With professional sports hit hard by the global coronavirus pandemic, leagues without salary caps — like most of the football world — are bringing them back up in conversation as a way to ensure stability. German FA president Fritz Keller says it’s something “they have to think about,” and the reasons are pretty straightforward.
Wages are the single biggest cost for any professional club. They typically amount to somewhere between 60% to 80% of revenue, though at some money pit organizations such as Nottingham Forest, they can actually be higher than revenue, with the owner pumping in money every year. So if you cap wages, then presto! It becomes a heck of a lot easier to make money or, at least, stay solvent.
I’m all for financial oversight; regular readers know that “transparency” is one of my favorite words. If football were transparent, from wages to fees and commissions paid to agents, you wouldn’t even need hefty regulations and an army of auditors/nerds to go through the books. Oversight would be crowdsourced by fans.
But when it comes to salary caps, I get distinctly spooked, because the term smacks of demagoguery. And there are two very different kinds of cap, too, that serve distinctly different purposes. There are caps designed not just to push sustainability, but parity as well. Those are familiar in U.S. sports leagues, like the NFL, the NBA or MLS. And while these caps can be “soft” or “hard” and offer myriad exemptions and exceptions, they are predicated on the principle that teams should spend roughly the same.
Then there are caps whose sole purpose is sustainability. They’re not interested in teams all spending the same amount; they’re predicated upon teams spending the same proportion of the money they make. They only exist in theory because, as we’ll see, there are many more factors involved when it comes to sports which, like soccer, are traditionally based on promotion/relegation, transfer fees and limited revenue-sharing between clubs.
The principle is essentially the same, but the effects are very different. The U.S.-style caps work because those are closed leagues where nobody gets relegated, parity is considered desirable and there is collective bargaining with the players’ unions. (None of which is the case in the vast majority of professional football leagues.)
In the NFL, the salary cap is calculated by taking the league’s projected revenues from television, sponsorship, ticket sales and anything related to the business of football, dividing up by the number of teams (32) and then taking 48% of that. That’s the most you can pay your players. There’s also a salary floor, which is a few percentage points lower than that, to ensure owners actually spend money and don’t collude or cheap out. (It’s a little more complicated than that, with exceptions and exemptions and other knickknacks, but that’s the basic principle.)
There are plenty of reasons U.S.-style caps wouldn’t work in football, and many are the same reasons that revenue-based caps wouldn’t work either (we’ll get to those later). But the most basic issue is that, in football, clubs in the same league have massively disparate levels of revenue.
Take the Premier League as a case study. In 2017-18, the 20 clubs made a combined £4.8 billion ($5.8 billion) in revenue. That’s £240 million ($290m) per club. Now let’s say the salary cap is 60% of per-club revenue, which would be £144m ($174m) for each team. That would mean wealthy clubs have to cut wages enormously to reach the cap: Arsenal would need to lop off 40%, Liverpool 45%, Manchester United a whopping 53%. Meanwhile, there would be a total of eight clubs, including Watford and Brighton, whose total revenues are less than what they’d be allowed to spend on wages.
U.S.-style caps only work if revenues are roughly equal throughout the league like they are in the NFL, where broadcasting and sponsorship income is equally distributed and the only variance come from gameday receipts and sponsorships. That’s not going to happen in football. Owners whose clubs are currently valued at, say, $3 billion, like Roman Abramovich’s Chelsea, aren’t going to accept seeing their revenues halved so they can share with Bournemouth or Burnley.
So what about the other salary cap, the kind linking wages to revenues?
Some would say it’s a close cousin of UEFA’s Financial Fair Play regulations, except FFP caps losses rather than wages. The upshot, though, is largely the same. So too is the downside: if Manchester United’s revenues are four times those of Burnley and you tell them they can’t spend more than 60% on wages, that’s fine: they’ll still be able to spend four times as much as Burnley.
This is, of course, potentially a surefire way to ensure stability in the system, but as we’ve seen with the criticism of FFP, it also ensures the rich stay rich and the poor stay poor. It would potentially be subject to legal challenges even more so than FFP, which isn’t out of the woods in that department, because the latter doesn’t act directly on wages. You could, I suppose, allow wealthy owners to put their own money in — something FFP limits, as you’ve seen with the brouhaha over “related party sponsorships” — but that would simply drive up costs, which is exactly what you don’t want to do.
And that’s before you get to the factors that, simply put, make both types of caps unworkable.
The NFL gets away with it because they have no competition. In football, unless you wanted an exodus of players to uncapped leagues, you’d have to apply it globally, and that’s not going to happen. Not when you’d be dealing with dozens of different legal jurisdictions and tax regimes.
There’s another Pandora’s box here too, one that few like to talk about: paying players off the books. It might not be as straightforward as it once was when every Fabio and Wolfgang, every Jorge and Robbie, every Didier and Dodgepot could sign a bogus image-rights deal, open up an offshore account and be paid out of slush funds, but it’s still rife in the game and this would only encourage it. After all, this dates from last month, not last century. And the simple truth is that very few entities, outside of the U.S. Department of Justice, have the necessary muscle to investigate.
If you really are dead-set on a salary cap in football, FFP is a much better (and less blunt) instrument, if only because it looks at the whole picture of how much is spent on players: wages, transfer fees and commissions. The latter two don’t exist in the NFL or NBA, so it’s not really an issue, but in football they’re hugely important. That said, again you’d need global compliance for it to work, as well as greater flexibility so that owners with access to cash — we’re talking real cash, not IOUs to dubious lenders — can fund growth in certain circumstances.
In the long run, there are better ways to ensure the stability and solidity of clubs, such as having tougher rules on cash reserve requirements and ensuring there’s enough oversight and legal muscle there to enforce them. Like transparency: total transparency, that is. If you’re going to argue that clubs are public trusts and have some social function (an argument often made to ensure stability), crowdsourced oversight by making every figure public so that those who care about the club the most — the fans — can be the first to query dubious or frivolous expenses. Like making it illegal for an owner to borrow against club assets (especially not to fund the purchase of the club itself …) and making sure auditors are accredited and liable and are not someone’s cousin with a briefcase, a calculator and an accounting degree they bought off the internet.
You don’t want to strangle football with so much red tape that nobody can invest. You just want to make sure that investment is backed by real, tangible cash, that bankruptcy (if it happens) doesn’t provoke a chain reaction and that, above all, a football club’s main purpose is simply to exist for the benefit of their fans. And not, as is so often the case, as a vehicle for individuals to get rich or acquire social or political influence.
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