Player Wages

If you look at the link I posted in the previous post, you can see the wage-to-revenue ratio for the top five soccer leagues in the world. (England, France, Germany, Italy, and Spain.)  As I understand it, the wage-to-revenue ratio indicates what percentage of the club’s revenues go towards players’ wages.  For example, in England the wage-to-revenue ratio is 70 percent, which means 70% of the money the club makes on everything goes back into player salaries. Italy and France are at 75, Spain is at 68, and Germany is at 53.

For some perspective, the NBA’s old labor agreement gave the players 57 % of BRI (Basketball Related Income), and the owners felt that was too much.  Now, despite the strike, the NBA players get 50 of of BRI.

A lot of people in soccer think that soccer’s wage-to-revenue ratio is getting out hand, like this guy:

Alan Switzer, director in the sports business group at Deloitte, said wage control was paramount for good business.

He said: ”If the wages to revenue ratio is 70 per cent or higher it’s very difficult to make an operating profit.

‘In our view it is too high as a league and the clubs need to be edging back to the low 60s. Every 1 per cent that it drops should increase operating profits by £20m to £25m.”

The only way this argument makes any kind of sense to me is that the lack of parity between rich teams and poor teams is bad for the league, and for that reason teams should have financial restrictions to level the playing field.  But I don’t buy that: the lack of parity is clearly not yet bothering enough people, because all five leagues are immensely popular despite the fact that only 2-6 teams, depending on the league, have a genuine shot at winning a title.

The real issue is that some team owners want a chance to win without having to spend so much money.  I have no sympathy for these people.  If you don’t want to spend money to win, then either settle for a less competitive team or sell your team to someone else.  As Matt Yglesias points out here in a post about the NBA, these sports franchises are very valuable in that the majority of owners can sell at a higher price than they bought.  When they complain they are losing money, they are full of it, because no one is forcing them to own a team.

The NBA owners can get away with keeping more of the profits because they are a cartel and collude to keep prices down.  International soccer clubs can’t collude because there are too many different markets available for players to flee to, and even still, many clubs with rich owners have no interest in keeping wages down.  The billionaires who own Chelsea, Manchester City, Paris St. Germain, etc. seem to be fine with losing money so long as they team does well.  Which is fine with me.  I root for Arsenal, who are a rich club but spend within our means compared to these other big clubs.  That’s the board’s choice, and my choice to support them.


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