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Professional sports leagues are organized in numerous ways. The two most significant types are one that developed in Europe, characterised by a tiered structure using promotion and relegation to determine participation in a hierarchy of leagues or divisions, and a North American originated model characterized by its use of "franchises," closed memberships, and minor leagues. Both these systems remain most common in their area of origin, although both systems are used worldwide.
The term league has many different meanings in different areas around the world, and its use for different concepts can make comparisons confusing. Usually a league is a group of teams that play each other during the season. It is also often used for the name of the governing body that oversees the league, as in America's Major League Baseball or England's Football League. Because most European soccer clubs participate in different competitions during a season, regular-season home-and-away games are often referred to as league games and the others as non-league or cup games, even though the separate competitions may be organised by the same governing body. Also, there is a rugby football code called rugby league, which is distinct from rugby union.
Professional sports leagues in North America comprise a stipulated number of clubs, known as franchises, which field one team each. The franchises have territorial rights, usually exclusive territories large enough to cover major metropolitan areas, so that they have no local rivals. New teams may enter the competition only by a vote of current members; typically, a new place is put up for bid by would-be owners. This system is often called a "franchise system." It was introduced in baseball with the formation of the National League in 1876[NB 1] and later adopted by the other North American leagues.
Although member clubs are corporate entities separate from their leagues, they operate only under league auspices. Partly because that relationship is so close, and partly because the four major team sports leagues represent the top level of play in the world, North American teams almost never play competitive games against outside opponents, although National Hockey League (NHL) and National Basketball Association (NBA) teams have played against European hockey and basketball teams in preseason exhibitions. The North American league, rather than any sport governing body, determines the playing rules and scoring rules of its game, and the rules under which players join and change teams.
The teams are organized with a view to each major city having a team to support. Only the largest cities such as New York, Chicago or Los Angeles have more than one team. As such the teams are often referred to as franchises. Even though they are not technically franchises in a business sense, the league is organised in a way that assures teams continued existence in the league from year to year, which fosters an ongoing connection with the team's supporters. On occasion a league may decide to grow the sport by admitting a new expansion team into the league. Most of the teams in the four major North American pro sports leagues were created as part of a planned league expansion or through the merger of a rival league. Only a handful of teams in the National Hockey League, for example, existed before becoming part of the NHL. The rest of the teams were created ex novo as expansion teams or as charter members of the World Hockey Association, which merged with the NHL in 1979.
The best teams in a given season reach a playoff tournament, and the winner of the playoffs is crowned champion of the league, and, in some cases as world champions. American and Canadian sports leagues typically have such "playoff" systems. These have their roots in long travel distances common in US and Canadian sports; to cut down on travel, leagues are typically aligned in geographic divisions and feature unbalanced schedules with teams playing more matches against opponents in the same division. Due to the unbalanced schedule typical in US and Canadian leagues, not all teams face the same opponents, and some teams may not meet during a regular season at all. This results in teams with identical records that have faced different opponents differing numbers of times, making team records alone an imperfect measure of league supremacy. The playoffs allow for head-to-head elimination-style competition between teams to counterbalance this.
Major League Soccer is a North American league that exhibits some aspects of the European structure because soccer has a European rather than American origin. Major League Soccer is technically not an association of franchises but a single business entity, though each team has an owner-operator; the team owners are actually shareholders in the league. The league, not the individual teams, contracts with the players. Unlike teams in the four major sports, several Major League Soccer teams qualify to play competitive matches in the CONCACAF Champions League against teams from outside the U.S. and Canada, and MLS uses playing rules set by the international governing body of its sport. MLS followed its own playing rules until 2004, when it adopted FIFA rules. In another parallel with the European model, both the U.S. and Canada have separate knockout cup competitions during the MLS season that include teams from lower leagues. In the U.S., the Lamar Hunt U.S. Open Cup has had MLS participation from the league's inception; starting with the 2012 cup, each competition features all American-based MLS sides. Similarly, all of Canada's MLS teams compete in the Canadian Championship. However, the league structure of MLS follows the North American model, with a single premier league and no promotion or relegation.
A more rarely seen business model in North America is the pure single-entity league, typified by the now-defunct XFL. In the pure single-entity model, there are no individual owners or investors, with all teams centrally owned by a single corporation and operated by league employees. Many upstart leagues begin their existence as pure single-entity leagues before they secure investors for teams (such as the NWHL) or are forced to operate in the pure single-entity model when investors fail to materialize (such as the Stars Football League).
