The Premier League is the most entertaining league in the world. We’ve all heard this phrase, but figures for both domestic and overseas broadcasting rights appear to back up the claim. However, despite the monetary success Premier League teams are awash with losses and financial burdens. The need to compete is sending clubs into spending beyond their means.
The problem hasn’t passed by UEFA and the Financial Fair Play (FFP) rules were installed on June 1st of this year. The central crux of these rules is the elimination of debt. For the period 2011-2014 clubs will be able to record a maximum loss of £39.5million (falling to £26.3million in the ensuing three years after).
Of the debts amassed by English clubs, the main problem is wages. Stats released by Deloitte concerning the 2010-11 season illustrate just how deep the issue runs. Blackpool with a turnover of £9million spent 144% of their income on wages. Similarly, Manchester City with a turnover of £125million spent 106% on wages. In fact, of the 20 Premier League clubs only eight spent less than 70% of their turnover on wages, and two of those; Everton (69%) and Birmingham (68%) were right on the cusp.
Whilst the FFP is aiming to eradicate this kind of expenditure and force clubs to ‘earn’ their money before they spend it one issue that hasn’t been heavily debated is that of the salary cap.
Amongst some fans the cap has been touted as the all-encompassing solution to the spectre of debt. People have often debated the potential successes but we must look at what these successes would be, should it ever be introduced.
The National Rugby League in Australia brought in a salary cap for two reasons: i) to level the playing field, and ii) keep spending in check. A look at the recent winners would suggest that the first goal has been achieved. Since 2001 there have been 9 winners of their competition.
The NRL has also been reluctant to raise the cap to any significant degree. This has led to players leaving, initially for England (and the Super League) and also to Rugby Union. However, the NRL have backed their youth policy to replace any departing stars. Critics say this has been a failure though as the national side, seemingly unbeatable for over thirty years has been caught and ultimately eclipsed by New Zealand.
The spread of competition would appear ostensibly to be an area worthy of investigation. In the past ten years only three teams have lifted the Premier League trophy, and prior to Spurs and then Man City crashing the party even the Top Four was easily predicted prior to a season starting. In spite of this the Premier League is still the most watched league in the world, so it would seem this lack of competition hasn’t hindered the interest.
In fact, globally there are contradictory aspects to the cap. In baseball there have been nine winners in ten years. In the same period there have been eight Superbowl victors in the NFL. However, in Super League only four clubs have tasted success, the same number as in the NBA, illustrating that it doesn’t always eliminate dominance.
If disparity of success isn’t guaranteed with the implementation of a salary cap we must look at the other goal of the NRL: that of debt reduction. One of the oldest criticisms of a cap is the perception that it punishes successful clubs by only allowing them to spend the same as much smaller teams.
In the area of TV revenue English football does make an effort for parity. Each team is given an equal share of 50% of the total revenue generated. Compare this with Spain where clubs negotiate their own television deals, resulting in huge financial disparity, for example Barcelona and Real Madrid who make £156million and £139million respectively compared to Sporting Gijon, whose deal is worth a barely significant £2.2million.
In rugby league’s Super League, clubs are sanctioned to pay a percentage based on their income. There is a minimum amount on the cap (around £1.1million) rising to a maximum £1.6million for the clubs who generate the most money. This criteria could be applied to football meaning Man Utd (turnover £286million) could still pay higher wages than West Brom (turnover: £28million) and would, in fact benefit those who achieve greater rewards of revenue. Although the example of Etihad sponsoring Eastlands would be a way of circumnavigating this issue (much as it is with the FFP).