Champions League: Does money help or hinder competition in football?

Economists sometimes measure how likely a market is to be an oligopoly using the four-firm concentration ratio. It measures how much of the market goes to the four biggest companies.

Apply that concept to European football and it looks increasingly like the leagues are becoming their own oligopolies. Back in the 1995-96 season the top four teams in the Bundesliga, English Premier League and the Spanish La Liga won about 25 per cent of the total leagues points; in the past season it was a third of all points.

But there’s one crucial difference compared with a normal oligopoly. Most of these teams aren’t making much of a profit. Instead money is being ploughed into them.

Finish in the top four in one of these leagues and a team qualifies for the Champions League. That brings in more revenue, which can then be used to construct a better team, attracting more fans and better sponsorship deals continuing the cycle.

Nowhere is the value of investment more in evidence than the English Premier League. Until Roman Abramovich invested in Chelsea, the club hovered just above the top five. For the five years after the Russian took ownership, it finished first or second – which meant Arsenal, who had been perennial title contenders, found themselves displaced to third or fourth.

Foreign money in the Premier League has made it more competitive at the top, changing the top four of Arsenal, Liverpool, Manchester United and Chelsea into a top six with Tottenham and Manchester City added.

And the recent sporting successes of German champions Bayern Munich show what can happen when one team establishes financial dominance.

In the 2012-13 season Bayern’s revenues were 70 per cent higher than their nearest rivals, Borussia Dortmund. And in that and the subsequent campaign, they strolled to the league title, winning a greater share of the Bundesliga’s points – adjusted for its smaller number of teams – than any top flight German, Spanish or English side in the modern era.