Independent Research gt 4 March 2015

Ms. Kucik

Independent Research GT

4 March 2015

The Influence of Money on Competition in European Soccer

In the last ten years, eight different teams in the National Football League (NFL) have won the Vince Lombardi Trophy by winning the Super Bowl while only three different English soccer teams in the English Premier League have won the Premier League title in the same time period. This is common in many other European soccer leagues. In eighty-two seasons of the Spanish soccer league, La Liga, two teams have won the league a combined fifty-four times, which is more than half of the total. This has become a major problem because rich teams with high revenues keep dominating the leagues for long periods of time. Many things have been discussed by the Union of European Football Associations (UEFA), the official governing body of soccer in Europe, about what they can do to improve competition in European soccer leagues. In order to become more equal and competitive, European soccer leagues should implement salary caps and teams with small fan bases and lower revenues should do marketing overseas to gain larger fan bases and reach the financial level of the dominating teams.

Unlike European soccer leagues, it is very difficult for teams to dominate over a long period of time. New teams start to challenge for the championship year after year. In Europe, the same teams tend to challenge for the trophies over time. Many people in the United States enjoy watching the NFL because it is very competitive. However, the situation is European soccer is very different. In European soccer, a few teams tend to dominate the leagues for a long period of time because they receive higher revenue than other teams and are able to spend unlimited amounts of money to sign the best players to big-money contracts. Small-market teams normally lose their best players to the rich and established teams because they are not able to pay these players the same amount of money as the rich teams. These small-market teams usually end up selling their best players to the rich teams in the transfer window, which is a period in the year where players can transfer from one team to another. UEFA attempted to prevent teams from spending too much money in the transfer window by introducing the Financial Fair Play (FFP) regulations. They hoped to prevent teams from spending money that they did not have to acquire players in the transfer window. However, FFP regulations have been criticized because they prevent small-market teams from investing a lot of money in the transfer window.

The NFL is organized differently than the European soccer leagues. The NFL is an organization that creates all the teams. Teams such as the Baltimore Ravens and the New York Giants were created by the NFL. In Europe, the soccer leagues do not create the teams. Instead, all the teams come together to make up the league. Teams, such as Manchester United and Tottenham Hotspur, are separate organizations created by themselves but they come together to make up the English Premier League.

The organization of the NFL makes the league more equal and competitive compared to European soccer leagues. In the NFL, all thirty-two teams receive the same amount of revenue from the league. In the 2013 NFL season, the NFL equally divided $6 billion in revenue and all thirty-two teams received $187.7 million from the league (Rovell “NFL Teams Split). The total amount of money that each team received represents 3.1% of the overall revenue of the league. The equal distribution of money in the NFL has created genuine competition because no one team can acquire all the best players in the league (Kuper, Szymanski 165). Sharing the national revenue equally also leads to the teams becoming more equal financially.

There are other factors, such as the playoffs system, that also contribute in helping make the NFL competitive. The NFL determines its champions by the playoffs. The playoffs are a tournament where twelve teams from the league compete to win the Super Bowl. Teams qualify for the playoffs based on regular season records. Teams are eliminated from the playoffs after they lose a game. The two remaining teams compete in the Super Bowl for a chance to win the Vince Lombardi Trophy, the championship trophy of the NFL. The most consistent team in the NFL does not always win the league because of the playoffs system. In the 2012 NFL regular season, the Denver Broncos and the Atlanta Falcons were considered to be the two most consistent teams because they had won thirteen games out of the sixteen regular season games. However, the Baltimore Ravens ended up winning the Super Bowl although they had three fewer wins than the Broncos and the Falcons during the regular season. The playoffs ensure that no one team can dominate for many years in the NFL (Kuper, Szymanski 207). This leads to the NFL producing a bigger number of different teams that win the Super Bowl.

European soccer do not use a playoff system to determine their champions. In European soccer leagues, the team with the most points at the end of the season becomes champion. The amount of points a team gets depends on the results of their games. Three points are awarded to the team that wins the game and zero points are awarded to the team that loses. If the game results in a tie, one point is awarded to each team. The points system that is used by European soccer leagues ensure that the most consistent team wins the league. If an American league-style playoff system is added into European soccer leagues, the best teams in each league would have to compete in a post-season tournament, and it would give the most consistent team a lesser chance of winning the championship.

The salary cap is also another factor that helps improve competition in the NFL. The NFL salary cap puts a limit on how much money teams are allowed to spend on the salaries of its players. The salary cap limit is adjusted annually based on the NFL’s revenues so the limit for each season is different (Brooks “How Does”). Teams can be penalized for violating the salary cap. The Denver Broncos were fined $950,000 million for avoiding the salary cap between 1996 and 1998 (Maske “Broncos Penalized”). As a result, teams with more money do not have any advantages because they are only allowed to spend the same amount of money as the other teams on the salary of their players. Teams also have to make hard decisions about trading and retaining their players (Shinzawa).

Unlike the NFL, European soccer leagues do not have salary caps that limit the amount of money that teams are allowed to spend on the salaries of their players. In the 2010/11 season of the English Premier League, the team that finished in first place, Manchester United, spent £152.9 million on the salaries of its players, which was almost three times as much as the amount of money West Ham United, the team that finished in last place, spent (Oliver and Palmer). Implementing a salary cap in European soccer leagues could help improve competition. It would prevent rich teams, such as Manchester United, from spending so much more money than teams like West Ham United. The salary cap would help prevent rich teams from signing all the best players (Wallace “The Advantages of Salary”).

