Revenue Sharing and Competitive Balance: Governance Innovations in Professional Sports Leagues

Abstract

This article shows the intricate relationship between revenue sharing and competitive balance in professional sports leagues, emphasizing governance innovations that promote financial equity and sustainability. Revenue sharing, a mechanism for redistributing league revenues among member teams, aims to reduce financial disparities and create a more level playing field. The article examines various forms of revenue sharing, including the pooling of broadcast rights, merchandise sales, and ticket revenues, to support teams in smaller markets and ensure competitiveness for all teams. Additionally, it discusses how governance innovations, such as salary caps, luxury taxes, and revenue thresholds, work in tandem with revenue sharing to maintain competitive balance. These mechanisms enable smaller-market teams to invest in talent and facilities while preventing wealthier teams from dominating through financial advantages. The research also highlights the role of player associations and collective bargaining agreements in shaping governance structures and policies within leagues, ensuring fairness for athletes and promoting social responsibility. Through a comparative analysis of different leagues, this article illustrates how governance innovations can lead to sustainable league ecosystems where competitive balance enhances fan engagement and long-term viability.