Superstardom in the Professional Football Industry

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Superstardom

in the

Professional Football Industry

‘an exploratory, qualitative study’

Master of Business Administration “Strategy & Innovation”

Universty of Groningen,

Faculty of Management and Organization

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Superstardom in the Football Industry _-Preface-

Preface

This thesis is also the subject of many discussions between football experts ranging from a select number of professional football analysts to millions of people who follow the most popular sport in the world.

I would like to seize this opportunity to thank the many people who helped me to write this thesis. First of all I would like to thank my supervisors at the University of Groningen, Dr. Postma and Dr. Gemser, for the inspiring discussions and feedback. Secondly, I would like to thank the people who found the time to discuss my research: Professor Ruud Koning (University of Groningen), Bert Schaap and Valentijn Driessen (Telegraaf), Kees Ploegsma jr. (Kees Ploegsma Management B.V.), Alex Kroes (MT&V Sports International), Hans Nijland (FC Groningen) Joris van Benthem (Feyenoord Rotterdam) and Jan de Visser (SP International). Thanks to their efforts and input I was able to obtain and present an empirical insight on the phenomenon of superstardom. Finally, I would like to thank my family and friends who joined in discussions and supported me during the writing process.

I hope you will enjoy reading this thesis on the professional football industry and its key inhabitants: the superstar football players!

René Woestenenk

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Superstardom in the Football Industry _-Abstract-

Abstract

The purpose of this thesis is to construct and empirically underpin an exploratory conceptual model that comprises the plausible factors that lead individual players to superstardom within the selection system of professional football. The theories on selection system, value creation and value capture as well as the concepts of superstar effects and winner-take-all markets form the fundaments of this thesis. The empirical, qualitative research consisted of a number of explorative semi-structured interviews with representatives of football clubs, football players’ agencies and with independent sports experts.

The main conclusion of this thesis is that it is very difficult to pinpoint one or two factors or aspects that lead football players to superstardom. The most important factor appears to be a player’s tacit knowledge, represented by the talent to play football coupled with the right personal traits. Players that can perform decisively in a consistent manner are valued highly. Furthermore, the importance of commercial activities of individual players is emphasized in this thesis; when a player improved his reputation he can become an invaluable promotional / commercial medium for expert selectors like sponsors and advertisers.

The most important addition this thesis makes to the current theory on superstardom is the role of bargaining. The amount of value captured by an individual football player depends on a bargaining process, not on the amount of value created. Moreover, the valuing criteria of the two types of employers, i.e. the football club and the expert selectors, appear to differ. The first mostly values a player’s on-pitch-performance, whereas the latter appears to value his reputation more. The final conceptual model that concludes the empirical research can be used as a starting point for future, explanatory research.

Key words:

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Superstardom in the Football Industry _{-Table of Contents-}

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Superstardom in the Football Industry _{-Table of Contents-}

5. CONCLUSION & IMPLICATIONS ...62

5.2. CONCLUSION...63

5.3. IMPLICATIONS...64

5.4. SUGGESTIONS FOR FURTHER RESEARCH...65

REFERENCES...67

BOOKS AND ARTICLES...67

WEBSITES...72

NEWSPAPERS...73

APPENDICES...75

A. THE PRODUCTS OF SPORTS ORGANIZATIONS...76

B. EMPIRICAL RESEARCH...77

B.1.1. People Approached For Pilot Research ...77

B.1.2. Sent Information for Pilot Research...78

B.1.3. Results of Pilot Research ...82

People Approached for Exploratory, Qualitative Research ...84

B.2.1. Sent Information for Exploratory, Qualitative Research ...84

B.2.2. Results of Exploratory, Qualitative Research ...86

B.3. Confirmations by the Respondents ...93

C. MARKET POOL UEFA CHAMPIONS LEAGUE 2002-03 ...94

D. REASONS TO BECOME A FOOTBALL CLUB SUPPORTER...95

F. PERFORMANCE OF TOP 15 HIGHEST VALUED CLUBS...97

G. THE DIVISION OF WAGES OF THE DUTCH EREDIVISIE...98

H. THE INCREASE OF WAGES OF THE FA PREMIER LEAGUE...99

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Superstardom in the Football Industry _{-Introduction-}

Introduction

"He's the archetypal Western Prince," Yohei Kasuga, the UK correspondent for The Nikkan Sports News, Japan's biggest tabloid newspaper, said. "Asian women simply can't get enough of this blonde, tall, handsome man, who happens to be rather good at football and has a pop star wife. It's the women wanting to be with him, men wanting to be him all over."

(the London Times, July 11th 2005)

The quote shown above about football player David Beckham presents the very core of the subject of this thesis: the superstar effect in the domain of professional football. This report represents the final assignment for the Master of Business Administration “Strategy & Innovation” of the University of Groningen. The entire master-programme has been centered on the management of non-technical innovations. The subject of this thesis is derived from the Field Course for Strategy & Innovation, which I based on the organization of Manchester United F.C. During this Field Course, it was striking to see how individual players like David Beckham can become very important for such a multinational corporation. That is why I decided to further investigate the phenomenon where individual players capture so much value. Hence the subject for this thesis: “Superstardom in the Football Industry”.

Research Objective and Research Questions

Earlier research has shown “that there is a positive relationship between revenue and the number of superstars under contract and between the number of superstars under contract and success in the [UEFA] Champions League” (Leijenaar, 2005: 56). This implies it can be rewarding for a football club to employ superstar football players. However it remains uncertain which factors lead football players to superstardom: “it is not clear which performance characteristic (if any) is valued by consumers in a way that leads to superstar effects in wage outcomes” (Lucifora & Simmons, 2000: 52). It would be interesting to explore which factors can lead individual football players to wages that are comparable to those of the top earners of the industry; i.e. the football superstars. That is why I have chosen the following research objective:

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Superstardom in the Football Industry _{-Introduction-} This research is conducted by desk research and qualitative empirical research. The target audience for this thesis consists of every person that has an interest in professional football and its superstars. In order to fulfill the research objective, I have formulated the main research question:

Which factors are most likely to lead football players to superstardom within the selection system of professional football?

