There are many reasons to love Deadspin, the sports website owned by Gawker Media. The idea of grown men getting paid squillions of dollars to play children’s games is essentially silly, so Deadspin’s combination of snark, uncompromising exposés of bad behavior, and withering criticism of the lamestream sports media is so very necessary.
The editorial staff of Deadspin is progressive enough to be ahead of its readership when it comes to covering sports that are growing in popularity but may not yet be on everyone’s radar. Specifically, I’m referring to soccer, played at the highest levels in Europe. Although I rate Slate and Grantland’s Brian Phillips as the best American soccer writer, Barry Petchesky does admirable work almost every week, converting mainstream ‘Merican sports fans to the world’s game by highlighting the sport’s unique excitement and drama.
One of the reasons soccer appeals to nerdy Murrican sports aficionados is that the competitive and financial structure of the sport is rather different than anything we typically see stateside. Teams play in up to four tournaments simultaneously, the best teams play against the best teams from other countries, and the worst teams engage in a compelling dogfight to avoid being relegated to a lower division and an uncertain future.
I love it when rednecks dismiss soccer as a sport for communists. While it’s true that European soccer adherents are dirty soshulists, what with their universal healthcare and well-maintained infrastructure, the sport itself is far more of a vicious Darwinian fight to the death than the NFL or Major League Baseball, which are highly subsidized, highly regulated monopolies. Relegation is the most obvious example of this principle in action, but the relatively low amount of cross-subsidization through “revenue sharing” may be just as important.
Yesterday, Herr Petchesky highlighted the fact that, despite an unprecedented $3.6 billion in league-wide revenues, the twenty clubs comprising the elite English Premier League collectively lost $566 million last year. Mr. Petchesky speculated that the structure of the league’s TeeVee deal is to blame for the upside-down finances of many of the clubs. Howevah, your correspondent respectfully disagrees.
If clubs like Liverpool and Manchester United were able to negotiate their own global television deals, they would almost certainly make more money than they do now, and some of that money would be invested on the pitch. But this almost necessarily means that other clubs would be made worse off (if not dollar-for-dollar, then something close to it). So, while the Premier League’s television rights might affect profitability among the member clubs, it’s not clear that moving to a Spanish-style setup where each team is free to maximize its own television revenues would substantially improve the profitability of the league as a whole.
For a good example of this, we can look no further than Spain itself. Real Madrid and Barcelona are massive clubs with astronomically high revenues, but even they don’t regularly generate profits. The white-hot rivalry between the clubs leads to extravagant spending on players, both in the form of transfer fees paid to acquire players under contract to other clubs and the wages that are quickly eclipsing anything we see in America except for superstars in baseball and basketball.
It’s true that large and growing amounts of TeeVee money chasing after the same pool of talented players will tend to cause player costs to increase just as fast as revenues are increasing, but the amount of money spent on player salaries and club overhead is a business decision for each club. Therefore, in the absence of meaningful revenue sharing the business incentives at the level of the club are the key factor for league-wide profitability.
In this sense, England and Spain are not all that different despite their markedly contrasting television deals. Barcelona, Madrid, Manchester City, and Chelsea are not run as responsible businesses, and this has cascading effects throughout their respective leagues. Madrid and Barcelona are sporting clubs with hundreds of thousands of members, with democratic governance and very messy politics. They lose money more often than they make it, and they’re implicitly subsidized by their local governments.
Chelsea and Manchester City are the playthings of vulgar foreign petro-billionaires who have never actually had to run an efficient business operation. Rather than earning a reasonable risk-adjusted return for shareholders, their owners just keep buying players until they win trophies. This causes an arms race that affects incentives in a perverse way for every team in the league, to the point that clubs that are run as responsible businesses are relegated.
In fact, it could be argued that the financial heyday of English soccer was really ten years ago, when many clubs (including Manchester United and Newcastle United) were publicly traded corporations with fiduciary responsibilities to their shareholders. When I was a wee thing, I demonstrated using fancy-pants statistics in my college thesis that clubs organized as public companies had better bargaining positions in negotiations for acquiring players and spent less on a player of any given (measurable) ability than clubs that were privately held. This has all largely gone out the window in the age of scumbags like Malcolm Glazer, Tom Hicks, Roman Abramovich, and most notably Sheik Mansour and his abuse of the sovereign wealth fund of Abu Dhabi.
The financial mess in England lies in stark contrast to the German Bundesliga, where clubs are not allowed to operate at a loss, or the French Ligue 1 where most of the teams are owned by municipal governments. As you might expect, those leagues are doing just fine financially. Their success underpins why UEFA (the European governing body of soccer)’s new Financial Fair Play rules are so important. In the future, clubs that lose money on a consistent basis will not be allowed to compete in lucrative European competition. Whereas the days of massive leveraged buyouts of Premier League clubs by ‘Mericans taking advantage of an artificially liquid financial system are already over, soon the era of corrupt oligarchs distorting the entire financial fabric of soccer will be as well, inshallah.
Whether UEFA’s rules have any teeth remains to be seen because they are not fully in force yet. Furthermore, the Financial Fair Play rules seem to be predicated on having a unified set of accepted accounting practices across the 50+ member football associations, which does not exist. It’s yet another wrinkle in the fascinatingly complex world of soccer, which no self-respecting ‘Merican sports fan should ignore.