Universities and competitive balance

Universities and competitive balance

19 Jan 2011

liam lentenDr Liam Lenten

E-Mail: l.lenten@latrobe.edu.au

 

This opinion piece first appeared in The Australian on 19 January 2011.

The public debate and rhetoric about the merits and consequences of the Bradley Report – more than two years old now – continues unabated.  It has been no surprise that many of the signals being sent by its detractors (mainly ‘Group of Eight’ interests) and its supporters (typically those outside the sandstone elite), have been transparently self-interested.

In light of this, it never ceases to amaze me how often objectives and behaviour of entities in the Higher Education sector (i.e. Universities) appear to mimic those of analogous entities in sports leagues (i.e. teams/clubs).  These similarities may be attributable to how in both industries one’s competitors are also allies in some aspects.  The report, while exhaustive and comprehensive in its scope, recommends a more equitable distribution of research-related resources across Australia’s 38 higher-education institutions, much to the chagrin of the Group of Eight.

The underlying concept of relevance in Sports Economics is that of ‘competitive balance’, which refers to the degree of evenness (or otherwise) of team league sports.  League administrators strive for a certain level of competitive balance since fans want to see an even contest, and hence a more competitive league should translate into more overall fan interest and therefore demand – this is known as the ‘uncertainty of outcome’ hypothesis.

However, while all teams are created equal, some teams are created more equal than others.   In each sport, there are inevitably larger-market teams (like Collingwood, Brisbane Broncos or Melbourne Victory) and smaller-market teams (eg. North Melbourne, Cronulla, Central Coast).  The larger-market teams have larger (non-league) revenues, such as sponsorship and merchandise, comparable to University (non-government) revenues, such as external grants and bequests.

Sports administrators do have the ability to implement policies that are known to level the playing field between the ‘haves’ and ‘have nots’ in their leagues, in a similar way to that of the Federal Government in determining the direction of the Higher Education sector.  Such policies include restricting the labour market for players (not possible for academics) and, more relevantly, the way league broadcast revenues are distributed.

On this basis, it may be possible to liken the Bradley Report to the radical reforms of the AFL (then VFL) in the mid-1980s, when after years of uneven competition (only four teams won all 16 premierships from 1968-1983), they introduced the highly restrictive draft and salary cap combination.  Equivalently, the last 16 titles have been won by no less than eleven different teams, during an era in which TV revenues (shared equally in the AFL) have become more prominent compared with other sources.

However, this all assumes a closed shop (the AFL is effectively a monopoly in its own sport).  Advocates of the nation’s wealthier Universities cite the need to have an Australian presence in the top tier of Universities worldwide, necessitating rewarding excellence in research.

This objective is similar to the major European football leagues, who themselves are all in competition with each other on a continental level and each want success for their own teams in the UEFA Champions League.  Subsequently, player labour markets are largely unrestricted, while broadcast revenues are highly-skewed in favour of the already rich and powerful teams (especially in Spain and Italy).  Followers of the A-League and NBL (and increasingly the NRL) will be similarly aware of the problem of losing the best players to foreign teams.

The European status quo ensures the better players tend to end up at the larger and more successful teams, just as there is a propensity for better researchers to tend to end up at the more prestigious Universities.  The downside to all of this is that in each domestic league, it seems to always be one of two or three teams winning the title every year, in a similar fashion to the ‘league champion’ from the plethora of Australian University ranking systems.

Of course, the uncertainty of outcome hypothesis is not an appropriate way to view the competitive balance of Universities.  We must allow some institutions to be better resourced in absolute terms.  The point of contention appears to be merely the extent to which this should be allowed to be the case.

In closing, there are many qualifications to the analogy of the University system as a 38-team sports league.  Nevertheless, it is amazing how often the talking heads all sound the same – the Education Minister sounds just like the League CEO, the Vice-Chancellor like the Club President, Deans and Heads of Schools like coaches, Academics like players, and students and alumni like fans.

Liam Lenten is a Senior Lecturer in Sports Economics at La Trobe University.

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