To answer this research question, I have formulated sub questions that are followed by an overview of the content of this thesis.

Theory: What is a selection system? How is value created, captured and protected? What characterizes the peculiarity of sports economics? What is the superstar effect? Domain: How can the selection system of professional football be described? What is the role

of the individual players within this selection system?

Empirical: What defines football superstars and which factors are likely to lead players to superstardom?

Overview

The first chapter presents the theoretical framework of the thesis. Concepts like selection systems (Wijnberg, 1995) and value creation, capture and protection (Bowman & Ambrosini, 2000) are elaborated. Furthermore, the - experience - products of professional sports organizations are discussed, as well as the relation between on-pitch1-performance and off-pitch-performance (Neale, 1964; Davenport, 1969; Hoehn & Szymanski, 1999; Stevens e.a. 2003; Fort, 2003). This leads to the introduction of the concept of superstar effects (Rosen, 1981). This theoretical background is used to describe the professional football industry and its relevant actors.

Before entering the domain of professional football it is important to elaborate the research design of this thesis first. The second chapter explains why I have chosen for a qualitative, exploratory research. Moreover, the methods of data gathering and analyzing of the two phases of the empirical research are discussed here.

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Superstardom in the Football Industry _{-Introduction-}

The third chapter introduces the domain of the thesis. The selection system and the role of individual football players are described here. This leads to the empirical subject of the thesis; namely football superstars. Accordingly, a preliminary conceptual model is constructed which presents plausible factors for the phenomenon of superstardom.

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Superstardom in the Football Industry _{-1 Theoretical Background-}

1.1. Introduction

This chapter presents the theoretical background of this explorative thesis. Firstly, the theoretical framework of selection systems (Wijnberg, 1995) is discussed. This leads to the concepts of value creation, capture and protection (Bowman & Ambrosini, 2000). Next, the peculiar economics of sports are elaborated (Neale, 1964; Davenport, 1969; Sloane, 1971; Hoehn & Szymanski, 1999; Stevens e.a. 2003; Fort, 2003). Finally, the phenomenon of superstar effects is introduced (Rosen, 1981).

1.2. Selection Systems

When discussing a problem or phenomenon within a certain industry it is helpful to first present a good view on how this industry functions. To effectively explain the boundaries of such a particular domain, the framework of selection systems is a useful tool (Wijnberg, 1995). This framework can be used to describe and analyze the characteristics of a particular process of competition by focusing on the characteristics of the actors who are being selected, the actors who are selecting and the nature of the relations between both groups (Wijnberg, 2002).

There are three ideal types of selection systems: i.e. market, peer and expert selection. Market selection is the most traditional type, where end consumers are the selectors and producers are the selected. Peer selection means that the group of selectors and the group of those being selected are essentially the same. An example is that of the selection of the winners of the Academy Awards (or Oscars) by fellow filmmakers in Hollywood. Finally, expert selection represents the selection system in which the selecting is neither performed by market demand nor by producers, but by experts: persons or institutions considered to possess specialized knowledge and powers of judgment. It should be emphasized that these are ideal types. In reality, the outcomes of competitive processes are often determined by a combination of these types (Wijnberg, 1994).

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Superstardom in the Football Industry _{-1 Theoretical Background-} advantage stems from the value that selectors attribute to the products of a particular firm or actor (Mol & Wijnberg, 2005).

To successfully enter a selection system a firm needs to fulfill some requirements. First, the firms’ products need to be perceived as valuable by the relevant selectors. Next, in order to obtain a competitive advantage, these products need to be valued over those of rival firms. Finally, the firm needs to secure the resources that enabled them to create this value (Mol & Wijnberg, 2005). This implies that a firm has to possess just those resources – or assets – that create, capture and protect value. What characterizes such valuable resources is discussed in the following sections.

1.3. Value Creation, Capture and Protection

The inside-out perspective that takes the value creating resources as its starting point can be described as a Resource Based Theory or Resource Based View (RBV) (Prahalad & Hamel, 1990; Barney 1991). A theory that is related to the RBV is the perspective of Resource Dependence (Pfeffer & Davis-Blake, 1987). Whereas the first mostly focuses on the resources of an organization, the resource dependence approach focuses on the role that the organization fulfills in a specific environment (Jacobs, 2005: 111). Both approaches are adopted in the following sections.

1.3.1. Value Creation

The RBV generally addresses performance differences between firms using asymmetries in resources like knowledge, competencies and / or capabilities (Prahalad & Hamel, 1990; Barney 1991; Amit & Schoemaker, 1993; Conner & Prahalad, 1996). According to Bowman and Ambrosini (2000), an organization can be regarded as a bundle of resources (Caves, 1980; Amit & Schoemaker, 1993). Consecutively, resources that are valuable, rare, imperfectly imitable and imperfectly substitutable (Barney, 1991) are an organization’s main source of competitive advantage. Although this last finding is in essence tautological: “indeed it is hard to imagine a resource that is valuable, but at the same time imitable, substitutable, and not scarce” (Priem & Butler, 2001; Mol & Wijnberg 2005: 4-5).

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resources: “human or ‘cultural’ resources are the sources of above normal returns, and not the purchasable and tradable physical assets”. This is because the employees are the only resources that are able to possess and use tacit knowledge (Bowman and Ambrosini 2000: 6).

Tacit knowledge can be best described as knowledge that cannot be explicated fully even by an expert and can be transferred from one person to another only through a long process of apprenticeship. Tacit knowledge is also described as knowing more than you can tell (Polanyi, 1967). Additionally, tacit knowledge is individualized knowledge, due to personal experiences and outlook, which requires a rich, broad communications medium to effectively transfer to another person (Tuggle & Goldfinger, 2004). In contrast, explicit knowledge is relatively easy to articulate and communicate and, thus, transfer between individuals and organizations. Explicit knowledge resides in formulae, textbooks, or technical documents (Madhavan & Grover, 1998).

