Cui bono: How Big Money Kills Competition in Europe’s Top Soccer Leagues

Originally published Sep 3, 2012

While the popularity of soccer is growing in the US, most Americans know little about how the sport is played in the oldest leagues around the world. They might be surprised to learn, like I was, that in the world’s top soccer leagues all the titles are won by a handful of rich super-teams and everyone else settles for being the Chicago Cubs. Soccer leagues in Europe (and most of the world) have none of the parity-enforcing regulations that are staples of American sports leagues, a reality that seems at odds with our stereotype of Europe politically. With leagues that staunchly embrace free market fundamentalism and the competition-crushing wealth disparities they lead to, soccer in Europe looks a lot more like America’s political and economic landscape. Just like America’s economy, deregulated and mired by gross wealth inequality, Europe’s top leagues may be headed for their own Great Recession.

Bad omen? Manchester United ditched sponsor AIG after they went belly-up in 2008. Now the team faces its own debt crisis

Europe’s Free Market Soccer

The richest and most-watched pro soccer league in the world is England’s Premier League. Of the 20 teams in the league, only 5 different teams have been crowned champions since the beginning of the Premier League era in 1992. Manchester United, one of the oldest and best-known soccer teams in the world, won 13 of the 20 championships held since then, with the remaining titles split between four other super-rich teams. That includes this year’s winners, Manchester City—a team that hadn’t won a first division title since 1968 but has become a soccer giant since its takeover by a billionaire sheikh in 2008. There’s even less parity in Spain’s first division soccer league, La Liga, where the 20-team league championship is really a two-horse race between soccer giants FC Barcelona and Real Madrid, two of the wealthiest sports franchises in the world. Only four times in the last 20 years has a team other than Madrid or Barcelona won a La Liga title.

The top European soccer leagues have no rules to enforce parity between the few enormously wealthy teams that are worldwide brands and…well, everyone else. (Real Madrid and Barcelona, for example, are nearly 5 times richer than the team that finished directly behind them in league standings this year). Not only can wealthy teams afford to invest more in players, coaching, youth development, facilities and all the things it takes to win championships, but they can reinvest both the tangible (money) and intangible (prestige, popularity) benefits of victories to ensure a win next season. It’s also much easier for winning teams to raise revenue from merchandise sales, brand licensing, and television rights, further increasing the financial and competitive gap between themselves and middling teams. To put it simply: the richest teams always win, which only increases their ability to win next time. Smaller teams have, literally, no chance to win titles and triumphing over the super-teams in league play is a statistical rarity. This apparently seems fair to the majority of soccer fans abroad (it’s been the status quo in most national leagues for decades) but failing to implement league rules that offset the compounding advantages of being a winning team creates practical problems for the sport.

One of those problems is poor resource management. The wealthiest teams have great players who struggle for playing time because the teams are so stacked with talent. These players end up riding the bench behind a big team’s 1st string even though they’re good enough to be key players on smaller teams. This results in a loss for everyone involved: all teams lose out on the value of the player’s output, the player loses out on playing time and the audience loses out on the chance to see a great player on the field.

The second problem is that this system undermines real competition. David Moyes, coach of Liverpool-based Everton Football Club, is considered by many fans to be the best coach in the Premier League due to his ability to field a strong team on a relatively modest budget. Despite his keen eye for talent and shrewd tactics, Moyes and Everton are unlikely to ever seriously challenge the top teams that can outspend him by huge margins and lure away his best players with offers of more money and league titles. League runners-up do qualify to play in other competitions, but this is an obvious consolation prize that acknowledges that only a handful of rich teams have a real shot at winning the league itself.

Socialist Soccer: The American Way

In 1996, a new national soccer league was founded in the Unites States. Major League Soccer (MLS) started out with only ten teams and a handful of bizarre rules designed to make the sport more appealing to a largely uninitiated American audience. The biggest difference between America’s league and those abroad are the strict regulations imposed on teams to ensure competitiveness. With revenue sharing rules and restrictions on how much big franchises can spend, America’s soccer league is, ironically, far more socialist than its counterparts in Europe.

In Major League Soccer, salary caps prevent the richest franchises from grossly outspending everyone else on roster-building (with some exceptions, like a rule that allows a team to spend whatever it can afford on “designated players” while only taking up a fixed amount of cap space or an exception for “homegrown” players that encourages teams to develop local talent). For the most part, this keeps a relatively rich team in a strong market like the Los Angeles Galaxy (a franchise owned by the same company that owns the LA Kings and the Staples Center) on a level playing field with teams in smaller markets where the sport is still getting a foothold. It also means rich teams can’t afford to horde talented players just to leave them on the bench since they eat up valuable cap space. Successful managers are the ones who can maximize the value of their players, not those that spend the most. Unlike foreign leagues, where talent acquisition is an open auction where the best talent goes to the highest bidder, MLS uses a draft system. The teams that performed worst in the previous season get the first choice of talent, while the league champions go last. Since the league also controls licensing of television rights, it evenly divides revenue amongst all teams in the league (world-renowned Spanish teams Real Madrid and Barcelona were able to further bloat their wealth advantage over other teams in their domestic league by negotiating their own international TV deals).