Although a salary cap could help improve competition in European soccer leagues, the leagues would face many challenges if they decide to implement a salary cap. A single salary cap would be required for all of the leagues in Europe because European soccer teams compete against each other in European tournaments, such as the UEFA Champions League or the Europa League. If only certain leagues had salary caps, teams from other leagues would have an advantage over teams from the leagues with the salary cap. UEFA would have to implement a salary cap for all of the leagues in Europe in order to make it fair (Dietl et al).

In order to implement a salary cap that works for all of the soccer leagues in Europe, UEFA would need to make a percentage-of-revenue salary cap because some leagues in Europe have higher revenues than others. In the 2012/13 season, the English Premier League received €2,946 million in total revenue while the French Ligue 1 received €1,297 million (Masters “And the Richest”). As a result, the teams in the English Premier League would have a higher salary cap limit than the teams in Ligue 1 because the total revenue of the league is higher. However, it would be very difficult to manage a single salary cap for all the leagues in Europe and UEFA would also have to get the approval of European Institutions in order for the percentage-of-revenue salary cap to be implemented (Dietl et al).

Implementing salary caps is something that UEFA can do in the future to help improve competition in European soccer make the teams become more equal financially in competitions. Something that could be done now to help the teams become more equal would be doing marketing overseas. If small-market teams target big global markets, such as the United States, it would help these teams increase their revenues and reach the financial level of the rich and dominating teams. Now is a very good time for these small-market European soccer teams to do marketing in the U.S. because statistics show that soccer is gaining popularity in the U.S. The television ratings for the U.S. games in the 2014 FIFA World Cup were higher than the ratings for the previous World Cups (Beaton, Johnson “Marketers Hope Soccer”). The World Cup game between the United States and Portugal on June 22 was viewed by a combined 24.7 million viewers in the United States making it the most viewed non-NFL sporting event (Beaton, Johnson “Marketers Hope Soccer”).

These small-market teams can follow the footsteps of previous European soccer teams that have done marketing in the U.S. before. Five of the twenty English Premier League teams toured in the U.S. in the summer of 2013 (“On the Road”). These teams played in friendly games against each other or teams from Major League Soccer in many different cities in the U.S., such as San Jose, Dallas, and Indianapolis. Playing friendly games in the U.S. can help the cub gain new supporters because it gives Americans a chance to see them play (Futterman “European Soccer Makes”).

Other teams have also built partnerships with huge organizations headquartered in the U.S. and Canada. In 2014, English soccer team Tottenham Hotspur sold one of their players to Major League Soccer team Toronto F.C. and made a deal with Toronto F.C. to sell their merchandise in the official Toronto F.C. team store (Reynolds “EPL Steps Up”). Other English teams, such as Liverpool and Arsenal, have made deals with organizations in the U.S. Liverpool’s Chief Commercial Officer Billy Hogan stated that “Liverpool will use its tour as a platform to activate many of the new U.S.-based partnerships the club has, including Dunkin Donuts, Gatorade and Subway” (Reynolds “EPL Steps Up”). Arsenal will use the tour to activate its sponsorship deal with sportswear company Puma. The deal will be worth $249 million.

These teams have used the U.S. market to its advantage to help them gain higher revenues and bigger fan bases. Small-market teams can follow their lead to reach the financial level of these teams in order to prevent uncompetitive balance in European soccer to become an even bigger issue. UEFA can also make a salary cap to help increase competition and help make the teams become more equal in European soccer leagues and competitions. An approval from the European Institutions would be required and a single salary cap would need to be regulated for all the leagues in Europe. This solution is very challenging and unlikely because it would be very difficult to manage a single salary cap for all of the soccer leagues in Europe.

Works Cited

Bowater, Donna, Mark Oliver, Dan Palmer, and Conrad Quilty-Harper. “Graphic: Premier League Transfer and Wage Spending from the 2000/01 Season to 2011/12.” Telegraph.co.uk. Telegraph, 1 Sep. 2012. Web. 23 Feb. 2015.

Dietl, Helmut, Egon Franck, Markus Lang and Alexander Rathke. “Salary Cap Regulation in Professional Team Sports.”

Futterman, Matthew. “European Soccer Makes a U.S. Pitch.” Wsj.com. The Wall Street Journal, 6 Aug. 2014. Web. 6 Feb. 2015.

Kuper, Simon, and Stefan Szymanski. "Football vs Football." Soccernomics. New York: Nation, 2009. 165-66. Print.

Maske, Mark. “Broncos Penalized Again for Salary Cap Violations.” Washingtonpost.com. The Washington Post, 17 Sep 2004. Web. 12 Feb. 2015.

Reynolds, John. "EPL Steps up U.S. Marketing as Interest Builds." Sportsbusinessdaily.com. American City Business Journals, 2 June 2014. Web. 3 Jan. 2015.

Rovell, Darren. NFL Teams Split $6 Billion. Espn.go.com. ESPN, 10 July 2014. Web. 5 Jan. 2015.

Shinzawa, Fluto. “NHL Players, Management Deal with Fallout of Salary Cap Trades.” Bostonglobe.com. Boston Globe, 13 Dec. 2014. Web. 12 Feb. 2015.