Tacit knowledge consists of two different elements: cognitive and technical elements (Nonaka, 1994). The cognitive elements represent mental models which include schemata, paradigms, beliefs, and viewpoints that provide perspectives that help individuals to perceive and define their world. In contrast, the technical element of tacit knowledge covers concrete know-how, crafts, and skills that apply to specific context. This technical element has been discussed by other scholars, who also state that tacit knowledge and specialized skills show great resemblance (Polanyi, 1976; Levin e.a., 1987; Grant, 1996; Berman e.a., 2002).

For example, Berman e.a. (2002: 15) contribute the skill of a baseball player hitting a homerun to tacit knowledge: “it involves pattern recognition, it is acquired through cumulative experience, it operates unconsciously in the background, it is difficult to articulate, and it forms the basis of valuable individual human skills”. This means that the tacit knowledge of hitting a homerun is hard to codify or transfer which entails that it is hard to replace or substitute those players that are able to hit homeruns often and consistently. When you reason that a baseball club’s competitive advantage is dependent on the number of homeruns, you might also assume that those players that are hitting homeruns frequently - thus create important value - capture a lot of value. Whether this holds true is discussed in the following section that describes the process of capturing value.

1.3.2. Value Capture

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Superstardom in the Football Industry _{-1 Theoretical Background-} competitive advantage. They suggest three categories of labor, namely: generic, differential and unproductive labor. Firstly, generic labor is labor that performs homogeneously across competing firms. This labor is essential to be able to compete, but it does not lead to a sustainable competitive advantage. Secondly, differential labor is labor that performs heterogeneously across competing firms. This labor is the source of an organization’s uniqueness, and its competitive advantage (Bowman & Ambrosini, 2000: 6). Finally, there is unproductive labor, which does not contribute value to the firm nor is it a base for competitive advantage.

Interestingly, Bowman and Ambrosini (2000: 9) state that:

“… there is no relationship between the nature of the use value2 supplied by the resource supplier, the role of this use value in the production process, and the amount of exchange value2 that the resource supplier captures. Even where a particular employee or group of employees can be seen to be critical to the creation of use value, or where a particular inert use value is a vital element in the process, the sellers of these resources may capture minuscule amounts of exchange value, due to their weak bargaining power. ”

In other words: although the actions of labor are the sole source of value - thus profit - employees often do not capture the full value they create for the organization. This is because the value that is captured by the employees is a function of a bargaining process between labor supplier and labor buyer. The bargaining position of an employee becomes weak when there appears to be a number of close substitutes for the labor offered by this employee. This implies that most employees are treated as though they are homogeneous, although in fact some employees perform heterogeneously. This means that the value that is created by employees is still mostly captured by the organization itself; the employees only receive a relatively small part (Bowman & Ambrosini, 2000).

Situations where specific employees form the essential value creating resources for organizations are often described by scholars that adopt a ‘Resource Dependence’ perspective. One of the questions these scholars ask is which relations organizations should take part in to secure a stable

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and maybe even prosperous future (Jacobs, 2005). In some situations this means that an organization’s future is highly dependent on the performance of its employees, because these have distinct characteristics that can not be substituted easily. According to the Resource Dependence perspective, situations where talent is complementary, an individual’s performance can add disproportionately to organizational output (Stinchcombe, 1963; Pfeffer & Davis-Blake, 1987; Jacobs, 2005). This is illustrated by Pfeffer and Davis-Blake (1987: 452): “Perhaps in contexts in which positions are especially critical, highly skilled or experienced people are recruited, and higher salaries are needed to attract those more capable individuals”.

There are situations where employees are very aware of their uniqueness and the distinct value they contribute to the organization’s output. This leads to high dependence on a few specific employees. According to Bowman and Ambrosini (2000: 10) examples of such employees are film stars, key sales people, top foreign exchange dealers and soccer players. Wijnberg (2002: 1481) presents the following situation, where:

“every member of an organization can estimate his or her value to the organization [..]. In fact, this would mean that the member of the organization would be able to know and appropriate the value of his or her contribution as determined by the selectors of the selection system in which the organization competes.”

These statements can be projected on the earlier example of the baseball player that consistently hits homeruns for his team. Such a player can be defined as a differential employee of his club; he consistently creates value that can ultimately lead his club to a competitive advantage in the baseball competition. Logically, this also implies that he can bargain to high wages; his club has become dependent on his (tacit) talent. However, if this same player is not willing or able to the bargain to the highest possible wages, then he will not capture the optimal value. So the value that is created by this baseball player does not directly influence the amount of value he actually captures; this is dependent on his willingness and ability to bargain.

1.3.3. Value Protection

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Superstardom in the Football Industry _{-1 Theoretical Background-} opportunities of its employees in that they cannot transfer or be released to another organization without the permission of their current organization (Dabscheck, 1975).

Besides the price of the performed labor, there is also the possibility to include a number of additional clauses to the employment contract. These might help to smoothen the negotiating process. Generally, there are two types of clauses: performance-rated clauses and future-based clauses. The first aims to stimulate a certain performance of the employee, which leads to a reward from his or her employer. The second type of clause has to do with future decisions of either employee or employer. Examples are clauses that prohibit employees from taking away customers from the employer when an employee leaves the organization to start a spin-off firm.

Organizations can also apply other protection tools to protect their competitive advantage. The ability of organizations to secure returns from investments in personnel and assets is also referred to as “appropriability” (Teece, 1986). Examples of such tools range from gentlemen’s agreements to Intellectual Property Rights. However, these are not the focus of this thesis, so these will not be elaborated.

The focus of this thesis is on the value created by the employees of an organization, because they represent the resources that possess and use tacit knowledge and skills, which enables them to perform heterogeneously across firms. These people do not all contribute distinct value to the output of the organization though. Only the generic and differential employees are able to do this, whereas the latter can also create a competitive advantage for their organization. The amount of value that an employee creates for his organization directly influences his bargaining position. Consecutively, the actual amount of value captured is dependent on this bargaining process. When an employee is aware of the value he contributes he can bargain to capture an optimal amount of value. Employment contracts enable organizations to exclusively exploit their employees and simultaneously enable employees to capture a part of the value they have created.

