Sugar Daddies In European Football Clubs

1948 words - 8 pages

2. Literature review and in-depth critical examination of the issue 1,095/1315 words – old college

The ‘Sugar Daddy Game’ received an increased academic attention in recent years; researchers observed and compared many aspects and implications of that phenomenon. To start with Dietl et al. (2009) and their analysis of social welfare and difference between profit-maximising and win-maximising leagues; then Lang et al. (2011) analysed benefactors influence on industry competitiveness; then Madden (2012) studied implications towards the economic stability of the industry; then Franck & Lang (2012) observed growing trend towards riskier strategic investments amongst ‘sugar-daddy’ owned clubs; and finally the possible outcome of new UEFA’s ‘Financial Fair Play’ regime (aimed at reducing clubs’ dependence on their wealthy owners) was researched by Vöpel (2011), Müller et al., (2012) and Peeters & Szymanski (2012). As already noticed the growing influence of ‘sugar daddies’ within the football industry leads to even greater focus on win-maximisation objective at the expense of financial stability (Madden, 2012). Franck & Lang (2012) analysed the financial situtation amongst 733 European top division clubs in 2009 and acknowledged that as much as 56% of these football clubs reported net losses, a total of €1.2 billion, even though revenues from all kind of sources increased significantly (Müller et al., 2012). Moreover 37% of these clubs are facing difficulties having debts larger than assets, while almost 10% of them spend more than they can earn in order to pay players’ salaries. For such clubs it is vital to receive money injections from benefactor owners at the end of each season. (Lang et al., 2011) These numbers highlights harming influence that ‘sugar daddy’ approach has on social welfare in sport. Dietl et al. (2009) concluded that ‘reorganisation from non profit members associations to profit-maximising public or private corporations’ would only benefit the overall industry. Lack of regulations in place allows ‘sugar daddies’ to change the competition and gain a competitive edge over rivals. As noted by Lang et al. (2011) ‘sugar daddy’ investments makes big clubs even more dominant within their league. This is because such clubs have more financial capabilities to attract and hire the best talent (Lang et al., 2011) available on rather inelastic marketplace (Madden, 2012). Franck & Lang (2012) decided to analyse the strategic decisions undertaken by ‘sugar daddy’ owned clubs and concluded that these clubs choose riskier investments strategies as compared to clubs without benefactor owners. However they built very limied theoretical framework, whereas they created only ‘one-club-model’ which enabled them to analyse very narrow scope of potetial incentives and implications within broader industry settings. Nonetheless they found that these riskier investments usually take form of overspending on transfer fees and players remuneration. Franck...

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