Nick Bendel
Money in sport – too much of a good thing
June 20th 2011 10:22
Photo: Vagawi
The latest salary cap scandal to hit Australian sport is a reminder of the value of salary caps and the importance of enforcing them.
Sydney FC have been accused of breaching the salary cap during their title-winning season of 2009-10. The FFA have been accused of covering up the alleged breach.
All has been denied and nothing has been proven.
Any breach would be a serious issue – and not simply for ethical and legal reasons.
Salary caps play an important role in keeping competitions as viable and attractive as possible. A dysfunctional salary cap means a less viable and attractive competition.
That is worth remembering when one considers the struggles the A-League’s clubs have endured during its six-year history.
The New Zealand Knights and North Queensland Fury have folded. Gold Coast are thought to be on the brink. And a succession of clubs has had to be bailed out – including the dominant Brisbane Roar, which is reliant on FFA charity.
Sports clubs are notorious for their poor financial planning, because they operate on emotion rather than logic. They will pay unaffordable transfer fees or unsustainable salaries if it means having a chance to celebrate a title.
These fools need to be protected from themselves.
With A-League clubs operating almost constantly in deficit, it is imperative that a limit be placed on their expenditure, so they don’t spend even more borrowed money.
Salary caps limit ruinous bidding wars, of the sort seen in European football. Every year, transfer fees and salaries seem to increase. Club A has to spend more and more because Club B is doing so – even though Club B is only spending all this money in order to keep up with Club A.
This vicious cycle could conceivably last forever, because no limit – no cap – has been set. European clubs will keep spending money until their bankers call an end to the madness.
But in the A-League – as in the AFL and NRL – there is a ceiling. That makes it harder for clubs to spend themselves to death.
So salary caps keep competitions as viable as possible.
They also create a level playing field. Minnows like the Central Coast Mariners have just as much of a chance of winning the league as giants Sydney FC, because richer clubs are not permitted to outspend their poorer cousins.
Compare that to Europe. We already know next season’s Premier League will be claimed by one of five big, rich clubs: Manchester United, Manchester City, Chelsea, Arsenal, Liverpool. Wigan and Norwich don’t stand a chance.
The result is that while the Premier League is dominated by a powerful oligopoly, the A-League’s clubs have taken turns at being successful. Sydney, Melbourne, Brisbane and Newcastle have won championships. Central Coast and Adelaide have been losing grand finalists. Gold Coast, Perth and Wellington have come closing to making a grand final.
The same has happened in the AFL and NRL. In the last 10 seasons, nine of the AFL’s 16 clubs (not counting newcomers Gold Coast Suns) have made the grand final. In the NRL, it has been 12 of 16.
A more even competition is a more unpredictable competition – and a more unpredictable competition is a more exciting competition.
So salary caps keep competitions as attractive as possible.
Governing bodies like the FFA therefore have a double responsibility. They must enforce a salary cap. And just as importantly, they must be seen to be enforcing it.
When a salary cap is regarded as dysfunctional, it gets ignored. Clubs feel they can overspend with impunity. Some of them do it to gain an edge. Others do it because they assume everyone else is. That then erodes the benefits provided by a salary cap – keeping competitions as viable and attractive as possible.
There is no evidence to suggest Sydney FC breached the salary cap in 2009-10 or that the FFA covered for them.
But the accusations raise serious issues.
Do clubs respect the A-League salary cap? In other words, do they assume it is being properly enforced, so that if they or their rivals overspend, they will be caught and punished?
Football fans should hope the answer is yes. Because if it is no, poorer clubs and poorer competition will be the result.
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