1.4. Sports Economics

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competing clubs leads to a situation that led Neale (1964) to define sports economics as peculiar economics. This is elaborated in section 1.4.1. which explains the importance of the on-pitch-performance for the continuity and profitability of professional sports clubs. Consecutively, section 1.4.2. zooms in on this experience product, by discussing the four characteristics of this product as well as the contribution of individual players to this product. This section also presents other possible products of professional sports clubs, besides the on-pitch-performance.

1.4.1. Peculiar Economics

According to Davenport (1969), the profitability of a professional sports club depends completely on the ongoing cycle of attendance and winning. The attendance can be defined as the entire interest of consumers either at the stadium or through media like television. Moreover, by hiring high-quality players, a club can improve its on-pitch-performance, thereby attracting more interest from selectors. However these high-quality players often come at a higher price than their less talented peers (Neale, 1964; 1971; Scully, 1974; Hausman & Leonard, 1997; Davenport, 1969; Dabscheck, 1975; Hoehn & Szymanski, 1999; Fort, 2003). This can be summed up by the following findings of Hoehn and Szymanski (1999: 216):

“ [i] for each team, increased wage expenditure leads to better performance on the pitch [ii] for each team, improved performance on the pitch leads to increased revenues.”

In Figure 1, I present the relation between on-pitch-performance, interest from selectors and revenues. To complete the cycle I have added the aspects of investment and reputation / brand value. I have added “investment”, because this shows the possibility of continuing the performance on the pitch, by investing the generated revenues in high quality players. The factor “reputation / brand value” positively influences the interest from selectors: this is explained in section 1.4.2.

-Fig. 1. Relation between On-Pitch-Performance, Attendance, Brand Value and Revenues-

Reputation / Brand Value Revenues Experience Product; On-Pitch Performance Investments

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Superstardom in the Football Industry _{-1 Theoretical Background-} This cycle implies that it would also be most profitable for sports clubs to win every game and competition there is. This is called a utility maximizing strategy (Sloane, 1971). However, this is not the most profitable strategy for professional sports organizations. That is where the peculiar aspects of sports economics come into play (Neale, 1964).

Firstly, a utility maximizing strategy has a negative affect on a club’s cost structure. As stated earlier; if a club wants to win the competition, it should employ a quality team. Such a high-quality team comes with substantial costs. This means that utility maximizing teams might win every game in the competition, but simultaneously see the majority of its revenues flowing into the pockets of their employees (Dabscheck, 1975; Vamplew, 1982). Or as Vamplew (1982: 550) puts it: “although winning may produce profits, it is commonly accepted by sports economists that consistent winning does not maximize them”. Moreover, bear in mind that clubs can not consistently buy and employ more and better players. This is because market potential is not indefinite; if clubs can not earn enough revenues to cover the wage expenditures then this has serious implications on a club’s continuity.

Secondly, if a utility-maximizing strategy is executed effectively and consistently, this will have negative influence on the competitive balance. An imbalanced competition becomes predictable which in turn leads to a decreasing interest of selectors (Davenport, 1969; Sloane, 1971; Dabscheck, 1975; Vamplew, 1982). This centers on the interdependence of the participants within a league and the importance of competitive balance and uncertainty of outcome therein (Morrow, 2003: 5). This interdependence can also be described as a trade-off between collusion and competition between the competitors (Davenport, 1975). On the one hand, this concerns the need for cooperation among clubs to offer an attractive - hence balanced - competition. On the other hand, a club wants to win its matches, in order generate more resources

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and fierce competition which appeals to the interests of selectors3. In other words: if there is no uncertainty about the result of a competition, there will be little interest from the selectors. Consecutively, this means that attendances, gate receipts, television rights income – hence profits – will be low (Neale, 1964). That is why Neale (1964) was the first to describe sports economics as peculiar economics. An excellent example is the declining interest in Formula One, when Michael Schumacher won the majority of the races and also six consecutive championships (NRC Handelsblad, 2005).

So it appears that the on-pitch-performance is essential for the economical performance of professional sports clubs. That is why the following section discusses this and other products that are common in sports economics.

1.4.2. Products of Professional Sports Clubs

All professional sports club have at least one single product in common: the on-pitch-performance. This can be characterized as an experience product, because its value can only be determined through consumption (Nelson, 1970; Huber & Elrod, 1981; Pine & Gilmore, 1999). But how do selectors choose such a product if its value can not be determined prior to consumption? This brings us to the factor of reputation - or brand value - that was mentioned earlier in figure 1 and section 1.4.1. After the explanation of the role of reputation and branding, I will zoom in on the actual product of sports. Finally, I zoom in even further on the product of sports, by describing the contribution of individual athletes.

Reputation & Brand Value

According to Neelameghan and Jain (1999) psychological cues like expectations and word of mouth are essential for the success of an experience product. This implies that selectors tend to be influenced by the behavior or expected behavior of similar decision-makers, also described as bandwagon effect among users (Van den Ende e.a., 2003). In stead of every selector making up his own mind, he or she is influenced by the preferences of his peers in order to eventually choose the experience product of ‘his’ liking.

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Superstardom in the Football Industry _{-1 Theoretical Background-} Bandwagon effects are also closely related to the concept of reputation. Reputation can be described as the consumers’ beliefs about a firm’s behavior based on its past and present actions (Liebeskind & Rumelt, 1989). Consecutively, brand names are used to build respect and trust with the organization’s offerings, so consumers are more likely to accept the organization’s promises about its other offerings (de Chernatony, 1999). Reputation and brands also prevent organizations from benefiting from the selectors’ inability to determine the value of experience products before they purchase it. As soon as the offered products do not conform to the expectations of the consumers, the reputation of the supplier will deteriorate and the brand value will diminish (Liebeskind & Rumelt, 1989). So in this way, brand value can be interpreted as the commercial value of an organization’s and / or product’s reputation. When the reputation of the organization and / or product deteriorates, the brand value will diminish.

