Soccermetrics Interview #7: Bill Gerrard

Prof Bill Gerrard

Bill Gerrard is someone who I’ve wanted to meet since I started Soccermetrics.  Prof. Gerrard is a pioneer in statistical performance analysis in sport and a leader in bringing an evidence-based approach to coaching in football, rugby league and rugby union.  Perhaps he’s better known in North America for his work with Billy Beane of the Oakland A’s, while in Britain he’s best known for his work with Leeds United and Saracens rugby.

Bill and I conducted the longest interview of this series yet one that covered a lot of areas in sports analytics.  I hope you enjoy it.

[Interview conducted 4 April 2013.]

(Howard) So Bill, tell us a couple of sentences about yourself.

(Bill) I’m a Scot living in Leeds, a big sports fan whose first love was the beautiful game but I follow most sports. I’ve always supported Celtic and, like many Scots of my generation, Leeds United is my English team because so many Scots including Billy Bremner played for the great Revie team. My day job is a university prof at Leeds University Business School. The rest of my time is spent working in sports analytics.

How did you get started in sport analytics?

I started in the mid-90s analysing the economics of the football transfer market. That academic research led naturally into the practical problem of how to value footballers. I developed a valuation algorithm for valuing footballers which I first applied for a stockbroker in late 1997 to analyse the efficiency of Tottenham Hotspur in their transfer dealings.

I noticed that one of your first consulting jobs in football was performing valuation for Leeds United. How did you get that job?

Initially most of the interest in my consultancy work was for financial institutions who were interested in putting a market value on a club’s playing assets as security for various debt instruments. I undertook a squad valuation for a company that provided debt finance for Leeds United. Later the club asked for an updated squad valuation which I subsequently discovered was used in the securitisation deal that raised £60 million.

As a Leeds United supporter, did that job give you a greater appreciation for how football clubs are managed? And if so, in what way?

Running a pro sports team must always be about combining passion and prudence. As a business school prof and a sports fan, I guess I was in a good position to understand both aspects of the sports business. And Leeds United provided a very sad lesson of what happens when passion over-rules prudence in the boardroom.

Do you think the rest of the football establishment has learned any lessons in the years since Leeds United’s relegation?

Leeds United was a victory of vanity over sanity and shows what happens when you chase “The Dream” with little regard for a sustainable business model. In three years Leeds United went from last four in the Champions League to relegation from the Premiership. And a decade on, Leeds United are still struggling to get back into the Premiership. It could have been very different if the senior management of the club had invested in the stadium to grow the revenues to support the wage costs of a higher quality playing squad. Arsenal have shown the right way to do things. Wenger versus Ridsdale – no contest when it comes to constructing a sustainable business model for a football club.

Let’s talk about Arsenal for a moment.  How have Wenger et al. gone about creating their business model and does there exist any tension between it and the desire to win trophies?

The major aspect of Arsenal’s business plan in recent years has been to build the Emirates Stadium This involved a very high level of debt financing but it was prudent given the cash flow projections. By increasing capacity from 37,000 at Highbury to 60,000 in their new stadium, Arsenal have more than doubled their matchday income. This has given them the financial resources to afford the top players. There has been some unrest amongst fans that Arsenal have not yet reinvested these resources into the playing squad but the resources are there for Wenger to compete in the transfer market. And I think we can see evidence of a greater willingness to spend big in the contract extension agreed with Walcott.

I’d like to ask a few questions about your work on competitive balance. One of your more recent findings was that even though North American sports leagues are more regulated than their European counterparts, the competitive balance as measured by “win dispersion” is better in the European leagues. Could you explain that?

It seems to me that competitive balance is quite a complex concept that has lots of different aspects to it. Win dispersion measures the variation in sporting performance between teams in a league. We would expect a lower degree of variation in win percentages between teams in leagues that are more competitively balanced. Given that North American leagues have tended to take a more proactive approach to managing competitive balance through, for example, salary caps and player drafts, you would expect lower win dispersion than in the less-regulated European football leagues. Surprisingly you tend to find win dispersion in lower in European football. One reason for this is because of tied games with around a quarter of football games tending to be tied.

What about measuring competitive balance by competitions won, which I imagine would be how most people think of competitive balance?

Win dispersion is only one aspect of competitive balance. The concentration of competition winners – prize dispersion – is another aspect. And yet another aspect of competitive balance is whether or not teams tend to have similar levels of sporting performance from year to year.

And how variable is that performance among teams in professional football?

When it comes to performance persistence (i.e. the year-to-year stability of team performance), you find that the leading European football leagues tend to have similar levels as the North American major leagues with one exception, the NFL which has a very low level of performance persistence. But this is no real surprise given that the NFL is probably the most proactive sports league in the world in terms of trying to ensure competitive balance.

There’s a lot of anxiety among football fans about competitive balance, especially when comparing who wins the Premier League now to who won the First Division in the 70s and 80s. But then I read papers by people like Peter Sloane who state that there were the same concerns about a two-tiered competition in the 60s! Are fans right to feel uneasy today, or has professional football always had issues with competitive balance?

My sense is that concerns about competitive balance have grown significantly in recent years across European football. And I would say the concerns are about the emergence of a three-tier not two-tier competitive structure. As well as the concerns about the super-rich top tier pulling away from other clubs in the top leagues, there are also concerns about the increasing gap between the top leagues and the rest of the football family. The latest TV deal will widen the gap between the Premiership and the rest of the English football pyramid making it more and more difficult for promoted clubs to survive in the Premiership. Whether or not UEFA’s soon-to-be implemented financial fair play rules will reverse the trends is questionable but at least there is acknowledgement of the problems and the need to act. But it’s a difficult tightrope to tread by the governing bodies because if they go too far in trying to regulate the super rich clubs they face a real threat of these clubs setting up on their own independent European Super League.

That’s a very good point.  I’ve always felt that UEFA might not want to push too hard on Financial Fair Play for similar reasons.  So how do you anticipate UEFA enforcing FFP in practice?

Perhaps when it comes to politics I’m too cynical but I wouldn’t be surprised if “temporary” exceptions were allowed to UEFA’s FFP if it is found that some of the biggest European clubs are going to be excluded from the Champions League. It will hurt UEFA financially if those clubs are excluded and it will intensify the threats of a breakaway European Super League.

You had a chapter on competitive balance and the sports media rights (The Economics of Sport and Media by Jeanrenaud and Késenne) where you wrote, “Unlike standard textbook industries, there is good reason to believe that rights market deregulation in the professional team sports industry may be against the consumer interest.” Has the experience of domestic competitions in Spain and Italy provided support to your point?

I am a strong believer in the collective selling of league media rights for a number of reasons, one of which is that teams are effectively monopoly suppliers to their own fans. Market deregulation creates rather than weakens market power in this case. I also think that collective selling of TV rights provides an effective revenue redistribution mechanism. The experiences of Spain and Italy show the problems created if you remove this redistribution mechanism.

It seems that football analytics is being asphyxiated by lack of data for outside analysts, lack of expertise from internal staff at football clubs, and lack of interest (if not strong cultural resistance) from the football community. Is that perception accurate?

We continue the conversation with Bill Gerrard in the upcoming edition of the Soccermetrics Newsletter.  Only subscribers will be able to access the full interview, so subscribe now.  You are a subscriber, right?