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The $2.5 million question

Roar Pro
10th December, 2013
36

A recent article I wrote about The Marquee Conundrum actually developed into an interesting debate about the sporting merits of a salary cap. It is an interesting discussion that often boils down to someone’s political and economic beliefs.

To understand the salary cap debate for the A-League, a broader understanding of salary caps around the sporting world is needed.

The NFL first introduced a salary cap in 1994, the NBA had theirs implemented in 1984. The NHL has one and MLB has a “luxury” cap.

Australia, of course, has salary caps for the AFL and NFL.

The basic reason most of these leagues introduced a salary cap is as a method of keeping overall costs down, and to ensure parity between teams so wealthy teams cannot entrench dominance by signing many more top players than their rivals.

In theory and ultimately, in practise, the salary cap achieves these motivations but it still hasn’t come without what I would call “glaring contradictions”.

The most obvious contradiction is when you put the word “sport” next to “salary cap”.

Sport is about being the biggest, best, fastest, most innovative and most dominant participant to win a prize measured by athletic or technical prowess.

A salary cap is about forcing every team onto an even playing field and to curb dominance.

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Put simply, a salary cap is not sporting.

One of the other curious contradictions of salary caps and the sporting world is that the USA, which is the supposed to be the home of capitalism and the free market, has implemented what in essence is a socialist ideology.

Many Americans will call you communist if you dare suggest they socialise healthcare but every weekend during the winter months they cheer for their favourite team in their favourite league that is run with a “socialist” salary cap designed to “spread the wealth”.

For them, you cannot get more “American” than the NFL/NBA/NHL or MLB yet all these organisations are all wearing “red underpants”.

The curious contradictions continue in Europe.

Most European nations, for all intents and purposes, are socialist set ups. With the French with their 35 hr work week or Denmark with it’s high taxes and collective wealth, you can really see socialism at it’s finest.

Sports in Europe, however, is where the socialism experiment ends and the free market/capitalism is the norm.

Football is the obvious example where the rich clubs keep getting richer and the poorer/weaker clubs fight tooth and nail for a slice of the pie.

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Sounds like the current state of America to me.

Formula One is also another example of the free market in European sports. While it is a world’s fair, essentially all the F1 teams are based in Europe and they are all left to their own devices to try and win the championship.

There have been recent moves in football and Formula One to reign in costs but these implementations are still far removed from a salary cap.

Back to the argument regarding the A-League and it’s salary cap.

I believe that the salary cap has necessarily played it’s part in the founding of the A-League but sooner rather than later it has to go.

A salary cap was needed for the inception of the A-League because we may well have seen an “eyes bigger than stomach” scenario.

In the initial excitement of the new league, clubs may have tried to outdo everyone else including their own economic sense.

No salary cap at this launch stage actually would have resulted in “failure to launch” and it all may have ended in tears.

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This argument is no longer valid as the league is now established and the sting of constant red ink has scarred CEO’s of most A-League clubs.

Money is flowing in from bigger TV deals, sponsorship is at all time high and all the clubs have a solid fan-base.

Our league is in no danger of economic collapse which is why removing the salary cap is not fraught with danger anymore.

I was recently turned to an interesting article about the A-League financial story. It was called “In Search of Blue Oceans: An Analysis on the A-League Business Model”.

Check it out, it is an interesting read.

In business terms, “Blue Ocean” basically means trying and doing different things to the competition.

Removing the salary cap is a “Blue Ocean” move that I believe could strengthen the A-League immensely.

Many people will argue that if you remove the salary cap that smaller clubs will become weaker and the larger clubs will dominate.

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The salary cap is now stifling the league and while it keeps the Central Coast Mariners closer in competitive terms to the Melbourne Victory, it is actually ensuring they will continue to struggle financially year on year.

By removing the salary cap, you allow the bigger clubs to purchase a lot more higher quality players with the result being that you see a better product on the field.

Fans will flock to see better quality football, TV revenue rises, sponsorship deals increase in size and the money base increases.

I still believe the TV deal and league naming rights should be centralised and that pie should be divided evenly, everything else is up to the clubs and may the best organisation win.

Central Coast would not die this way but would actually thrive due to more money coming their way. It would be up to them to find alternative ways to compete with Melbourne Victory on the football pitch.

Don’t be fooled in thinking that because of the evenness of the A-League you are watching genuine sport.

Football is different to the AFL and NRL in that it is a sport on a truly global scale and the management of it has to be “Blue Ocean” compared to our more established competitors.

We have the active supporters, a truly unique sporting experience in this country.

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The next unique step is to remove the salary cap and let teams compete and improve the standard that way.

It may very well keep Central Coast in Gosford.

Just understand that the term “sporting salary cap” is a huge contradiction.