A football brand in specific can become quite valuable due to fan loyalty, brand longevity and low marketing / promotional expenditures (Middleton 1997, cited in University of Leicester 2002a). This is because (i) most clubs have their own share of - fanatic - supporters, (ii) clubs are set up as a long-term organization and (iii) marketing costs are very low for high-profile companies like football clubs. This implies that the brand and reputation of a football club can also be used to sell other product than just its on-pitch-performance.

So reputation and branding appears to be important for the selection of the products of professional sports clubs. But what characterizes the actual product of sports? After all; a reputation or brand has to be based on something. That is why the next section takes a closer look at the different characteristics of the product of on-pitch-performance.

Characteristics of the Actual Product of Sports

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Athletic prowess concerns the physical abilities of a team or of certain players (Fort, 2003). Berri e.a. (2004) and Hausman and Leonard (1997) found that the presence of specific highly talented players has a substantial effect on television ratings of the American National Basketball Association (NBA).

Secondly, absolute team quality refers to the level of quality (Fort, 2003); for example the difference between the Primera Division and the Segunda Division in Spanish football. Relative quality describes the competitiveness of a team. This product characteristic is closely related to the third product characteristic ‘thrill of victory’: “winning is very closely related to competition in the sense that victory over a bitter rival is the sweetest of all” (Fort 2003: 14). According Rivers and DeSchriver (2002: 166), the optimal winning percentage in Major League Baseball from an economic point of view is 60%; at that percentage the attendances will be the greatest. However, other studies have shown that some English football fans are not affected by the rate of success or failure of their favorite team. This means that strongly committed fans continue to support their teams irrespective of on-field success (Meier, 1979; Wann and Branscombe, 1990; Jones 1998, cited in Morrow 2003: 48).

This brings us to the fourth and final product characteristic of sports, i.e. the commonality that sports provide. This refers to the opportunity to commit or bond people to a particular club and each other. Football clubs offer a collective and symbolic focus for a sense of belonging and pride in a local community. Some people have even described following football clubs as a neo-religious form of devotion, which in turn can also explain the phenomenon of football hooliganism (University of Leicester, 2002b).

Absolute / Relative Team Quality Athletic Prowess

Absolute / Relative

Quality Thrill of Victory

- Fig. 2. The Characteristics Of The Actual Product Of Sports -

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Superstardom in the Football Industry _{-1 Theoretical Background-} Collectively, these four characteristics form the actual product of sport. To improve the value of this product, sports club can invest in their players. Although having highly qualitative players is never a guarantee to win the competition, it does raise the expectation of a good result. This is of key importance for experience products since the true value of an experience product can only be determined after its consumption. For example: when one of the best basketball players of all time, Michael Jordan, returned to the NBA in 1994 after a period of absence the television ratings of his first game were 10,9%; the highest NBA ratings since 1975 (Hausman & Leonard, 1997: 587).

However, highly talented players often come at a high price. That is why professional sports clubs are searching for other ways to generate more revenues, for example by market development and / or by diversification (Ansoff, 1987; Jacobs, 2005). First of all, clubs are trying to bring their experience product to new markets. This is stimulated by the possibilities of technological developments of media. Secondly, clubs have started to enter new markets with new products in order to generate extra revenues; i.e. adopting diversifying strategies (Ansoff, 1987; Jacobs, 2005). This diversification strategy is fuelled by the reputation and brand that professional sports clubs have created. In Appendix A, an overview is shown about the diverse products that sports clubs offer nowadays. At the centre of the figure you can see the core experience product, which is surrounded by diversified and branded products. All of these potential revenue sources are based upon the core product, i.e. the on-pitch-performance.

The actual product of sports is created collectively by the players of the professional sports club. But what is the contribution of the individual athletes to this product and why are some athletes more valuable then others? These questions are addressed in the next section.

Contribution of Individual Athletes

In team sports, individual athletes often fulfill specific roles on the field. This is often coupled with the position they occupy. In the case of football, goalkeepers are there to prevent goals, whereas strikers are there to score goals. But how can individual players be compared and valued, when they all play different roles? Accordingly, as shown in the introduction, Lucifora and Simmons (2000, 52) stated that “it is not clear which performance characteristic (if any) is valued by consumers in a way that leads to superstar effects in wage outcomes”.

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athletes were perceived as sports ‘heroes’ because of five reasons: athletic skills, personal traits, pro-social behavior, celebrity status and ‘adhesion for other reasons’ (Stevens e.a., 2003: 107).

Athletic skills include aspects like strength, speed, agility and athletic competence. Personal traits are related to being succesful, friendly, committed, humorous and intelligent (Stevens e.a., 2003). These two characteristics can be defined as respectively the technical and cognitive tacit knowledge that define an individual athlete. Because this tacit knowledge is difficult to transfer, these characteristics define the extent to which a player is unique, thus the extent to which this player can be substituted by other players. The athletic skills and personal traits appear to enable athletes to perform heterogeneously, thus to create a competitive advantage for their club.

Pro-social behavior related to the sport hero’s level of social outreach both on and off the pitch and investment in the lives of others. Celebrity status is related to media promotion and image enhancements. These refer to commercial appearances, sport product endorsement and the physical attractiveness of the sports hero (Stevens e.a., 2003). These characteristics do not appear to be part of tacit knowledge of an athlete. Both pro-social behavior and the celebrity status of an athlete can be stimulated to some extent. This implies that these characteristics are less important for the substitutability of athletes.

Finally, adhesion for other reasons refers to reasons that have to do with either activity adhesion or social adhesion. In the case of activity adhesion, some respondents selected their favorite sport hero based upon their love of the game. “For example, ‘I love basketball’ was offered as a rationale for admiring Michael Jordan.” In the case of social adhesion, arguments like nationality, gender or ethnicity were given (Stevens, 2003: 107).

