Football Economics II: Salary caps
Continued: Does profit strife destroy the spirit of football?
In America salary caps are as normal as anything in professional sports. Whether it is about a predefined budget for every club or certain spending rules, no club is exempt from it – in any sport. Even football – or in America “soccer” have a salary cap. The exact opposite is still true for European football: unfettered competition, ever rising salaries for their top players, with rising discrepancies between the clubs. The questions this inevitably rises is: wouldn’t it all be fairer if we had a salary cap as well in Europa and wouldn’t it bring back more excitement and balance during the season?
What seems normal on the one side of the Atlantic is perceived as odd on the other. Whether you look at the NBA (basketball), NFL (American football), NHL (ice hockey) or even the MLS (football) – they all have some form of salary cap: For example, in the NHL and NFL teams are allotted a certain budget depending on the league’s revenue in the previous season which they are maximally allowed to spend on salaries. The same goes in principle for the MLS, but there the salary cap changes by a predefined rate from year to year (from $4.9 million to $7 million in 2027) and so-called designated players (of which 3 are allowed per team) are not subject to any caps and may earn as much as they want. Of course, neither rule prevents clubs from purchasing or contracting superstars, even more than one of them – but there are boundaries in almost any sport. This means, when you spend more on your big stars, you have less money that you can pay to the rest of your team; still, it prevents you from having a team full of superstars. No one would actually believe that in the NBA all players on the All-Star team might play in one or two teams – it is simply financially impossible. Surely, there are always some kind of exceptions or workarounds if you really want to have a player (e. g. hand money when the transfer takes place, or placement on the list for long-injured players) but these
In Europe all this sounds far away. There are predefined or agreed-on budgets, not even requirements by league: Of course, this is also due to decentralization and the largely independent structure of leagues and clubs from powerful owners, but also due to profit strife from the best clubs. Even when there is no competition, titles and wins bring money, a lot of money – which can in turn be spent on new players and higher salaries and sets up a spiral which in the long run increases the distances between successful and unsuccessful clubs. To exemplify this discrepancy let’s take a look at France: PSG has an annual payroll of 375,620,000 while FC Strasbourg has one of only 13,520,000 and their highest-paid player (€2.4 million) would not even make it into the top-25 at PSG. In Germany the situation looks little differently: FC Bayern has a payroll of roughly €200 million for the current season while even runner-up Borussia Dortmund pays only €90 million in salaries, not even speaking of last place Greuther Fürth which pays just under €10 million to their players. No wonder the table becomes predictable over the years.
Now, which system is preferable? A quasi-egalitarian system can preserve equal opportunities and which that create more excitement and changing champions from season to season. This is quite evident in America where cases of clubs winning championships consecutively for a decade are unheard-of. Further, a salary cap does not prevent you from signing stars, it only prevents you from signing all of them. However, the currently held opinion in Europe is still that if you have the money, then you should be able to use it to your full benefit without anyone interfering. And in the end, it comes down to industrial organization and competition regulation: In case of the latter at least a mild salary cap would be preferred to prohibit monopolistic structures and too large inequalities between clubs. However, the currently most powerful clubs are also the ones benefiting most form not having a salary. Hence, they will stay reluctant in introducing one in order to preserve their power and continue winning titles. Even though the Americas have shown that caps principally achieve more fairness, although complete equality will not be reached (which is also not the goal), a free market might resemble better the chances of football as big business and pure entertainment. But in terms of sportivity and competition there is no real added benefit – only increasing sympathy for the underdogs and growing antipathy for the greedy rich clubs which look for nothing but money – as the Super League experience has shown us.
Money can corrupt. Not only people but also structures, especially when it is too unequally distributed, or no regulation is imposed to create a level playing field financially. If you add then the level playing field in terms of the sport, some regulation seems necessary to preserve the entertainment for the fans and the sport as the sport – and not a business endeavor. In this regard salary caps can be one step in the right direction but they are unlikely as ever to be introduced because none of the mighty bosses in European club football would bother (in pure self-interest) even thinking about them seriously.