Some other North American systems also have a hierarchical structure but without the promotion and relegation of clubs exhibited in the European model. Instead, the sports leagues generally use a minor league system. For example, Major League Baseball has an affiliation with Minor League Baseball to develop young talent. Most minor league clubs are independently owned, but each one contracts with a major league club that hires and pays players and assigns them to its various affiliated clubs. The minor clubs do not move up or down in the hierarchy by on-field success or failure. Professional ice hockey has a system somewhat similar to baseball's (without as many levels), while the National Basketball Association operates a single developmental league. The National Football League does not have a minor league system as of 2011 but it has operated or affiliated with minor leagues in the 1930s, 1940s, 1960s, 1990s, and the early 2000s and invested in another in the late 2000s.
To prevent conflicts of interest, most North American sports leagues that operate on the franchise system do not allow individual owners to hold more than one franchise at once. (This is a stipulation that arose out of a crisis in 1899, when the Cleveland Spiders were bought out by a rival team and had its roster raided, leading to the remains of the Spiders organization being stuffed with subpar talent and setting records for futility.) Most such leagues also use revenue sharing and a salary cap or luxury tax system in an effort to maintain some level of parity between franchises.
Football in England developed a very different system from the North American one, and it has been adopted for football in most other European countries, as well as to many other sports founded in Europe and played across the world. The features of the system are:
European football clubs are members both of a league and of a governing body. In the case of England, all competitive football clubs are members of The Football Association, while the top 20 teams also are members of the Premier League, a separate organization. The 72 teams in the three levels below the Premier League are members of still another body, the English Football League. The FA operates the national football team and tournaments that involve teams from different leagues (except the EFL Cup, operated by the English Football League and open to its own teams and those in the Premier League). In conjunction with FIFA and other countries' governing bodies, it also sets the playing rules and the rules under which teams can sell players' contracts to other clubs.
The Premier League negotiates television contracts for its games. However, although the national league would be the dominating competition in which a club might participate, there are many non-league fixtures a club might play in a given year. In European football there are national cup competitions, which are single elimination knock-out tournaments, are played every year and all the clubs in the league participate. Also, the best performing clubs from the previous year may participate in pan-European tournaments such as the UEFA Champions League, operated by the Union of European Football Associations. A Premier League team might play a league game one week, and an FA Cup game against a team from a lower-level league the next, followed by an EFL Cup game against a team in the EFL, and then a fourth game might be against a team from across Europe in the Champions League.
The promotion and relegation system is generally used to determine membership of leagues. Most commonly, a pre-determined number of teams that finish the bottom of a league or division are automatically dropped down, or relegated, to a lower level for the next season. They are replaced by teams who are promoted from that lower tier either by finishing with the best records or by winning a playoff. In England, in the 2010-2011 season, the teams Birmingham City, Blackpool and West Ham United were relegated from the Premier League to the Football League Championship, the second level of English football. They were replaced by the top two teams from the second level, Queens Park Rangers and Norwich City, both of which won automatic promotion, as well as Swansea City (a Welsh club that plays in the English system), which won a playoff tournament of the teams that finished third through sixth. In the 2011-12 season, the teams Wolverhampton Wanderers, Blackburn, and Bolton were relegated to the Championship. They were replaced by Reading, Southampton, and West Ham. The two former teams had won automatic promotion, while the latter occupied the last promotion spot when they defeated Cardiff 5-0 on aggregate in the semifinals, and defeated Blackpool 2-1 at the final in Wembley Stadium.
The system originated in England in 1888 when twelve clubs decided to create a professional Football League. It then expanded by merging with the Football Alliance in 1892, with the majority of the Alliance teams occupying the lower Second Division, due to the divergent strengths of the teams. As this differential was overcome over the next five years, the winners of the Second Division went into a playoff with the worst placed team in the First Division, and if they won, were promoted into the top tier. The first club to achieve promotion was Sheffield United, which replaced the relegated Accrington F.C.
Relegation often has devastating financial consequences for club owners who not only lose TV, sponsorship and gate income but may also see the asset value of their shares in the club collapse. Some leagues offer a "parachute payment" to its relegated teams for the following years in order to protect them from bankruptcy. If a team is promoted back to the higher tier the following year then the parachute payment for the second season is distributed among the teams of the lower division. There is of course a corresponding bonanza for promoted clubs.
The league does not choose which cities are to have teams in the top division. For example, Leeds, the fourth-biggest city in England, saw their team, Leeds United, relegated from the Premier League to the Championship in 2004, and relegated again to the third-tier League One in 2007. Leeds will remain without a Premiership team as long as it takes for United, or in theory any other local club, to play well enough to be promoted into the Premiership. Famously, the French Ligue 1 lacked a team from Paris, France's capital and largest city, for some years. Likewise, Berlin clubs in the Bundesliga have been rare, due to the richer clubs being all located in the former West Germany.