Furthermore, Stevens e.a. (2003) investigated how to adopt a successful sports endorsements strategy, by selecting sports heroes as promotional representatives. This is because athletes possess both credibility and attractiveness which are vital for sport endorsement communication. Moreover, their credibility is associated with expertise and trustworthiness (Shank, 1999 in: Stevens e.a., 2003). This implies that athletes not only contribute value on the pitch, but can also fulfill promotional purposes; either for the club or for third parties like sponsors and advertisers.

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1.5. Superstar Effect

Imagine a situation where it is very hard for firms to create a sustainable competitive advantage, due to high rivalry. Within such ‘rat race markets’ every resource is often directed at creating a obtaining the highest rank order. The only thing that matters is to be better than the competitors: at all costs. Such an environment can be interpreted as a winner-take-all market (Frank & Cook, 1995). Now imagine that an organization in this market is very dependent on a small number of employees, because these create a specific value which is essential for the competitive advantage of the organization. When these key employees are aware of their uniqueness and of the value they contribute to their firm’s output, they can bargain their way to enormous salaries. In other words: winner-take-all markets form excellent scenarios for superstar effects to occur in.

The phenomenon of ‘superstar effects’ was first described by Rosen (1981: 845), who defined it as a situation “wherein relatively small numbers of people earn enormous amounts of money and dominate the activities in which they engage”. This phenomenon is very similar to the phenomenon of winner-take-all markets (Frank & Cook, 1995), although the superstar effect looks at individual persons with the same activity, whereas winner-take-all markets look at firms that compete within the same market4.

Several scholars relate both phenomena - the winner-take-all market and the superstar effect - with the entertainment industries and the industry of professional sports, i.e. industries that are centered on experience products (Rosen, 1981; Adler, 1985; Fort & Quirk, 1995; Frank & Cook, 1995; Pepall & Richards 2000; Rosen & Sanderson, 2002; Lucifora & Simmons, 2003; García del Barrio & Pujol, 2004). For example, MacDonald (1988: 166) described the superstar effect within the music industry: “there are a few stars in the industry [... who] serve a large fraction of the audience and obtain an even larger share of the returns”.

Both superstar effects and winner-take-all markets are the result of competitive interactions. Firstly, selectors often find lesser talent a poor substitute for greater talent. This means that small

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increases in talent lead to great increases of income (Rosen, 1981; Frank & Cook, 1995; Fischbacher & Thöni, 2002). When you translate the factor talent into football terms, it appears that the personal aspects of football players are relevant. Especially the tacit knowledge of an individual player, like athletic skills and personal traits, reflect talent. This is because these qualities can be unique and hard to transfer or learn. The exact aspects of the factor talent remain to be explored.

Secondly, the superstar effect is the result of technological developments which enable superstars to access markets effectively and efficiently (Rosen, 1981). This either means that (i) the activities of superstars can be reproduced endlessly at a fixed cost, for example by recording the activities, or (ii) the costs of production do not rise in proportion to the size of the seller’s market (Rosen, 1981; Frank & Cook, 1995; Fischbacher & Thöni, 2002). This implies that the potential size of a market might also be of importance for the phenomenon of superstardom. After all, in markets where there is a lot of demand for a product, it is plausible that these markets will also generate more revenues. Whether this holds true for football superstars, is explored in chapter 4. Thirdly, Adler (1985) attributes the superstar effect to the extent in which a particular musical performer is known and appreciated among the selectors. Thus, when an artist is more widely known – and appreciated – it becomes easier for selectors that are not familiar with this artist to select this artist too5. This corresponds with learning factors that are pivotal for the success of experience products (Huber & Elrod, 1981), like for example bandwagon effects. Aspects that presumably are relevant are reputation or personal aspects of players that appeal to selectors, for example pro-social behavior, celebrity status, nationality, and ethnicity. Furthermore, the influence of other selectors might also be of relevance for the occurrence of bandwagon effects with regard to individual players, for example in the form of opinions of experts. This is also kept in mind when empirically exploring the phenomenon of superstardom in chapter 4.

1.6. Summary and Conclusion

The framework of selection systems can be used to present a particular industry, by describing both the selected and the selectors who eventually choose the ‘winners’ of the competitive process of that particular industry. The ‘winning’ firms obtain a competitive advantage because their products are valued over those of rival firms by the relevant selectors. The value of the

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Superstardom in the Football Industry _{-1 Theoretical Background-} products of an organization is created by its resources. Especially the employees are able to perform heterogeneously across organizations which can lead these organizations to a competitive advantage. This is because the employees possess and use tacit knowledge which consists of technical and cognitive elements. However, not all employees contribute distinct value to the output of the organization. Only the generic and differential employees are able to do this, whereas the latter can also create a competitive advantage for their organization. Consecutively, the amount of value that is captured by these people is dependent on their ability to bargain; not directly on the amount of value they create. It can be assumed that those employees that create considerable, specific value are also the toughest bargainers. Employment contracts enable organizations to exclusively exploit their employees and simultaneously enable employees to capture a part of the value they have created.

The domain of this thesis lies within the context of sports economics. This is characterized by the experience product of on-pitch-performance. When the on-pitch-performance of professional sports clubs improves, the size of the attendances increases which in turn leads to an increase of revenues. Within sports economics the actors need to obey the demand for an attractive, thrilling, thus balanced competition. This means that clubs can not afford to adopt a utility maximizing strategy. Maximum profits can be achieved when the attractiveness of the experience product of sport is maximized. The attractiveness of the product of sports is partly dependent on the expected value of the product, which is derived from bandwagon effects among users. That means that factors like reputation and brand value are relevant. The actual value of the product of sports is derived from four factors, namely the athletic skill, the absolute / relative quality, the thrill of victory and the commonality the sport provides.

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The purpose of this thesis is to empirically explore the factors and aspect that lead individual football players to substantially higher wages than their colleagues. Superstardom often occurs in winner-take-all markets of experience products. Firstly, this dominance is a result of a difference in talent. This can be translated into the athletic skills and personal traits. Secondly, technological means of distribution and reproduction enables superstars to access vast markets. Thirdly, due to their reputations superstars are well-known by the relevant selectors. This last factor is supported by the way superstars and winning firms use their reputations and brands. This also implies that factors like for example pro-social behavior and celebrity status can be relevant for the status of superstardom.

