse effect on attendance demand. There are various studies on UK football which support this argument.
Moving away from football, another major sport across the world is rugby league. It has a major following in the Southern Hemisphere, and in the UK, particularly in the northern regions. The rugby league in England has also benefited from revenue streams because of broadcasting, most recently securing a £182m 5-year contract with BSkyB to broadcast 71 Super League games per season (Sadler, 2014). This continued a long-standing relationship with the broadcaster, spanning back to 1992. Due to the significantly smaller audience in rugby league- average viewing figures in the stadium are just under 9,000 while television audiences are regularly below 140,000 (Willacy, 2017), compared to average figures of 890,000 people watching Premier League matches (McCormick, 2017) – it is likely broadcasting will have a greater impact on attendance in rugby league. A 1995 article by Baimbridge et al. investigated whether satellite broadcasting of matches had any significant effect on gate attendances in the rugby league (Baimbridge, et al., 1995). Variables used in the model specification included average ticket price, weather and travel distance to name a few. The variable for live broadcasting used a dummy to denote whether it was shown. The model was estimated using OLS with log(Attendance) as the dependent variable. The results of the regression showed a coefficient of -0.251 on the SKYTV variable. This variable had a t-ratio of 6.012, which is statistically significant at the 1% level.
The results from this study show that live broadcasting of rugby league matches had a negative effect on attendance by 25.1%. This means that attendances at matches were heavily reliant on the match not being broadcast. If a cub’s game is chosen for live coverage their attendance would fall by a quarter. This has major impacts on club finances. The average Super League ticket price in 2009 was £17.34, while the average attendance is about 9,000 (SportsInsight, 2009) (Willacy, 2017). This means that clubs on average would suffer a gate revenue loss of ¼ x 9,000 x £17.34, or £39,015. This is a large sum of money for a Super League club, especially when you consider the average player salary in the Super League is £65,000 (Clarke, 2013). Being featured just twice would comfortably cover a player’s salary for the season.
The results of this study were further analysed and refined in a 1998 study on the impact of BSkyB on attendance (Carmichael, et al., 1999). This study pointed out how the Baimbridge et al. study produced a positive price elasticity on attendance, contradicting economic theory. They produced a different model specification to address this issue. Again, log(Attendance) was used as the dependent variable. This time, three dummies were used for live coverage of matches; FRIDAYSKY, FRINOSKY and OTHERSKY, representing games broadcast on Friday by Sky, Friday games not broadcast and games broadcast at other times respectively.
The results of this study produced a price elasticity of -0.57 which falls in line with economic theory. The broadcast of Friday games by Sky showed significance in the coefficient, where it would result in around a 20% reduction in attendance, supporting the results put forward by Baimbridge et al. However, the other two variables were insignificant in their inclusion.
These results combined with those put forward by Baimbridge et al. point towards the theory that broadcasting has a significant adverse impact on attendance. This contrasts the findings in the empirical evidence provided in the Premier League study. It is interesting to see how television broadcasting has varying impacts on attendance when investigating different sports.
A possible explanation for this could be the comparison of size between the two sports. Football clearly has a much larger audience. The stadium capacities in the Premier League are hugely greater than those for rugby league, the biggest capacity in the Premier League being almost three times greater than in the Super League (Potts, 2017). This combined with higher viewing audiences for football point to greater demand for gate attendance and broadcasting. Premier League teams regularly sell out matches with many watching on television, while Super League teams rarely sell out. The evidence suggests less popular sports are more likely be affected by live broadcasting on gate attendance.
The trend that seems to follow is that higher grossing sports tend to be less affected by match broadcasting in relation to attendance. The best place to look to see if this holds would be the National Football League (NFL) in the US. The NFL generates the most revenue out of any sports league in the world, generating $13 billion in the 2015/16 season, compared to that of the Premier League which generated under half of that with $5.3 billion (Kutz, 2016).
An early 1979 study into the anti-blackout law on televising NFL games considered the effects that televising a match had on the number of “no-shows” to a game (Siegfried & Hinshaw, 1977). They used four variables to measure the effect of the blackout being lifted for the seasons between 1973 and 1975, including weather variables for coldness and precipitation as factors for no-shows.
Results from their study fell in line with the economic theory that there would be little to no effect on attendance from broadcasting games. However, they did find the weather variables significant in contributing towards no-shows. Precipitation was associated with around a 6% reduction in no-shows.
Welki and Zlatoper looked to back up the results by computing additional regression analyses, solidifying the results from Siegfried and Hinshaw. What is interesting to note is that the results suggested that “blackout” games, those not televised, were the ones which suffered an attendance drop of approximately 5,000 fans (Welki & Zlatoper, 1994). This went against the NFL’s argument against the anti-blackout law that televised games would increase no-shows (Siegfried & Hinshaw, 1977).
The pattern again follows in assessing the impact of broadcasting on attendance demand. Whilst also supporting the theory that there is no significant impact on attendance by live broadcast of matches, the paper also puts forward a new idea that the opposite in fact occurs, whereby attendance increases in the event of broadcast. Welki and Zlatoper compounded their research further in a 1999 study and again showed that blackout games were more poorly attended than those televised (Welki & Zlatoper, 1999).
The studies discussed all point towards supporting the initial hypothesis. In major leagues attendance was not significantly affected by broadcasting. Though this does not hold for smaller leagues, like the rugby league case, the empirical evidence does not support the reasoning put forward by professional sporting bodies against the broadcasting of matches. Upon further investigation of the claims made, there is much gain to be made from broadcasting. While attendance is not affected significantly, revenues generated from the broadcasting will clearly outweigh any (minimal) loss from the fall in gate receipts.
Based on these findings there appears no real reasoning for all games not to be broadcast in major leagues, and steps to allow this may be beneficial. In fact, the Premier League has very recently adopted a strategy of allowing all matches in a game-week to be broadcast, initially only for midweek fixtures, most likely as a reflection on the supporting evidence on attendance demand related to live broadcasting (Ziegler, 2017). Within the next 5 years, it could be easily conceived that all major-league sports fixtures are broadcast, rather than just a selection, in line with empirical evidence.
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