Correct, and part of the formula UEFA use to decide on the number of spots a football association receives is how many television viewers that country will generate - nothing to do with champions or quality of football hence England 5, Scotland 1.5
Not quite... domestic results are used for the calculations. However, bonus points are awarded for success in European competitions and stuff, and this is where the 'bigger' nations get an advantage.
As we all know, the higher up the list of UEFA coefficients a nation is, the more places it gets in the Champions League. So for example the three highest ranked nations Spain, England and Italy, each get four places, while the next three ranked nations get three places, and so on.
As mentioned, you can improve your coefficient ranking by doing well in European competitions, so if your country has more teams competing in those tournaments it figures that you're likely to pick up more bonus points and retain your place high up the list of coefficients. And of course, the clubs from these nations get the lion's share of the cash, meaning it's harder for the teams from other nations to compete against them the result is that it's these teams who year on year advance in Europe, picking up the bonuses. This financial advantage skews national leagues as well would the Premier League's big four be as dominant domestically without their Champions League gravy train? Most likely not.
It's kind of like a self-fulfilling prophecy yes, this system means that what are ostensibly the best leagues in Europe get the most places in UEFA competitions, but it can be argued that they're only ranked higher because of the advantages the system gives them.
I will concede that a useful result of this system is that the countries with the traditionally larger TV audiences get to keep their place at the top of the pecking order and have more teams competing meaning more money for UEFA from TV rights. Great, isn't it?
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