For some Americans supporting a team or a club is a relaxing Sunday afternoon activity, for some this social event is a good excuse to be loud and let of some steam but for most Europeans supporting a team is a way of life. These people would do anything for your team to be successful. They would gladly go to every away and home game, buy all of their merchandise and get as many people as they can involved. This affects the amount of revenues clubs earn and their profitability. Many would argue that this is because of the cultural difference between Europe and America but in reality this is a result of an economic phenomena that is caused by the way the respective leagues are set up.
European leagues are considered as open, platforms not only because in European leagues teams can be relegated or promoted, but also in the sense of property rights and free entrance to all market sides. North American leagues, on the other hand, are organized as closed platforms with exclusive property rights and high entry barriers for major leagues. This difference explains why European clubs outperform their North American counterparts in terms of revenue generation and value creation, and why North American clubs are much more profitable than most European clubs.
The list below provides us with important numbers to get a better understanding of how European soccer clubs match up with American sports teams. As seen the top 6 clubs are all European, this is because European clubs “create wealth”.
Rank Team Revenue 2007/08
1 Real Madrid ...
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...n open platform the more games that enter form side B automatically increase the amount of interest in side A because more games are available. The more gamers that join in side A makes game developers more interested in entering through side B. This is how open platforms generate wealth and grow.
However these types of platforms are less profitable because the platform owners have less ways to profit because they are giving up a huge amount of their property rights. On the other hand in closed platforms property rights are much more concentrated. This property right concentration allows for values appropriation.
In closed platforms, on the other hand, property rights are much more concentrated. This property right concentration facilitates value appropriation.
How do sports leagues generate wealth?
These network effects are how sports leagues generate wealth
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