Professional sport seems to adopt an ever higher profile. News stories commonly refer to dizzying sums of money or to extraordinary reach in terms of audience numbers. For example, the British and Russian governments were evidently willing to spend nearly USD15b and USD22b, respectively, on hosting the Summer (2012) and Winter (2014) Olympic Games in London and Sochi (Flyvbjerg et al. 2016). The foreign owners of the Paris Saint-Germain football club proved willing to pay more than EUR200m to FC Barcelona to transfer the registration of a single player, the celebrated Neymar, in 2017. Clubs in Americaâs National Football League pay an average quarterback a salary of USD4m per season (Kahn 2017) and the television networks which broadcast its annual Super Bowl match attract a (domestic) television audience of many more than 100m, charging USD5m for an advertising slot (Dorfman 2017). The Super Bowl is also reputed to generate (domestic) betting stakes of nearly USD5b though the sport cannot easily capture a share of this particular revenue because the wagers are placed in illegal markets (American Gaming Association 2017).
Developments in technology over several decades have enabled professional and elite sport to reach this position where it can attract such large sums of money and where its major events can be viewed by so many. The two go together of course. Modern media make it possible to sell the product to huge numbers of consumers rather than just to those who can fit into a stadium and it is their money, which reaches sport primarily via the sale of media rights, which makes the dizzying expenditures possible.
As unprecedently large amounts of money pass through sport, it is not surprising that predators seek to take advantage by manipulating the institutions of sport for their own gain. The well-publicised financial exploitation of footballâs World governing body, FIFA, by its own officers is an example of how, without adequate supervision, individuals will look to capture economic rents accruing to monopoly suppliers of sports competitions. Size of audience is an independent source of another species of manipulation since the global reach of sport attracts governments to intervene to use sport for their own political ends. The Russian Government stands accused of manipulating events on the field through state-sponsored doping programmes, presumably because it judged that international sporting success would play well with both its domestic population and countries where it wanted to promote a favourable image. Its exposure has had major repercussions with the banning of most of its athletes from Olympic and Para-Olympic Games and international track and field championships. And it may not be just within elite sport itself that there are repercussions. The tarnishing of the reputation of a sport may produce negative externalities in recreational sport. For example, parents may deter their children from taking up activities associated with doping.
These opening remarks refer to some of the different types of manipulation that challenge sport today. This volume takes a broad canvass. It deals with attempts to manipulate sports events on the field, for example by doping to increase athletic performance (cheating to win) or by fixing, paying athletes to underperform (cheating to lose). It deals also with attempts to subvert the institutions of sport through financial corruption. Authors of manipulation can be sports insiders (players, referees and judges, coaches, owners, officials of governing bodies) or external (e.g. professional bettors, organised crime, governments). Many forms of manipulation violate sports rules and sometimes civil or criminal law. Other forms of manipulation can be said to violate only accepted norms of behaviour. In the latter case, it can be ambiguous whether particular actions should in fact be regarded as âmanipulationâ, a word which suggests behaviour which should be considered negatively. For example, if two football teams agree to manufacture a drawn match to allow both to progress to the next stage of a tournament (as was alleged of Peru and Columbia in the qualifiers for the 2018 World Cup), should it be regarded as playing by the rules of the competition or as cheating likely to undermine public trust in the sport? If a wealthy investor funds a club from his own resources to allow it to gain success which would otherwise be impossible given the market-generated revenue of the club, should this be prohibited because it allows external agents to change the power structure of the teams and the competitive balance of the league? Or is it to be regarded as legitimate because it allows new teams to feature in sporting honours? These issues, considered through the lens of economics, are among those within the scope of this Handbook.
The book is divided into five sections. The first section introduces the topic, discusses definitions of manipulation and puts everything within the context of changes in the broad market for sport. Section two deals with specific types of manipulation in professional sport. The third section focuses on how the law deals with manipulation. Section four discusses manipulation at the level of sports organisations. Finally, Section five offers some reflections, based on contributions from our various authors, on how the diverse forms of manipulation prevalent in contemporary sport should be addressed and the role of economic thinking in framing appropriate policy.
