The Way Geography Affects Sports
Sports, in the last few years, have changed dramatically. The biggest and best players have gone to the biggest cities. In U.S sports, it’s a major trend, with superstars joining others on the West Coast or the East Coast, where the biggest cities are.
It has happened especially in the NBA, with the Brooklyn Nets and the Los Angeles Lakers, in the NFL with the NFC West Division, and in the MLB with the NL West and AL East, all divisions with MVP-caliber players.
The reason for this is because of the profit major markets make in comparison to small market teams. In the NBA, there is a soft cap, meaning teams can spend over the limit if they pay the taxes proportional for their overspending. The Lakers, who had a potential $100 million luxury tax could’ve paid it off with the money they get from their national TV deal with Time Warner Cable, which they earn $150 million from yearly. The big city teams usually get the most air-time and the television deals, which gives those clubs a gigantic advantage over teams like the Milwaukee Bucks or Utah Jazz, who have to grow their team internally ( draft and trades ) to reach the heights needed to get a TV deal.
Being a big city team definitely helps in US sports leagues because of those types of privileges as well as other sales which skyrocket based on popular culture ( jersey sales, tickets, merchandise, etc. ).
Europe, specifically football leagues there employ a much different strategy. Unlike US leagues, which are closed leagues ( only the best teams play each other; the NFL and XFL don’t play each other ), most European leagues operate on a system of promotion and relegation, which ties around three leagues together ( professional, semi-professional, etc. ).
The English Premier League in England, Ligue 1 in France, La Liga Santander in Spain, and Bundesliga in Germany all have that type of system. As a result, the sport is praised due to the equality that it lets flourish. Teams from a very small city can eventually make it to the top flight where they play a team from a major or even globally known city.
A team in the EFL ( league below EPL ) can progress to eventually play against one of football’s best teams like Manchester City or Chelsea FC. By doing this, hundreds of “micro-market” teams can make a huge profit ( proportional to their earnings ) playing the best teams.
The Super League, which was an idea proposed by Juventus and at some point had the 15 best teams in Europe, operating on a closed league system, breached the promise of equality that football brings to the table, thereby creating protest and anger toward the idea. If the Super League became a tangible thing, then small teams that play in lower flights or even in the depths of the top leagues would be barred from playing the best and wouldn’t be able to gain recognition or funds to grow their club. After outrage fueled by that very notion, the Super League was virtually disbanded, with only Barcelona, Real Madrid, and Juventus still clinging to it. One of the main motivators of joining and playing in the Super League for these bigger teams was arguably greed. The New York Times wrote,
“According to their own estimates, each founding member stands to gain around $400 million merely to establish “a secure financial foundation,” four times more than Bayern Munich earned for winning the Champions League last season.”
The Super League was essentially a way for teams to amass a gargantuan profit which they didn’t have to share with the league or other teams, and also dwarfed the amount they would ever get before.
But why do the best teams need more money? One of the most important parts of sports is the trading or signing of players for a club. To do this, clubs need funds. Like in US Sports, domestic leagues set a cap limit for each team. In European football, which includes gigantic transfers, loans,release clauses, and signings, the salary cap is much higher. In this case, one pattern that occurs in American sports happens again in European sports. The biggest teams, many of which are located in Europe’s biggest cities ( Munich, Barcelona, Madrid, Paris ), have the biggest transfer budgets. Clubs like PSG, which is situated in Paris, one of Europe’s most populous cities, have transfer budgets in excess of €250 million.
Teams like LOSC Lille, which had a better record than PSG this past season, but is situated in a city with a population less than 300K, has a transfer budget of around €10–20 million. The biggest cities have the biggest transfer budgets, which allowed clubs like Barcelona to bring together Messi, Suarez, and Neymar, a virtually unbeatable trio, in 2013 and 2014, respectively. As a result, teams like PSG or Bayern Munich, or Borussia Dortmund, ( all clubs whose budgets dwarf their domestic counterparts ) can create a monopoly in their own leagues because of the funds they have and subsequently the talent they buy.
The issue for bigger clubs is those that become too greedy in the pursuit of winning championships or tournaments pay their biggest players too much. In 2017, Barcelona signed Lionel Messi to a 4 year, $674 million contract ( $168.5 million/yr ). Though leagues don’t put a limit on teams’ transfer budgets, they do on their wages. In 2009, UEFA created Financial Fair Play ( FFP ), which is aimed to limit spending for a team before they find themselves in financial turmoil. Smaller teams who don’t have blockbuster players don’t have gigantic wage bills.
Teams like Barcelona or PSG or Chelsea do because they were able to spend much more sums of money. However, the warnings that UEFA sent fell on deaf ears : 50% of clubs are in debt. The vast majority of these teams are the biggest ones who miscalculated when signing players. Their financial struggles have been exacerbated by the pandemic, which forced many domestic leagues to cut spending limits, with La Liga cutting theirs by $725 million . Barcelona, which was already starting to be in financial turmoil because of their miscalculations around contracts, began sinking much faster.
Their struggles became much harder to overcome with La Liga’s 4x1 rule, which states,
“for every four euros gained in revenue, only one euro can be spent on the upkeep costs of maintaining a fully registered squad of players.”
Barcelona pays an average of €10.4 million per player and were put more in debt by that rule and the cutting of the spending limit. Their president, Joan Laporta, reported that their wage bill constitutes 95% of the money that they bring in through sales and other income sources, 35% more than the industry-recommended limit. In addition, they have losses of €1.35 billion. In May of 2021, they took a €500 million loan from Goldman Sachs to try to pay off their losses then, which emphasizes how dire of a circumstance they were in to start. As a result of financial fair play laws, La Liga laws, and club dysfunction, it was impossible to sign Messi.
PSG, which signed Messi on a two-year contract with a $41 million salary, has narrowed future options for the club. FFP and the policies surrounding it have put a limit on how good teams can be through signings and transfers.
The biggest free agent players can control the market and start an all-out bidding war between the biggest clubs, but if a team over-calculates and signs them for too much without being financially cognizant, then the ultimate result is a financial crisis and loss of their best players.
Financial fair play is coming to an end after a decade of use by UEFA to give clubs more freedom over what they want to use their profits and funds for, and being that most clubs are in debt, the end of that policy will usher in a new era of sports finance that will shake up the footballing world.
