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
The NFL model isn’t analogous to the EPL because the NFL is the premier American Football competion, whereas the EPL is just one country’s competition, whose clubs compete globally with foreign clubs for players — and whose top clubs compete with European clubs in tournaments (and for sponsorship and commercial revenues). If the EPL were to introduce a wages cap players would simply go elsewhere.
But the EPL won’t introduce a wages cap, ever, because 14 of the 20 member clubs have to support any policy change for it to be carried, and there will always be more than 6 clubs against capping wages.
We will have to deal with it. As a yoyo club we benefit a bit when we’re in the Championship (more by the ability to keep the players we want than making big signings) but lose out heavily to the Prem clubs with endless money when we’re up there.
The NFL isn’t a great comparison as it doesn’t have any competition for its players or have the level of employment laws and rights we have. If we put a salary cap in place here, would Spain or Germany follow suit?
Financial Fair Play is a bit of a toothless tiger.It has been greatly diluted at the top of the game and Championship clubs such as Bournemouth and QPR are willing to risk a heavy fine (which I think they only pay on return to the Championship) to obtain promotion to the honey pot of the Prem.
We’re all stuck with it.
Mick, imagine a premier league with only British players after all the mercenaries go elsewhere….
Maybe the national team would benefit
It’s a great idea but it’s never going to get accepted over here. Too many self interests within individual clubs.
I believe the system works well in American soccer (I hate that word) because the player registrations are owned by the League, rather than the individual clubs.
Not sure why you’re looking over the Atlantic for an analogy when rugby (both varieties) has long operated a salary cap albeit at vastly lower levels than the PL. With the different competitions and European leagues-fixtures, this is surely a better analogy for footy?
http://www.premiershiprugby.com/salary-cap/
With the round ball game, sadly it’s a case of closing the stable door etc now there is such huge TV money swilling around. It’s a consumer-led bandwagon with all the brakes taken off.
I’d like to see temporary salary reductions enforced when players are not being picked for the 1st team. Would be a massive encouragement to the individual to buck their ideas up. It riles me when I see certain individuals on full pay for no play.
But the NFL is a franchise operation, no relegation.
They share income from licensing NFL products, including shirt sales, and access to draftees, so there should never be a financial failure, but if a franchise should fail (or be outbid) they would simply move to another city.
Mick raises another point, about 14 out of the 20 Premier League member clubs supporting policy change – how long will it be before the largely foreign owned clubs pull up the drawbridge behind them, end relegation and cast the 72 aside?
Not sure why the premise of the article or the comparison is being questioned.
It’s a perfectly reasonable argument – in principle the idea of sharing the wealth and the draft is about as fair as professional sport could get – and ironically a little socialist for a nation still paranoid about reds under the bed.
But can we dream for a moment? Maybe FIFA finally roots out all its corruption and that slogan ‘For the Good of the Game’ finally means something: it makes every FA in the world adopt the NFL principle along with relegation and promotion.
Norwich can aspire to do a Leicester every season. Arsenal fans can take their sense of entitlement and flush it down the loo. Franchise clubs – which are everywhere but hiding behind their ‘community responsibility’ will finally be outed.
Of course it’s a pipe dream. But one day people will get bored of this Harlem Globetrotter system and just switch off.
Interestingly in the NFL, despite their efforts dominant teams still emerge – the New England Patriots being the main example. Equally their are teams who are consistently poor and not reach the playoffs. This tells me there is still more to it than just money. It’s about excellent coaching and the ability to build a team. My belief is still that our best chance of continued success rests with showing faith and patience in Alex Neil and the squad he is building.
I think we unfortunitely just have to deal with it. As others have said the NFL is a closed shop and has no outside competition for players. With this latest TV deal the PL is finally starting to catch up with the games biggest spenders. Until very recently the top transfer fees paid league table has been utterly dominated by Real Madrid and Barcelona. With that they have also dominated the truely world class talent.
Whether Pogba is truely a WCT is up for debate but they paid a fee that suggests Real and Barca will no longer have it entirely their own way. But the truth is any salary cap would have to be world wide to have any sort of chance of success, would the Chinese and their newly rich league be happy with that? Would the PL? Now from top to 4th from bottom in the top 30 richest clubs by revenue in the world.
Competition dictates that we won’t get a salary cap, but could something else be done? Could a promoted side be given a golden hello? “Here’s £50M upfront see how you go”. On the relegation side it’s a difficult connundrum. The loss of the TV money grows ever bigger and it is going to lead to propomtion increasingly becoming a closed shop to any relegated sides that are even half well run.
Bah!
While we have 2 different structures governing our football structure ,ie The Premiership & the FA , , those outside the elite WILL have to deal with it. The PL has the TV deal that brings in so much of the money swilling around the top 20 clubs. Unfortunately those that hold the purse strings to this pot of gold are only interested in their own. Lip service is paid to the rest with virtually nothing filtering down to the lower levels of the football pyramid, even though we all know that if the base of a pyramid becomes too weak the whole thing will collapse. That’s in stark contrast to the world of athletics , where Britain has been so successful these past few years. It still has its super stars with wealth & fame , but since the introduction of Lottery money the whole of athletics has benefitted. This in turn has been the basis for a good solid structure that has resulted in a steady stream of up & coming talent & continued success for those who make it to the top.
If football continues to fritter away the golden pot of gold on players wages , agents & spiraling transfer fees I fear for the fate of football outside the PL in this country.