Following Newcastle’s 6-0 demolition of Queens Park Rangers, there was a phone-in on a national radio station to discuss the financial disparity that exists within the Championship.
The content was predictable enough with fans from a whole host of clubs ringing in to lament Newcastle’s financial muscle interspersed with a few Geordies whose counter-arguments effectively amounted to ‘deal with it’.
Although City and Villa are also benefitting from record parachute payments, it’s predominantly Newcastle who have (or had) attracted the most attention due to a combination of big-money signings and their early season form, which culminated in that result at Loftus Road.
However, based on reported transfer fees, Newcastle made a significant profit of circa £30 million during the summer thanks to the departures of Wijnaldum, Sissoko and Townsend (among others), which in turn allowed for the subsequent reinvestment and squad-building.
And whilst transfer fees alone don’t reflect the true cost (i.e. no accounting for signing-on fees, wages and agents fees), it’s likely that Newcastle’s dealings went quite some way to address their short-fall in income due to relegation.
Pretty shrewd – as Jez Moxey might say.
Although parachute payments may seem to provide an unfair advantage to relegated cubs, the real issue is the huge gulf that exists between the revenues generated and the level of investment across our top two leagues.
Without a mechanism to soften the financial impact of relegation and the loss of income, clubs would be forced to either drastically restructure their finances through a complete overhaul of their playing staff or gamble on their long-term future whilst amassing unsustainable losses.
But what – if anything – should be done about it?
In American Football, the National Football League (NFL) operates a salary cap in an attempt to create some form of parity between its teams.
First introduced in 1994, the cap is essentially an agreement between the NFL and the players which limits the total amount each team can spend on player salaries.
Every year, the cap is renegotiated based upon all revenue streams including ticketing, merchandise and media contracts.
But crucially, the calculation is made from the League’s revenue rather than those of the individual teams so that each franchise within the NFL has the same limit and constraints.
This season, the cap has been set at $155.3 million which constitutes roughly 48 per cent of total revenue.
For comparison, the average wage bill for Premier League clubs in 2015/16 was £93.4million (or $123.5 million in today’s post-Brexit money) and on average, teams spent 59 per cent of their turnover on players’ salaries.
However, those figures hide the disparity that exists between big-spenders like Chelsea who paid their players a total of £216.6 million and the likes of Norwich City with an estimated wage bill of £37 million.
The NFL cap applies to the total value of players’ annual salaries but also covers all performance-related and signing-on bonuses. However there are no constraints on what an individual player can be offered – so long as the overall number sits below the cap.
In effect the teams are faced with the same decisions that you or I might make when building a fantasy football side – spend big on a few star players or settle for a more balanced side and distribute the finances equally across the team?
The players are also faced with key decisions – join a weaker side which has more headroom within the cap to offer a more lucrative contract or accept reduced terms to sign for a better team with a better squad of players?
It’s worth noting that there are examples of NFL players who have restructured their contracts on lesser terms to free up cap-room for the overall benefit of the team.
An interesting contrast to the Premier League where wages continue to spiral – triggered by individual players demands; seeking parity with their peers and fuelled by rich owners looking to guarantee silverware.
Despite our relative wealth in Championship terms, we all know that Norwich City have financial constraints. Our ‘salary cap’ is defined, not by the League, but by those who hold the purse strings at Carrow Road – or rather those who own (and fill) the purse in the first place.
Without a limitless pot of money, the club has to define its own budget and balance the available funds and players to create the strongest possible squad. For example, the inability to bring in more new faces during the transfer window was largely down to an inability to move certain players on and remove their wages from our overall playing budget.
It’s the same for each and every club – we all just have different sized pots. And whilst that remains the case, there will always be a ‘natural’ hierarchy within the game.
The salary cap is not the only mechanism that the NFL uses to prevent a team from simply buying success or long-term dominance. It also operates a draft system aimed at balancing talent across the league.
In the draft, the teams with the poorest records from the previous season are given the first opportunities to select and sign the most promising young players out of college football. The aim is to ensure that the sport doesn’t become predictable and prevent domination by the same teams year on year.
Of course Leicester City proved that it is possible to upset the odds but in doing so they became only the sixth side to lift the Premier League trophy since the competition began in 1992.
In that same period, fourteen different teams have been crowned the Super Bowl champions in the NFL.
The introduction of Financial Fair Play regulations and parachute payments shows there is some recognition of the inherent issues, however few people would claim that these have addressed the situation.
So unless there is a collective will to fundamentally change and follow the examples set by other sports, our national game is set to remain a sport which is dominated by those with the largest budgets.
Until that point, and as the Newcastle fans on the phone-in suggested, we’re all just going to have to ‘deal with it’.
Steve posts on Twitter @stevocook