We’ve seen cases over the last ten years of Billionaires buying football clubs in England, and spending unlimited amounts of money on players, and there have been no restrictions on this at all, and clubs like Chelsea, as just one example, have spent over £1B on players since Romain Abramovich bought Chelsea in 2003 – what’s wrong with this picture?
There’s plenty wrong with it, and it’s simply an unsustainable business model, and the outlandish spending has caused other clubs to spend money they just didn’t have in order to try to keep up, and those clubs have gone into bankruptcy – or administration as it’s referred to in England.
And Manchester city have done much the same thing as Chelsea since 2008, culminating in the club winning the Premier League last season for the first time since 1968. Do you think the big money helped?
This is all very well and good for those clubs, but it’s a situation which cannot last, and UEFA President Michel Platini is already introducing Financial Fair Play (FFP) rules to limit the spending of each club to what their revenue is – so in effect they are being forced to balance their books, and the rules are being phased in over the next several years.
And we have seen some top clubs like Portsmouth and Glasgow Rangers go into bankruptcy because of gross mismanagement of their finances, and they have paid the penalty for spending money they just didn’t have.
In England there’s already a salary or wage cap – and the top leagues in both the Aviva Premiership in Rugby Union, and the Super League in Rugby League have already implemented wage caps.
America has long had to deal with big money in sports, and while things in the US are different to how sports are run in Britain – College Sports for example is a huge business – there are ways in which American Sports tries to keep things competitive so that a rich club – like the NY Yankees in baseball – cannot spend unlimited amounts of money to ensure success – like Chelsea and Manchester City have done recently.
Here are two main ways in which American sports ties to keep things competitive, and the third point is the way sports in America handles “transfers” – where players are exchanged between clubs.
- There is generally a salary cap – and the amount is a percentage based on the total amount of revenue for the sport. It is very detailed and takes into consideration merchandise sales and ticket sales
And there are two main reasons for the salary cap – to keep competition between the teams and to also get some control of the costs of each team.
In Major League Baseball instead of a salary cap there’s a luxury tax, a scheme by which teams whose total payroll exceeds a certain figure (determined each year) are taxed on the excess amount. The tax is paid to the league, which then puts the money into its industry-growth fund
- There is the college draft – where college players have completed their college playing days and can move into the top leagues. The way this is done is that the bottom professional teams in the league get the first college draft choice in a particular sport, the second bottom team gets the second draft choice, so in this way there is an attempt to even out the ability within the professional teams each year – in short the worst teams get the best players
- There are no real transfers for dollar amounts but clubs can trade players and draft choices – so in a way this is like the transfer system in Europe – and as we have seen above teams get draft choices every year.
American Football has compensation when a player leaves based on their estimated value, and if a top player leaves through free agency, their former club can put a claim in and get draft picks from the player’s new team.
They also can franchise tag a top player to keep him from leaving. What this means is they can do this for one player a year, and that player has to remain with the team, but he is paid the average of the top five wages at his position for that year.
And American sports also have player unions, but all is not well at the moment in the NHL, where there is no agreement on wages between the owners and the players’ union, and there is a lockout in progress, and fans have to hope things are agreed soon, and they don’t have to go through another year like back in 2004, when the entire season was lost because of a dispute.
Ad NHL referees have just returned to American football after their stand-ins produced some terrible calls that cost teams some games, but the owners finally agreed to give the referees a wage rise and better pension benefits – and they are back refereeing again.
It’s difficult to justify these types of disputes with rich players involved, when economic times are so difficult and ordinary people are struggling big time – but it seems the owners are making big money and the players want to see more of it.
We have to hope that the new FFP rules being introduced by Michel Platini will get the job done, but notice that the rules still favor the big clubs, because clubs can spend what they bring in revenue, and of course clubs that play in Europe, and especially in the Champions League have much bigger revenues than other clubs like Newcastle United – as one example.
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