If all of this socialism and regulation sounds familiar, it’s because these ideas have been used for decades in America’s top sports leagues, including (especially) the NFL. That’s right: the National Football League “redistributes wealth” by sharing revenues and “punishes success” by putting the league champion last in the draft order. Major League Baseball is the only one of the Big Four leagues that doesn’t have a salary cap and is also facing a serious decline both in TV viewership and stadium attendance. With the MLB ceding the brand of “America’s past-time” to the NFL, which has long since overtaken baseball in popularity, some pundits speculate whether or not a salary cap could reverse waning interest in the sport.

As with the NFL, the results, so far, are a success: in 15 years of Major League Soccer, there have been 9 different champions and only one team has won back-to-back championships. Some franchises do well more consistently than others, but this depends on the merits of the management, as it should be, rather than how much they can afford to spend. While MLS has a long way to go to compete for talent with top European leagues, it’s one of the fastest growing leagues in the world. The league rules aren’t perfect and currently prevent even the richest American teams from competing with those abroad but they have been crucial to the long-term growth and stability of the league.

Europe’s Free Market Meltdown

There’s a lot of money to be made in Europe’s top leagues, which makes them very attractive to foreign oligarchs and financial predators. The richest and most successful teams are also the most in debt as their new foreign owners (oil barons and Arabian princes) spend their way to league titles and continental championships. The influx of big money and small regulation has primed European soccer is for its own market crash.

This year, Rangers, one of the two winning teams at the top of Scotland’s hideously imbalanced league, entered administration. Despite their economic woes, Spain has been enjoying its greatest success in recent years on the field, winning the World Cup in 2010 and the European Championship this year. But even as the country reels from harsh austerity measures, the Spanish government is considering waiving a collective tax debt of nearly 1 billion US dollars owed by Spanish soccer teams who can’t pay. With teams in Italy and England (where the sport’s governing body is also in the red) crumbling under their own debt burdens, insolvency is become the rule rather than the exception in Europe.

With soccer’s oldest teams crumbling under their own debt, FIFA, soccer’s global governing body, conceived a set of “Fair Play Rules” to force teams to manage their finances responsibly if they want to compete in certain tournaments. Leagues in France and Germany already have similar regulations and are much more balanced leagues as result. In addition, Germany’s national soccer league, the Bundesliga, practices a “50+1” rule, which gives fans the majority share of ownership of German teams. The idea is to discourage financial shenanigans like the leveraged buyout of Manchester United that has left the century-old team with an unsustainable debt burden. Insulating German teams from takeovers by foreign investors prevents them from being able to keep up with Europe’s best. But with an exciting, competitive league and the world’s best stadium attendance, many are calling Germany’s Bundesliga the best soccer league in the world.

Applying the lessons at Home

Robert Kraft, American billionaire and owner of both the New England Patriots and MLS’ New England Revolution gets it. He passed on an opportunity to own storied English team Liverpool FC because the Premier League has no salary cap: “I want to be able to compete. Manchester City won the championship this year and I hear they’re going to lose $156 million. I would rather give that money to charity if I had it.”

The kind of regulations used in MLS are still foreign to European sports fans but are a natural part of American sports culture. The imbalance of Europe’s top leagues feels intuitively wrong to those of us who grew up on American sports, where league rules reflect core cultural values of fairness and competition. The closest thing Americans have to a Manchester United is the New York Yankees, and everybody hates the Yankees. So why have Americans forgotten how to apply these values to our economic policies at home? Why aren’t we outraged by the the huge inequalities in our own economy? When did free market fundamentalism and social Darwinism become en vogue?

During America’s most prosperous period, policies were in play that mirrored those used to balance US sports leagues: a higher tax rate on top earners and a social safety net that provided a floor for the underclass. You don’t have to be an economist to see the common sense in regulating wealth inequality and competition—just a sports fan.

Cui Bono (latin for “To whose benefit?”) is an editorial series dedicated to analyzing the influence of neoliberal capitalism on culture, politics and social development.

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One thought on “Cui bono: How Big Money Kills Competition in Europe’s Top Soccer Leagues

  1. Pingback: The Passion of Donovan and the Future American Soccer | bear flag culture

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