Although league members generally operate as independent entities, separate from the league itself, they are largely creations of the league. Only the few oldest teams in the National Hockey League, for example, existed before becoming part of the NHL or its former rival, the World Hockey Association. The rest of the teams were created ex novo as expansion teams or as charter members of the WHA, which merged into the NHL in 1979.
Exceptions to the ownership structure described above do exist. 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. The short-lived XFL football league did not have independently owned teams; all teams were owned by the league.
Since North American pro teams are so closely tied to their leagues, in the case of the four major team sports they clearly represent the top level of play in the world, in some cases are involved in a sport that lacks much international competition and/or organization, and finally due to travel and geographic concerns, they almost never play games outside of the league. Furthermore, these generally are exhibitions rather than competitive contests, such as with the NBA and MLB preseason (which are becoming more prevalent). 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 the case of the "the Big 4" major professional sports leagues, "world champion"). The league develops its own rule book and sets the conditions under which players join and change teams. Major League Soccer teams, however, play many games against international competition, due to the global nature of the sport and the regional (CONCACAF / FIFA) organization.
Major League Baseball has an associated minor-league system used to develop young talent. Although most minor league teams are independently owned, each contracts with a major-league team, which hires and pays the players and assigns them to a given level in its minor-league hierarchy. The teams as a whole cannot move up or down levels. Professional ice hockey has a system somewhat similar to baseball's, while the National Basketball Association and National Football League each operate one small developmental league.
The system of league organization described above developed in Major League Baseball in the 19th century and was later adopted by other North American sports leagues.
Outside of North America, the American system of organizing sports leagues is sometimes referred to as "franchising." North Americans themselves refer to major-league teams as "franchises," but have no need for a name for their system of league ownership, since all major leagues operate on the same principles.
A number of leagues outside of the United States now use this system. These include the Super League, which is the top level of rugby league in the United Kingdom and France. This will run on a franchise basis from 2009. In rugby union, the Southern Hemisphere Super 14 competition operates on a franchise system. In 2006, a promotion/relegation system was introduced affecting only the South African teams, but as of November of that year, it was confirmed that it will never actually be employed. Professional sport leagues in Australia are based on this model as well, with the most notable examples being the Australian Football League (Aussie rules) and National Rugby League (rugby league). The German Bundesliga also initially ran under a similar 'licence' system, though this was relaxed in 1965. Nippon Professional Baseball in Japan uses this system due to American influence on the game. In cricket, the Indian Premier League, launched in 2008, also operates on this system.
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 organisation. The FA operates the national football team and tournaments that involve teams from different leagues. In conjunction with 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, the "league" is only one of several competitions in which a club might participate in a given year; only some of the games a league member plays are league games. 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. The third game might be against a Danish team in the UEFA Champions League (operated by the Union of European Football Associations).
In any given year, a country could have several champions. In 2004-05, Chelsea won the Premier League championship, Arsenal won the FA Cup and Liverpool won the UEFA Champions League (a multi-country club championship). Usually the national league winners are considered the national champions (a notion also used in franchise-based leagues), and the disparities may be settled by means of a Super Cup, although this is considered a special event and has not been mandatory in any league anywhere in the world.
The promotion and relegation system is generally used to determine membership of leagues. Most commonly, a pre-determined number of teams at the bottom of a league or division are automatically relegated down to a lower level, being replaced by the same number of teams gaining promotion from that lower tier. A few countries use a slightly different system which combines automatic relegation with a playoff system. For example, in the Netherlands, only one team is automatically relegated from the Eredivisie to the Eerste Divisie, to be replaced by the Eerste Divisie champion. The next two teams on the Eredivisie table each enter a mini-league with four other high finishers from the Eerste Divisie, with the winner of each mini-league either remaining in or promoted to the Eredivisie. The following season, these teams compete at their new levels. In England in 2008, Birmingham City, Derby County and Reading were relegated from the Premier League to the Football League Championship, the second level of English soccer. Relegation has devastating financial consequences for club owners who not only lose TV, sponsorship and gate income but 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, (if a team is promoted again the next year then the parachute payment for the second season is distributed among the teams of the lower division), sums which often are higher than the prize money received by some non-relegated teams, in order to protect them from bankruptcy. There is of course a corresponding bonanza for owners of promoted clubs.
Clubs may be sold privately to new owners at any time. However, relocation of clubs to other cities is very rare. If a millionaire wishes to have a top club in his native city, he must buy the local club as it stands and work it up through the divisions, usually by hiring better talent. He would be unlikely to buy an existing top-flight club and move it to his city. (There have been a number of cases where existing owners have chosen to relocate out of a crowded market, to better facilities, and/or simply to realise the market value of the land that the current stadium is built upon. As in the U.S., team relocations have been controversial, but for different reasons).
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 relegated to the Championship in 2004, and then saw their team relegated to the third-tier League One in 2007. Leeds will remain without a Premiership team as long as it takes for Leeds United (or in theory any other local club) to do well enough in the second-tier division to win the right to play in the Premiership. Famously, the French Ligue 1 lacked a team from Paris for some years.
Territorial rights are not recognised, and new teams in a geographical location can overtake older ones; in Munich, for example, TSV 1860 München were initially more successful than the city's current biggest team Bayern München. Major cities such as London may have many teams in the professional leagues: for example, in 2008-09 it has five teams in the Premier League alone, and an additional eight teams in the three fully professional leagues within The Football League.
This system originated in England in 1888 when twelve clubs decided to create a professional Football League. The "closed shop" aspect of baseball's National League was not deemed to be necessary to ensure stability in England because a national English football league did not require the sort of travel commitments that were necessary in the U.S. A secretariat was created to organise and run the Football League. Later lower tiers (divisions) were added.
This system is widely used in football (soccer) 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 (this is due to many Spanish-speaking Latin American nations lacking a national cup competition). It has historically been used in other team sports to have expanded out of the United Kingdom, such as rugby union and cricket. Even "American" sports such as basketball and ice hockey use the system in European countries where their influence is strong, such as Spain or Lithuania in basketball or Russia in ice hockey.
East Asian countries (Japan, China, South Korea, Taiwan) have a particular differentiation among leagues: "European" sports (soccer, rugby, etc.) use promotion and relegation, while "American" sports (baseball, basketball, etc.) use franchising, with a few differences varying from country to country. A similar situation exists in countries in Central America and the Caribbean, where soccer and baseball share several close markets.