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Most of us cannot even begin to imagine what it must be like
earning the megabucks that many professional sports players
earn. So what if you suddenly found that the amount shown on
your pay slip was £500,000
per week
?
Imagine the plight of Ricardo Izecson dos Santos Leite (better
known as Kaká) when he learnt of his earning potential at
Manchester’s lesser known club if he were to ditch European
giants AC Milan.
Ardent fans of the beautiful game lambast ‘mercenary’ players
for abandoning aspirations of representing the most prestigious
teams in favour of a quick buck. But let’s be realistic; if another
company offered you double your salary to do the same job
elsewhere, would you turn them down because “it has always
been my dream to adjust claims/plaster walls/deliver the mail
for…(insert appropriate company here)…”? Probably not!
The implication is that Manchester City with their new billionaire
owner, Sheikh Mansour bin Zayed Al Nahyan, will surpass
Chelsea’s efforts in harvesting the world’s finest players to forge
a global monopoly. Is this fair on their English Premier League
(EPL) rivals? Take Everton for example who are closing in on
the ‘Big Four’ and even crashed the party in 2004/05? Or Aston
Villa who are doing the same this year. How can their shoe-string
budget compete with the ever increasing wealth of the Champions
League regulars?
The two detrimental aspects of increased wages in football are
the ability for the richest clubs to afford the best players and
dominate a league, and the issue of solvency for clubs paying
more on wages than their turnover.
Would a wage cap be the answer?
Michel Platini, the president of European football governing body
UEFA, thinks it may be. He has told the European parliament that
he is reviewing proposals to cap spending by clubs. “Clubs are
telling us that our system is in danger of financially imploding in
the medium term. We are looking at limiting a club’s expenditure
on staff”, he said.
‘That limit would be salary and transfer fees combined - to an
as yet undecided percentage of its direct and indirect sporting
revenue.’
‘During this year’s festive season, one club which had suddenly
become very rich made various astronomical bids in the transfer
market,’ Platini added, alluding to Manchester City’s bid for Kaka.
‘Many people have responded by talking about limiting players’
wages by introducing a European salary cap.’
Do any of these players warrant such bloated wages? Well if
you compare across sports, then yes. Top sportsmen in F1 (Kimi
Raikkonen earned $44 m in ‘07), Tennis (Roger Federer - $35 m in
‘07) and Golf (Tiger Woods - in excess of $100 m in ‘07) all receive
more than any footballer with the exception of David Beckham
($50 m in ‘07) who earns over £70,000 per day. You could argue
that Kaká would be receiving his worth, as a world cup winner
with the World Player of the Year accolade under his belt.
According to Deloitte’s Annual Review of Football Finance, in
2006/07 the EPL wage bill was well out in front compared with
Europe’s five biggest leagues at €1.44 bn, 75% higher than nearest
contender; Spain’s La Liga at €822 m. The report revealed that
the percentage of wages to turnover in the EPL stood at 63%,
which is a comfortable level for teams receiving a share of the
current TV deal worth £2.7 bn.
However, while wages have grown by 13% in 2006/07, the
revenues only grew by 11%.
So how could a wage cap improve the situation? We can compare
with the National Hockey League (NHL) in North America and
Canada where a salary cap was introduced to ensure the ‘cost
certainty’ of clubs.
The salary cap represents a budget calculated on a league wide
percentage of revenue. There is a maximum spending limit, a
minimum spending limit as well as greater transparency over
contract details and player wages (no player can earn more
than US$10m per year). A benefit of this wage structure is an
emphasis on promoting cheaper home grown players. But how
would you impose a limit on spending for Manchester United that
is fair on Wigan Athletic?
The biggest difference within the NHL is that contracts are strictly
binding agreements compared to those of the football world.
Players can only leave their club at the end of their contract or if
they are traded. There are no contract release fees, and trades
are done for players on the merits of who can benefit the team.
There is an expectation in the US that the wage cap will decrease
over the next few seasons to reflect the economic downturn,
proving that the sports industry doesn’t exist in a bubble immune
to the recession.
The wage cap isn’t perfect though. Despite the limit on team
spending, the equality hasn’t drastically changed the hierarchy
in the NHL; the traditionally biggest teams still threaten the top
places each year.
There have also been ‘lockdowns’ where the NHL Players
Association has gone on strike over pay and a whole season was
Given the rise of mega clubs
dominating their sport, salary
capping is being proposed as a way
to increase competition in the major
football leagues in Europe, so we
ask…
Is
Wage Capping
the
Way Forward
for Sport?
Story by Chris Hootton