Chapter 2
Prof. Wladimir Andreff, long one of the leading scholars in sports economics, presents in this first substantive chapter of the Handbook a comprehensive overview of the history and current state of manipulation of sport. He defines various types of manipulation and then hones in on doping and on match-fixing, the two forms of manipulation which most directly affect events on the field in particular contests. On each, he proposes a novel policy to mitigate manipulation, in each case based on modifying incentives on whether to cheat. These suggestions illustrate a theme of the volume, that economic thinking has much to contribute in understanding and addressing attempts to manipulate sporting competition.
Chapter 3
In the limit, consumer views matter. On the one hand, if revenue suffers when manipulation is revealed, this may provide some check on corrupt behaviour by, or tolerated by, sports governing bodies. On the other hand, negative fan reaction could become an existentialist threat to some sports competitions. In Chapter 3, Prof. Sebastian Kaiser-Jovy and Marcus Harms provide an overview of the current state of research on the impact of manipulation on the demand for sport. Their focus is on doping, match-fixing and corruption in sport organisations. Using an integrative review, the authors are able to identify six studies and one model. Whilst there is plentiful research in the field of manipulation in sports as well as on the subject of demand for sports, empirical studies of the impact of manipulation on demand are relatively rare. Whilst the number of studies is limited, it appears to be true that interest in a sport declines where manipulation is revealed. However, consumer behaviour seems to exhibit little change in response to doping scandals. More research is clearly needed to gain fuller understanding of the effects of manipulation on sport demand. They would point out in particular that it is not yet established whether fans really care about doping. If not, the case for strong anti-doping programmes rests more strongly on protection of athlete health and welfare.
Chapter 4
In Chapter 4, Prof. Terri Byers takes a very broad view of âmanipulationâ. Sport may be manipulated by governments and commercial interests for their own ends as well as by athletes who cheat and administrators who line their own pockets. The process of professionalisation of sport and the emphasis on profit may itself have changed the behaviour and attitudes of professional athletes. Moreover, there are likely to be effects running from elite sport to the recreational and voluntary sectors where there is a general decline in participation and volunteering. Indeed in Chapter 6 , attention is drawn to the extremely large falls in participation in football in China following revelations in the 1990s that the professional league was deeply corrupt. But, as Prof. Byers notes, the situation in sport falls into the category of âwicked problemsâ where complexity of relationships makes it hard to distinguish causal connections between different components of the whole. In any case, any links between manipulation in professional sport and ongoing problems in the recreational sector deserve further exploration in future research. The emphasis in the rest of this volume is on professional sport.
Chapter 5
Prof. Frank Daumann proposes an economic explanation for doping, focusing on the costs and benefits to individual athletes of using performance-enhancing substances in high-performance sports. Using a game-theoretic approach, he shows that athletes currently have strong incentives to violate rules and that these incentives are strongest in sports where performance is precisely measurable and in which historical tables of best performances play an important role. Considering the case for a legal ban on doping, he concludes that it is hard to justify such legislation (with the exception of athletes under age). Rather organisers should employ anti-doping measures which either reduce the benefits associated with the choice to dope or increase the cost. Prof. Daumann also proposes an innovation to policy termed the âinnovation bonusâ which would be a response to the current tendency for athletes and their coaches to search for novel substances not yet on the list of excluded substances.
Chapter 6
Prof. David Forrest outlines various reasons why the results of sports matches might be contrived by match fixers; but most of his chapter relates to the evident and ongoing epidemic of betting-related manipulation, which corrupts many sports, including particularly football, cricket and tennis. His framework is that there is a market for fixes in which supply is by sports insiders (players, referees) and demand typically originates with syndicates aiming to profit from trades on betting market. The step increase in activity in the market for fixes is attributed to the greater profits that fixers can now make given huge increases in the liquidity of sports betting markets as the online product has evolved. This high liquidity is concentrated in effectively unregulated markets, primarily in Asia. Prof. Forrest argues that it is beyond the power of sport to bring reform to these betting markets and its policies therefore necessarily have to focus on the supply side of the market for fixes. Sports players are likely to become less willing to supply fixes only in a sports industry in which player rights are better respected. There is also scope in individual sports for change in prize structures to modify incentives to supply fixes. As with doping, fast progress in addressing ills requires better governance in sport across the board.