The dominance of superstars leads them to bargain to enormous wages. Or in other words; the great value that is created by superstars enable them to bargain to capture great value. However, the factor of bargaining is not incorporated explicitly in the definition of superstardom. This can mean that there are individuals who do create essential and unique value, but do not bargain to capture a lot of this value. In my interpretation, these individuals can not be defined as true superstars. After all, these individuals do not extort great amounts of value; so they do not dominate their activities. This is also kept in mind when empirically exploring the phenomenon of superstardom in the professional football industry in chapter four.

Experience Product of Sport: Expectations - Reputation – Brand Value -Fig. 3. The Experience Product of Sports-

Actual Product of Sport Athletic skills

Absolute / relative quality Thrill of victory

Commonality sports provide

Superstar Athlete Dominates football, thus high wages, due to:

Talent;

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-2. Research Design-

2.1. Introduction

This chapter discusses the research design of this thesis. The methods of research, data gathering and analysis are presented here.

2.2. Research Methodology

This thesis empirically explores the factors that lead individual players to superstardom within the industry of professional football, by conducting a qualitative research. According to Blumberg (2005) exploration typically begins with a search of published data. By conducting desk research, relevant literature about both superstar effects and sports economics were framed. This literature often explained the effects of employing superstars, measured in their contribution to their organization’s performance. However, most research did not examine just how individual players were able to capture these enormous sizes of value. That is why this thesis attempts to explore just those factors and aspects which potentially lead football players to superstardom.

This thesis presents an empirical research that is based upon earlier, academic literature. I have chosen to conduct a qualitative survey method, because this is the most effective research tool to uncover in-depth, detailed information (Cooper & Schindler, 2003: 325). The research is conducted by addressing football clubs, football players’ agencies and independent experts. The actual data gathering process consists of two phases; an exploratory pilot research which tested the possibility of further explanatory research and an extended exploratory research which consisted of a number of semi-structured interviews with primary sources; see section 2.3. The goal of this research was to construct a comprehensive conceptual model which can possibly be tested in future, explanatory research. The results of the empirical research can be found in Appendix B.

2.3. Data Gathering & Analysis

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Superstardom in the Football Industry

it through academic / journalistic research. The independent experts, misters Schaap and Driessen and Professor Koning helped to define a superstar football player. Consecutively, I interviewed both football players’ agents and representatives of football clubs to obtain an objective image of the employment negotiations of football players. All respondents are shown in Table 1.

-Table 1. Empirical Research-

# Date (1st) Respondent Organization Description Method Confirm. 1 11-11-2005 Prof. Ruud

Koning

University of Groningen First and only Sports Economics Professor in the Netherlands Semi-structured interview6 Not added6

2 21-11-2005 Bert Schaap & Valentijn Driessen

Newspaper ‘Telegraaf’ Sports Journalists E-mail

correspondence and telephone conversations 6 Not added6 3 15-11-2005 & 5-5-2006 Kees Ploegsma jr. Kees Ploegsma Management B.V.

Players’ Agent E-mail

correspondence and telephone semi-structured interview 6 5-5-2006 4 a. 11-11-2005 b. 16-3-2006

Alex Kroes MT&V Sports International

Players’ Agent a. E-mail correspondence 6 b. Semi-structured interview 1-5-2006 5 22-3-2006 Joris van Benthem

Feyenoord Rotterdam General Counsel Semi-structured interview

10-5-20067

6 23-3-2006 Hans Nijland FC Groningen Chairman Semi-structured

interview

10-5-20067 7 7-4-2006 Jan de Visser SP International Players’ Agent Semi-structured

interview

10-5-2006

The information I discussed with the respondents was based on secondary data like earlier academic research on superstar effects in sports and also on personal ideas. These secondary data were then subjected to those people who are directly involved in the wage negotiations of football players. In fact, this is where multiple primary sources are used to verify the secondary information. This process can also be described as triangulation. According to Blumberg e.a.

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Part of the first data gathering phase; i.e. the pilot research. For these parts I have not asked for confirmations, because they were purely meant as an inquiry and as help for the research process.

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(2005: 197), triangulation is a method which increases the construct validity of a research because it uses multiple sources of evidence to increase the independence of the sources of information. The data gathering process consisted of roughly two phases, the first - pilot - research was conducted in November 2005 and the latter research was conducted in March 2006. The methods of these phases also differed, the pilot research aimed to roughly explore the area of research and the possibility of further explanatory research. The methods of data gathering of this pilot research ranged from semi-structured interviews to e-mail correspondence. The results of this first phase led me to explore the phenomenon of superstardom in the football industry even further. This is because (i) the response was too low to conduct a valid quantitative, explanatory research, (ii) the possible causal factors needed to be explored better in order to conduct a proper explanatory research and (iii) the statistics on wages of football players are confidential (Simmons, 1997: 17), which prevents to get an objective and reliable insight to the valuation of players.

The second phase consists exclusively of semi-structured interviews, which were recorded with a dictaphone and summarized. These summaries were verified by the respondents which ensures their reliability. The date of confirmation is shown in the most right column of Table 1. The results of the empirical research are shown in Appendix B. According to Blumberg e.a. (2005: 193) semi-structured interviews have two main objectives: (i) to uncover the respondents’ perspective and (ii) to get to know whether the respondent conforms to ideas that were suggested in earlier research. Especially the latter is difficult, because it must remain the highest priority to get an objective and valid insight from the respondent’s point of view, without guiding the respondent to ‘desirable’ answers. By organizing these semi-structured interviews it was possible to pose follow-up questions which enabled me to fully explore and unravel the complexities of the phenomenon of superstardom in the football industry (Blumberg, 2005: 294). During the interviews the respondents first explained their view on football superstardom, after which I presented the preliminary conceptual model (chapter 3). This model was evaluated by the several respondents. One thing I did encounter was the unwillingness to discuss financial specifications of individual players or their contracts. This seems like a taboo within the culture of professional football, where this type of information is viewed as extremely confidential. The implications and findings of the empirical research are discussed in the fourth chapter. But first, the third chapter

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_{-3. Domain: Professional Football Industry-}Superstardom in the Football Industry

3.1. Introduction

This chapter introduces the domain of the thesis, namely the professional football industry. The theoretical background that was presented in the first chapter is projected on this industry, thereby creating a sound image of the context of the phenomenon of superstardom. This chapter is concluded with a preliminary conceptual model which is evaluated empirically in chapter four.

