“Financial Fair Play” and Geography

One thing I’d like to note in response to Patrick’s post about Financial Fair Play, and the “grand canyon-sized gap between the clubs”. I would argue that this gap is not particularly surprising, given the way that professional sports leagues have developed in Europe as opposed to in the US (what that says for the potential new regulations, I won’t have much to say).

England is a country of roughly 50 million people, and its Premier League consists of 20 teams scattered throughout the country (with one in 3 million person Wales). Of those 20 teams, 5 are in the Greater London, 5 more are in Greater Manchester, another 3 in West Midlands (within a few miles of Birmingham, the second largest city in the country), and 2 each reside in Liverpool and the Newcastle-Sunderland metro area. That is, 17 of the 20 teams are concentrated in 5 large urban areas. For reference, those 5 urban areas have a combined population of 15 million people. The three other teams are scattered in smaller cities, with populations between 200,000-400,000.

Now, suppose that the NFL owner’s lockout had caused the league to crumble, and in its place, most of the US states established their own leagues. Consider then the case of California. If they wanted to build a 20-team league, could that work? Well, they might put 5 teams in LA, another 5 in the San Francisco Bay metro area, 3 in San Diego, and 2 each in Sacramento and Riverside. That is, 17 of the 20 teams would be concentrated in 5 large urban areas. For reference, those 5 urban areas have a combined population of 28 million people. The three other teams could be put in the Fresno, Bakersfield, and Oxnard metro areas, each of which has a population greater than 800,000.*

So, point being: it seems likely that with enough advertising and stadium money and whatever else, that could work! However, just like in European soccer, these teams would be competing against one another on the field, but in terms of TV time, they would also be competing with teams from other leagues across the country. It wouldn’t be surprising to see a couple of the LA teams, or maybe a San Jose team bankrolled by Silicon Valley billionaires, tear through the league year after year and compete successfully on a country-wide stage. Doing so would boost their TV contracts, ensuring higher revenues and ever-better players. Before long, you might well have San Jose Solar Panels and the Santa Monica Surfers towering head and shoulders above the competition.

In the interest of fairness, perhaps the new California league would follow the NFL and enforce parity by instituting a player draft, salary caps, and revenue sharing. Or perhaps, the state government would seize the opportunity to institute high tax rates on these high-earning players. What would the likely outcome be? Probably an exodus of top players to the state football league of low-tax Texas–depriving California football of the revenue it needed to sustain itself and the players its fans loved to watch.

Eventually though, the top teams from the state leagues might seek to set up a separate competition on top of their usual games, one that pitted the top teams in each state against one another. They might call it the “Champions League”, or maybe the “National Football League”. This would present another new revenue source for those teams, and perhaps create some interesting inter-state rivalries. If it were successful enough, I could even see these top teams dropping their state leagues, and just moving strictly to the national league. Such a move would probably kill off the state leagues.

To rewind my analogy, the current situation–where only a couple top teams are located in each state, and they play teams thousands of miles away–is roughly analogous to the European Champions League, in which the top teams from the various European countries battle it out for continental supremacy (with the smaller home leagues stripped out in the US). This league features a much closer approximation of parity–in the last 15 years, 9 different teams have won the Champions League, while 10 different teams have won the Super Bowl. The teams who compete here tend to be on much more equal financial terms with one another. But this is not the main competition that teams, fans, or commentators tend to focus on–nor is it where the bulk of the games are played.

Unlike in the US, it doesn’t seem as likely that the smaller country-level leagues will fall apart. However, I only say that because of the cultural and historical pull of maintaining those leagues. After all, what’s to stop Manchester United from getting together with Real Madrid, Milan, and their closest friends and rivals, and joining a permanent Super League? There is still money at the national level, but these clubs’ financial fortunes are more dependent than ever on earning money abroad. It seems to me that the biggest thing holding them back is tradition–and those can change.

So, what’s the alternative? The NFL is probably the best example (that I know of) where a league has made itself profitable for all of its members by adopting parity-enforcing techniques. These techniques depend to some extent on the league having a monopoly over player talent–but that problem could be avoided if all of the big European leagues established similar systems in tandem. However, what exactly is going to get Manchester United to buy into such a system? If their public stock offering (in Singapore!) goes through, their debt should be about covered, and going forward they should be spectatularly profitable. Why would they buy into a system of revenue sharing? It could be imposed from the “top down”, but who is this “top”? What are their interests? And if that did happen, why wouldn’t the Super League emerge as a credible (and profitable) alternative?