As well as having no right to being in a certain tier, a club also has no territorial rights to its own area. A successful new team in a geographical location can come to dominate the incumbents. In Munich, for example, TSV 1860 München were initially more successful than the city's current biggest team Bayern München. London has 14 professional teams, including five Premier League teams.
Clubs may be sold privately to new owners at any time, but this does not happen often where clubs are based on community membership and agreement. Such clubs require agreement from members who, unlike shareholders of corporations, have priorities other than money when it comes to their football club such as tradition or local identity. For similar reasons, relocation of clubs to other cities is very rare. This is mostly because virtually all cities and towns in Europe have a football club of some sort, the size and strength of the club usually relative to the town's size and importance. Buying an existing top-flight club and moving it to a new location is problematic, as the supporters of the town's original club are unlikely to switch allegiance to an interloper. This means anyone wanting ownership of a high ranked club in their native city must buy a local club as it stands and work it up through the divisions, usually by hiring better talent. There have been some cases where existing owners have chosen to relocate out of a difficult market, to better facilities, or simply to realize the market value of the land that the current stadium is built upon. As in the U.S., team relocations have been controversial as supporters of the club will protest at its loss.
Leagues around the world generally follow one or the other of these systems with some variation. Most sport leagues in Australia are similar to the North American model, using post-season playoffs and no relegation, but without geographical divisions, with the most notable examples being the Australian Football League (Aussie rules) and National Rugby League (rugby league). Nippon Professional Baseball in Japan uses the North American system due to American influence on the game. In cricket, the Indian Premier League, launched in 2008, also operates on this system. The Super League, which is the top level of rugby league in the United Kingdom and France, was run on a franchise basis from 2009 to 2014, but returned to a promotion-relegation model with the 2015 season. Another example of a franchised league in European sport is ice hockey's Kontinental Hockey League, centered mainly in Russia with teams also located in Belarus, China, Finland, Kazakhstan, Latvia, and Slovakia.
The promotion-relegation system is widely used in football around the world, notably in Africa and Latin America as well as Europe. The most notable variation has developed in Latin America where many countries have two league seasons per year, which scheduling allows because many Latin American nations lack a national cup competition. Promotion and relegation has historically been used in other team sports founded in the United Kingdom, such as rugby union, rugby league and cricket.
The European model is also used in Europe even when the sports were founded in America, showing that the league system adopted is not determined by the sport itself, but more on the tradition of sports organisation in that region. Sports such as basketball in Spain and Lithuania use promotion and relegation. In the same vein, the Australian A-League does not use the pyramid structure normally found in football, but instead follows the tradition of Australian sports having a franchise model and a post-season playoff system that better suits a country with a few important central locations where a sport needs to ensure there is a team playing with no risk of relegation. Likewise, another notable example of "European" sports using the American model is rugby union's Super Rugby, currently featuring 15 franchises. Thirteen of these are from the competition's founding countries of South Africa, Australia and New Zealand, and the other two are teams from Argentina and Japan that joined the competition in 2016.
In east Asia, places such as Japan, China, South Korea and Taiwan have a particular differentiation among leagues: "European" sports such as football and rugby use promotion and relegation, while "American" sports such as baseball and basketball use franchising and minor leagues, with a few differences varying from country to country. A similar situation exists in countries in Central America and the Caribbean, where football and baseball share several close markets.
A major factor in the development of the North American closed membership system during the 19th Century was the distances between cities, with some teams separated by half of the North American continent, resulting in high traveling costs. When the National League of Professional Base Ball Clubs was established in 1876, its founders judged that in order to prosper, they must make baseball's highest level of competition a "closed shop", with a strict limit on the number of teams, and with each member having exclusive local rights. This guarantee of a place in the league year after year would permit each club owner to monopolize fan bases in their respective exclusive territories and give them the confidence to invest in infrastructure, such as improved ballparks. This in turn would guarantee the revenues needed to support traveling across the continent.
In contrast, the shorter distances between urban areas in England allowed more clubs to develop large fan bases without incurring the same travel costs as in North America. When The Football League, now known as the English Football League, was founded in 1888, it was not intended to be a rival of The Football Association but rather the top competition within it. The new league was not universally accepted as England's top-calibre competition right away. To help win fans of clubs outside The Football League, a system was established in which the worst teams at the end of each season would need to win re-election against any clubs wishing to join. A rival league, the Football Alliance, was then formed in 1889. When the two merged in 1892, it was not on equal terms; rather, most of the Alliance clubs were put in the new Football League Second Division, whose best teams would move up to the First Division in place of its worst teams. Another merger, with the top division of the Southern League in 1920, helped form the Third Division in similar fashion, firmly establishing the principle of promotion and relegation.