Chapter 7
Prof. Markus Breuerâs focus is on multi-club ownership situations, i.e. situations in which a single company (or an individual) holds shares in at least two clubs competing in the same competition. Under this scenario, there is a risk that the shareholder might use his position and power to influence the outcome of matches and thus compromise the integrity of the competition. The growing importance of investors into sport, especially in professional football, is making this scenario more common and its attendant risks more common. Although there is, to date, hardly any empirical evidence of manipulation in multi-club ownership situations, UEFA and other sport organisations have already introduced special rules and regulations. Using a formal analysis, Prof. Breuer shows that fans and their behaviour could play a crucial role: if they have a strong preference for honest contests and are willing to sanction any intervention (e.g. by reducing their willingness to pay for tickets), it might be the investorâs profit-maximising strategy not to intervene at all. Thus, market regulations might not be necessary to maintain integrity.
Chapter 8
From contrasting perspectives, Chapters 8 and 9 each address situations where individuals or state or private entities inject money into a club to allow it to perform at a level above that which would be possible with the resources it could capture from its own activities, given its market size and sporting record. In Chapter 8, Dr. Mathias Schubert and Sean Hamil argue the case that external injections of cash should be regarded as âfinancial dopingâ. They argue that, similar to physiological doping, financial doping is also a form of manipulation which undermines the core values of sport. In general, it could be said that the more successful a club is on the field, the better are its opportunities to generate revenue. Financial doping disrupts this idea because funding is often provided independently from sporting success. UEFA, as the agency responsible for the most important competitions in European football, has sought to address the implications of financial doping through its Financial Fair Play rules. Given the experience of clubs which were able to overindulge in systemic loss making but subsequently experienced financial distress or even collapse, the Financial Fair Play rules seek to stop the problem at source by requiring clubs to live within their means as implied by the revenue they can generate themselves.
Chapter 9
Prof. Oliver Buzinskiâs chapter also deals with external injections of money into clubs and UEFAâs intervention through the Financial Fair Play regulations. In contrast to Schubert and Hamil, he is very sceptical over whether the new layer of regulation is for the good of the sport. He argues that every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Often the results do not coincide with the stated goals of the intervention. This can be due to unintended consequences and side effects of regulationâa scenario well known in economic analysis. It can also be a consequence of the vested interest of powerful regulatory bodies and/or participants (clubs) that are sufficiently powerful to influence the market-internal regulator (lobbyism). Again, the politico-economic deficiencies of real-world regulations are another well-known topic in economics. Real-world financial regulation, thus, may distort sporting competition by protecting the competitive advantages of powerful clubs, cementing the competitive order, deterring market entry by new club talent, serving the regulatory interests of sports associations and/or their officials and in other ways as well.
Chapter 10
Whereas the role of big data for sports marketing has been discussed in detail in academia, Prof. Ian McHale throws another light on other potential uses of statistical analysis. Hitherto, the use of statistics in betting markets has mainly been twofold: bookmakers use models for forecasting the results of sporting events, whilst sophisticated professional bettors use similar models to exploit inefficiencies in the betting market. Recently, a third use of statistics has emerged in the analysis of betting markets to identify potentially manipulated matches. Prof. McHale shows how a well-calibrated probabilistic forecasting model for match outcomes can serve as a benchmark against which to evaluate the evolution of actually observed odds. Substantial deviation of the evolution of observed odds from what the model would indicate as ârationalâ flags a reason for the match to be looked at more closely. Prof. McHale illustrates how this approach works in practice at the market-leading monitoring agency, Sportradar. Several cases of manipulation detected by Sportradar have resulted in criminal or sporting sanctions; and evidence from its Fraud Detection System has, as discussed by Prof. Ian Blackshaw elsewhere in th...