Elgar original reference
Edited by Sten Söderman and Harald Dolles
Chapter 12: The sale of media sports rights: a game theoretic approach
Many stakeholders involved in sport have experienced that miscalculations of the revenues and costs can cause severe consequences. In recent years, a number of European sports clubs have been on the brink of bankruptcy. In addition, several sport governing bodies and organizers of sporting events have also had financial problems. One reason for this has been unforeseen negative shifts in demand. Such incidents can cause problems, particularly for non-profit producers and organizations. Different from profit maximizing companies, these agents do not have any ‘safety margin’ if the revenues are being reduced. For them, the ability to accurately predict the costs and revenues will be of importance. This particularly applies to production processes involving a high proportion of fixed costs. The objectives of the stakeholders involved in sport and sporting activities have been thoroughly discussed in the sports economic literature. As for team sports, there has been a consensus that North American teams behave like profit maximizers, whereas in Europe and other continents, some kind of utility maximization seems to be the objective (Fort, 2003; Késenne, 1996; Rottenberg, 1956; Sloane, 1971; Vrooman, 1997). Sloane (1971) considers European football clubs as utility maximizers where the utility function of club owners also includes sporting performance. According to Vrooman (1997), European football club owners are willing to sacrifice some financial return in order to achieve better sporting performance.