Professional sports league organization Professional sports league s are organized in numerous ways . The two most significant types are a Europe an model , characterised by a tiered structure using promotion and relegation to determine participation in a hierarchy of leagues or divisions and a North America n model characterized by its use of franchises and closed membership . Etymology . 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 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 games , even though the separate competitions may be organised by the same governing body . Also , there is a rugby football code called rugby league , as distinct from rugby union . Structure of North American leagues . Professional sports leagues in North America are limited to a fixed number of teams , sometimes called " franchises . " In this system , sometimes called a " franchise system " in the U . K . , only a vote of the existing franchises can admit more teams . When this is done , a new place is put up to bid among would - be owners . With a few exceptions , no second team is allowed in an area where a team already exists . This system of league organization was first developed in Major League Baseball with the formation of the National League in 1876 , and was later adopted by the other North American sports leagues . Although member teams are separate corporate entities from the league , they operate only under the auspices of the league . This doesn ' t necessarily mean American franchises can ' t play against teams outside their league . Exceptions include NHL teams playing against European hockey teams , as well as NBA teams playing against European basketball teams and Major League Soccer teams playing against other soccer teams in their region , during regional tournaments . The league , rather than any other sporting organization , determines the rules of the sport and sets the conditions under which players join and change teams . However , this is beginning to change with various American leagues , thanks to the global exposure that these leagues are facing with the rest of the world right now . For example , Major League Soccer used to follow its own gameplay rules prior to 2004 , when they decided to embrace the standardized international rules that FIFA and the rest of the world were playing . Similarly , as of October 2010 , NBA gameplay laws are now homogeneous / universal to international basketball laws of the game ( as led by FIBA , international governing body / organization for that sport ) . Also , it makes it easier for people to watch different leagues of the same sport , since the rules are universal everywhere , as well as the fact it also makes it easier for players of the same sport to transfer between different leagues , be it domestically or internationally . This is not a necessity more than it is a formal understanding between the various leagues and sports bodies . Since North American professional teams are so closely tied to their leagues , and , in the case of the four major team sports , clearly represent the top level of play in the world , teams almost never play games outside of their league . The teams are organised so that each major city has a team to support . Only the largest cities 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 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 team s or as charter members of the WHA , which merged into the NHL in 1979 . 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 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 . Major League Soccer teams , however , play many games against international competition , due to the global nature of the sport and the presence of regional ( CONCACAF ) and international ( FIFA ) organizations . The North American system has some features of the European model in terms of a tiered structure . Major League Baseball has an associated minor - league system used to develop young talent . Although most minor league teams are independently owned , each one is contracted toa major - league team , which hires and pays the players and assigns them to a given level in its minor - league hierarchy . The teams themselves do not move up or down in the hierarchy . Professional ice hockey has a system somewhat similar to baseball ' s , while the National Basketball Association operate a small developmental league and the NFL used to operate one in Europe . Structure of European leagues . English football ( soccer ) developed a very different system from the North American one , and it has been adopted for soccer in most other 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 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 rules or Laws of The Game are determined by the International Football Association Board 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 , and then a third 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 2010 , Burnley , Hull City and Portsmouth were relegated from the Premier League to the Football League Championship , the second level of English soccer . They were replaced by the top two teams from the second level , Newcastle United and West Bromwich Albion , as well as Blackpool F . C . , which won a playoff tournament of the teams that finished third through sixth . 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 relegated from the Premier League 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 . 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 . 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 . Anyone wanting ownership of a high ranked club in his native city must buy the local club as it stands and work it up through the divisions , usually by hiring better talent . Buying an existing top - flight club and move it to the city is problematic , as the supporters of the town ' s original club are unlikely to switch allegiance to an interloper . 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 . Systems around the world . Leagues around the world generally follow one or other of these systems . Most sport leagues in Australia are based on the North American model , with the most notable examples being the Australian Football League ( Aussie rules ) and National Rugby League ( rugby league ) . 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 . The Super League , which is the top level of rugby league in the United Kingdom and France , will be run on a franchise basis from 2009 . 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 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 . East Asia n countries 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 , 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 .