3.2. Selection System of Professional Football

The market for professional football can be described as a combination between a market and an expert selection system, wherein the market selectors can be considered as the most influential. This section elaborates on this description, by analyzing the actors that are being selected and those actors who actually select. The section is ended by describing how a competitive advantage is created within this selection system of professional football.

3.2.1. Selected: Football Clubs

Professional football clubs are scattered all over the globe. The wealthiest clubs are all situated in the region where professional football was invented, i.e. Europe (Deloitte & Touche, 2005a). That is why the focus of this thesis is on these European clubs.

All of the European professional football clubs compete in a national competition. Within these national competitions, the best teams qualify to compete in European competitions. The highest competition to compete in is the UEFA Champions League. This last competition also generates the highest revenues, presumably because it is the most viewed football competition in Europe. To distribute the revenues from the television rights, the UEFA uses a market pool method. This means that these revenues are distributed according to the proportionate value of each TV market, coupled with the on-pitch-performance of clubs participating in the UEFA Champions League that season (UEFA, 2005a; 2005c).

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Division and the French Ligue 1 (Deloitte, 2004). In Appendix C the market pool distribution of the UEFA Champion’s League 2002-2003 is shown. These figures evidentially show the difference between the Big Five leagues, totaling 91,4 % of the market pool, and the non-Big Five leagues who make up for the last 8,6 %. This also implies that the winners of the UEFA Champions League on the pitch might not always be the winners of that competition in an economical sense. Consider season 2003-2004 of the UEFA Champions League, where the eventual on-pitch winner – FC Porto – was not the economical winner. This is because FC Porto earned relatively little prize money (€ 29,980,000 or 11 % of all eight quarter finalists) compared with the other clubs that made it through the quarter finals, like Arsenal (€ 43,258,000 – 16 %) and Real Madrid (€ 29,767,000 – 11 %) (UEFA, 2005c; Appendix D).

As discussed in chapter 1, the experience product of on-pitch-performance is very important for professional sports clubs. To generate even more revenues, clubs are also offering their experience product on other markets nowadays. This market development is often done through broadcasting through - broadband - media, coupled by promotional actions. Manchester United for instance, has estimated its global fan base at 52,7 million people. These are divided over Europe (45,7%), North-America (8,0%), Asia (31,5%) and the rest of the world (14,8%). Manchester United is promoting its brand, by touring the world with their team in the off-season. Hong Kong, China, Korea and the United States were visited on a ‘roadshow’, trying to trigger people to become football fans (Manchester United website, 2004).

Another way to generate more revenues is to diversify the product range of football clubs. Most professional football clubs nowadays not only offer merchandise and paraphernalia, but also catering, security, financial and betting services, next to diverse media products like - online - television and radio (also see Appendix A). In other words: the performance on the football field stimulates the commercial potential of a professional football club.

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_{-3. Domain: Professional Football Industry-}Superstardom in the Football Industry betting services and financial services. Besides this, Chelsea has transformed its stadium grounds into a leisure and entertainment complex housing two four star hotels, five restaurants, conference and banqueting facilities, a nightclub, an underground car park, a health club and a business centre (Thomas, 2004; Chelsea F.C, 2005).\

3.2.2. Selectors: Market and Expert Selectors

The selection system of professional football can be described as a combination of a market and an expert selection system. Figure 3 shows the relation between the football club and both market and expert selectors (also see Appendix A). It has to be noted that the term selectors is chosen in stead of consumers, because (i) the passive selectors do not pay for the experience product of clubs and (ii) the expert selectors do not consume the products of football clubs. This is elaborated further on.

Market Selectors: Active and Passive Selectors

Initially, football was solely selected by the spectators that visited the stadium. I call these the active market selectors. With the development of media and broadcasting technology, this group has expanded with passive market selectors, or as Maandag and Visscher (1993: 14) call them: followers. These are the people that follow the football competition through written or broadcasted media. The active and passive selectors combined form the market selectors, or as Maandag and Visscher (1993: 14) say: primary market.

Expert Selection

Market Selection - Fig. 4. The Market and Expert Selectors of Football-

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In chapter 1 I have already presented the four product characteristics of the experience product of on-pitch-performance and the five reasons why fans select athletes as their heroes. To complement these I have added Appendix E, which shows the reasons for a football fan to become a supporter of a particular club (University of Leicester, 2002c). For both the active and the passive market selectors ‘locality’ (56%; 41%) and ‘family influences’ (47,7%; 38,6%) were the most common reasons to become a football club’s supporter. What it is very interesting is that the third, fourth and fifth reasons for the passive selectors are respectively: ‘certain player(-s)’ (29%), ‘the way the team played’ (27%) and ‘the club’s image’ (22,5%). These findings are based upon research among 20,470 English football fans before the season of 1995-1996.

The revenues that stem from the active market selectors - the stadium spectators - take a part of 30 % of total revenues for English Premier League club. Another 45 % flows from the sale of television rights (Deloitte, 2004). Hence, the passive market selectors - the television viewers - and the active market selectors collectively attribute the most value to football clubs. However the revenues for television rights do not originate directly from any of these market selectors but from the expert selectors. These selectors are discussed next.

Expert Selectors

The expert selectors are represented by those entities who mostly aim to use professional football clubs (and / or players) for their own motives. These expert selectors consist of mostly corporate entities and are described by Maandag and Visscher (1993: 15) as the secondary market of football. These selectors do not consume the products of football; they either support or broadcast them.