Again, I’m not really trying to argue much here, beyond that perhaps a certain amount of fragmentation was more or less inevitable–or at least, unsurprising. I am mostly suggesting that there are no good solutions. Patrick supports salary and transfer caps, with higher taxes on salaries. Perhaps. In American sports, salary caps are a means to transfer income from players to management. In the European common market, players would likely just leave for another country, unless it were done in tandem–and even then, it would mostly just be a transfer of income from players to management. Transfer caps would make star players more likely to play out their existing contracts (by reducing the value of off-loading them). But who does this benefit? Surely Real Madrid won’t sell Ronaldo for $30 million, just because there’s a cap–it would just hold onto him instead. At contract expiry, players will (again) move to whichever country–Russia, perhaps?–doesn’t have a salary cap.

Which isn’t to say that they are terrible ideas. It’s just that they aren’t panaceas. Nothing is. If everything fell apart and we got a continental Super League, I think Patrick would probably still watch. I know I’d love to see how Real Madrid and Barcelona would fair in a 40-game season against the Manchester teams and their ilk. But the joys of the FA Cup and the Copa del Rey would be no more–and that would also be a real loss. While I appreciate the intentions behind establishing a greater parity behind financial reforms, I’m just not sold–on anything, at this point.

*I should note that this is basically what college and high school football are–regional leagues with attendance not much below that of the various English football leagues.

2 thoughts on ““Financial Fair Play” and Geography

  1. I do understand your main point concerning the risks each of these harder solutions (other than those offered) would have. But, supposedly UEFA would institute the rules who holds the rights to the Champs League and generally is the governing body of Europe. FIFA I think only is higher than them. So, if the rules were wide spread across Europe (Russia included here), it might (again, hesitancy) help create greater parity. Overall, I’m not convinced the economy is an autonomous thing that can’t be controlled. Humans made it and can shape it. But, if anything, the whole thing may have reached proportions that just aren’t controllable; that is a very real possibility. And if that’s the case, screw it all.

    But, I think (hope?) some of the transfer caps and such might force clubs to spend more time on internal youth development, and some club loyalty on the part of players might reemerge (if you–supposedly–always dreamed of playing for your “boyhood club” and actually got to play there, you might stay instead of taking the first big offer from a bigger club). A richer sporting culture might be fostered. More Manchester United fans might actually be from Manchester. Zing! And, the flip side, other clubs might get some chance to get fans outside their geographic zone. Man U only exists, remember, because Stoke and Wigan do, too.

    I will, of course, watch whatever drivel comes out whether it’s some super-league (which has been discussed) or the status quo. But, I think that traditional culture is a very powerful thing and that part of winning the FA Cup is that it has that tradition behind it. You know all the previous teams that have won it, etc. etc. In the end, any policy that tries to institute some sort of financial fair play will, as devin correctly points out, battle the “race to the bottom” which, ironically here, is a race to the top, or a race to who can outspend whom.

  2. Yeah, I didn’t intend to come down to strongly in favor of/against any particular proposal. I was mostly just struck by various things I’ve read (mostly elsewhere) about how Spain/England/whoever needs to take a page from the NFL, and the difference between running national leagues in countries that are more or less comparable sizes to US states.

    I think you’re right that it would work much better if it were introduced at a continental level, and that’s my basic complaint about a unilateral Rooney tax.

    But also interesting (probably to both of us) is how strong an argument this is for the importance of the nation-state in all sorts of developments–cultural, institutional, and economic. If nations didn’t matter at all, then a continental superleague would be inevitable. But they seem to, so we’re left with a weird mishmash where Manchester United is selling themselves on this world stage and then compete against, like, Norwich City, who is on the stage of Norwich. Even ignoring the worldwide aspect, the fact that Manchester is like 10 times bigger than Norwich suggests that this is going to be hard to iron out. But nevertheless, the nation-state is a constraint on the evolution of footballing institutions.

    I’m not sure if that’s a good thing or a bad thing. The NFL has obviously been doing something right, as the league is ridiculously popular and basically rolling in money. But they have done that via careful use of monopoly power, a ridiculously anti-free labor stance, and massive transfers of public money (in the form of stadium investments). I dunno what I think.. but it’s an interesting topic to think about, surely.

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