The Japan Professional Football League (J.League) and DAZN signed a broadcasting rights agreement to broadcast all J1, J2, and J3 matches live for 10 years starting in 2017. The contract amount is approximately 210 billion yen, or about 21 billion yen per year. The purpose of this study is to examine how the J.League clubs spent the revenues, which were expected to certainly increase, with a particular focus on team personnel expenses. This was accomplished by using disclosed management information for J1 and J2 clubs published annually by the J.League and creating comparative data for 2016, when there were no DAZN allocations, and 2017, when such funds were distributed. The propositions (hypothesis) are as follows.
Proposition 1: Clubs with large operating expenses (or operating revenues) have larger personnel expenses than smaller clubs.
Proposition 2: Clubs with large operating expenses have a large personnel expense ratio than smaller clubs.
Proposition 3: If operating expenses increase, the club’s personnel expense ratio increases beyond the rate of increase in operating expenses.
Moreover, for changes from one year to the next, this proposition can be rewritten as Proposition 3b: If operating expenses (and revenues) are expected to increase, the club’s personnel cost ratio will increase by more than the rate of increase in operating expenses.
When comparing 2016–17 seasons, the overall trend in operating expenses was an increase in 14 of 15 clubs in J1 and 16 of 18 clubs in J2, suggesting that most clubs increased their operating expenses in anticipation of the increase in DAZN allocation revenues. The overall trend in team personnel expenses was an increase in 2017, except for five clubs in J1 and J2. There is clearly a relationship between operating expenses and personnel expenses, with a high coefficient of determination. Regarding operating expenses and personnel expense ratio, J1 had larger operating expenses and a higher personnel expense ratio than J2. But on the other hand, relationship between operating expenses and personnel expense ratio was almost uncorrelated for J2 and inversely correlated for J1. In other words, the larger the business size, the lower the personnel expense ratio. The coefficient of determination was high for both J1 and J2, when a linear first-order regression was performed by calculating the difference (increase/decrease) in operating expenses and the difference (increase/decrease) in personnel expenses for 2016–17 seasons. For J1, the marginal personnel expense ratio is 56.2%, which is larger than the average personnel expense ratio of J1. This indicates that each J1 club invested more money in personnel expenses based on the anticipated increase in revenues. For J2, the marginal personnel expense ratio is 85.0%, which is higher than that of J1 and larger than the average personnel expenses ratio of J2, indicating that more money was additionally allocated to personnel expenses than in J1.
An important conclusion in this study is that each J club anticipated an increase in the business size and correspondingly increased its marginal personnel expense ratio. Each club was able to allocate the increased revenues to personnel expenses on a gradient basis. Furthermore, the fact that the operating expenses and the personnel expense ratio were not proportional within the same league was both new and surprising. This is probably because clubs with low operating expenses invest funds in personnel expenses even by sacrificing other expenses in order to improve their ranking, or rather, to avoid relegation.
View full abstract