Sports economics is often overlooked, yet behind every thrilling match lie market dynamics, incentives, and complex strategic decisions. This was the central theme addressed by Professor Robert Simmons, a lecturer at Lancaster University Management School, during the FEB UGM Research Series entitled ‘Sports Economics: What Really Determines Winning?’
Simmons explained that the greatest value of sport does not lie solely in conventional industry metrics such as added value or employment figures. In his view, the primary dimension lies in people’s emotional engagement.
“What makes sport economically compelling is how people react to it as spectators, fans, and through their emotional involvement,” he said.
In addition to the emotional dimension, Simmons also highlighted the abundance of data available in the world of sport as a unique attraction for economists. This data enables researchers to analyze various aspects, including incentives, strategic behavior, and the impact of regulations on players, clubs, and fans. In other words, sport provides a wealth of empirical evidence for directly testing various economic theories in a real-world context.
“With such a vast volume of data, we can examine incentives, strategic behavior, and the operational impact of rules in great detail,” he explained.
In the context of policy, the awarding of substantial bonuses to high-performing athletes in Indonesia has also drawn attention. Simmons acknowledged that bonuses are a reasonable form of recognition, given the significant sacrifices athletes make to achieve their successes.
However, he cautioned that bonuses alone are not enough. He cited the UK’s experience in the early 2000s, which shifted policy focus towards long-term investment in specific sports, such as cycling. The development of facilities, improved training quality, and institutional support proved capable of generating sustainable international success.
From an industry perspective, Simmons stated that the commercialization of football through sponsorship, broadcasting rights, and private ownership is essentially driven by growing global spectator interest. Rising broadcasting rights costs have a direct impact on the ability of major leagues to attract high-quality players, as seen in the English Premier League.
“Ultimately, it all comes down to the audience. If no one wants to watch, then a sport will decline,” he explained.
In the academic sphere, Simmons highlighted the main challenges in cross-country comparisons within sports economics research. Data consistency and comparability are crucial issues that researchers must address. He cited his research on the determination of footballers’ wages in England and Italy, which required a high degree of precision to ensure comparability of variables and measurement methods.
“Comparable data is the first challenge a researcher must overcome. You need to be careful when handling data, noting every difference and inconsistency. So that is the first issue,” he said.
Furthermore, he emphasized the importance of methodological approaches, such as difference-in-differences, for identifying causal relationships. This method allows researchers to compare a group affected by a policy with a control group that is not affected.
“Methods such as difference-in-differences open up opportunities for stronger causal analysis, particularly when there are changes in policy or regulations,” he concluded.
However, data availability is often a major challenge when conducting research using such approaches. He also recommended an alternative method: propensity score matching. Web scraping skills in Python are also essential for students and young researchers to master today.
At the end of the session, Simmons highlighted the positive potential of the sports industry in developing countries, including Indonesia. With a large population and market opportunities, fan bases are considered highly promising. However, this potential needs to be supported by adequate governance, as has been the case with the UK’s transformation over the past few decades.
The full video of the Research Series program titled ‘Sports Economics: What Really Determines Winning?’ can be accessed via: SportEconomics
Author: Dwi Zhafirah Meiliani
Editor: Kurnia Ekaptiningrum
Sustainable Development Goals
