Leisure Markets

There are four leisure markets which need to be considered in F583 Spectator sports (which usually means football)

Holidays and travel (a very broad category)

Cinemas

Broadcasting

The main skills needed in the examination for each of these will be: To be able to recall some key data and recent trends (L2)

To place them into a market structure using the characteristics (L3)

Use the market structure to explain their behaviour and efficiency (L3)

Evaluation the market structure (L4)

Assess the level of contestability (L4)

Market structures recap Perfect competition characteristics

Perfect knowledge and mobility

No barriers to entry

Homogenous products

Must accept market price for all goods

Perfect competition implications Horizontal AR/MR curve (all goods sold at the same price)

Productively and allocatively efficient

Unlikely to be dynamically efficient

Cannot make abnormal profits

Market structures recap Monopolistic Competition characteristics

Differentiated goods

Low barriers to entry

Many, small firms

Limited price setting power

Monopolistic Competition implications Gently sloped AR/MR curves (elastic because of alternatives)

Profits in SR only

Not efficient

Market Structures recap Oligopoly characteristics

Few firms

Interdependence (what one does affects the others)

May be competitive or collusive

Non-price competition is dominant

Barriers to entry (often loyalty)

Oligopoly implications Profits depend on level of competition

Unlikely to be efficient

Potential for dynamic efficiency

Price stability

Market Structures recap Monopoly characteristics

One firm (or one with more than 25%)

High barriers to entry (often legal)

Significant price setting power (may only be limited by government)

Monopoly implications Depend on attitude of firm

May or may not be dynamically efficient

May or may not exploit the consumers

Likely to benefit from economies of scale (natural monopoly)

Profitable in short and long run

Placing the Leisure Markets The importance of perspective What are we considering to be the market?

Spectator Sports – All football teams (including local ones) or only the Premiership? Are we considering all Premiership teams or only those which are comparable?

Holidays and Travel – so many options

• Hotels – Chains? All-inclusive? Local?

• Flights – Airlines generally? Specific routes/airports? Business/Pleasure?

• Holidays – Independently booked? Travel agents? Package holidays?

Cinemas – all cinemas? In a particular location?

Broadcasting – All freeview channels? Sky? Online? Are we considering mass market channels only?

Sports Travel Cinema Broadcasting

Monopolistic Competition

All sports teams including local and minor leagues

Travel agents

Airline industry generally

Hotels generally

All cinemas within a city

All channels including the small, random ones on Freeview/Sky

Oligopoly

Premiership, especially the “big brand” teams (Man U, Chelsea, Arsenal, Man C, Liverpool)

Package Holidays (Thomas Cook, TUI own more than 40%)

Flights on a particular route

Large, chain hotels within a city

Large, out-of town cinemas (multiplex)

Large mass-market channels (BBC1, BBC2, Channel 4, ITV, Channel 5)

Service providers (BBC, ITV, Channel 4, Sky)

Trends and other notable items Sports

Lack of focus on profits (almost like a hobby), not like a ‘normal’ business

Increasing ticket prices

Massive brand loyalty

Holidays Growth of internet making things more competitive

Increase in holidays to long-haul destinations

More holidays than ever before but this also means growth in ‘staycations’ and package holidays

Cinemas Move to multiplexes & backlash against multiplexes

Introduction of new differentiators e.g. alcohol, 3D, IMAX

Much smaller audiences than historic amounts but a revival in last few years. Sustainable?

Broadcasting Much more competitive than it used to be

Easy technology and ability to broadcast online at low cost

Impact of SMART TV, iPLayer, TiVO, mobile?

Homework From the January 2012 Paper

3a) Analyse, using diagrams, the difference between the short run and long run equilibrium of a firm in monopolistic competition. (15)

3b) Discuss, using a leisure industry of your choice, the extent to which it is monopololistically competitive. (20)