Football needs an industrial strategy

Proposals for a European super league would simply redistribute value upwards

ROBIN HARDING

FT, DECEMBER 17 2019   

 

Insane, selfish, money-oriented and egotistical: football’s grandees could have been talking about the professional game in general but were, on this occasion, describing Real Madrid president Florentino Perez’s idea for a breakaway league of top European clubs. Liverpool manager Jürgen Klopp summed up fan feeling about change to the traditional schedule more concisely. “Absolute bollocks,” he pronounced.

 Nonetheless, money-spinning plans for new international football competitions keep popping up, because the game’s most powerful clubs would gain. At a time of global concern about inequality, and national concern about keeping economic activity at home, football is a fascinating case study in how the rules of the game determine the distribution of rewards, and whether they are captured by labour (players), capital (club owners) or nations in the form of taxation. The particulars of football are unique, but the issues are common to many industries that work in co-operative systems, from finance and law to high technology.

 Proposals for a European super league would redistribute value upwards, to the best players and the biggest clubs; away from countries with popular leagues, such as England and Spain; and from players as a group towards the owners of clubs. This goes against not just the romance and sporting integrity of football, but against the public interest, and against the national interest of several European countries.

 

Industrial strategy is in fashion again, at least when it comes to batteries for electric cars. Perhaps nations need an industrial strategy for football.  The economic advantages of getting it right are immense. In the 2017/18 season, clubs in the English Premier League paid a wage bill of £2.5bn, according to Deloitte. All of the activity is onshore, so no matter how skilful the accountants, football’s finest send about half their pay to the UK exchequer. In economic terms, stars such as Kevin de Bruyne and Paul Pogba are among the most productive individuals on the planet. You want them paying tax in your country. 

 English football is also an exporter. The Premier League’s overseas broadcast rights bring in £1.4bn a year, and many of the team shirts bear adverts aimed at markets abroad. And that is before counting the hundreds of millions of pounds pumped in by owners such as Chelsea’s Roman Abramovich and Sheikh Mansour at Manchester City. Historically, however, the cash flows to owners are modest. Only a few clubs (step forward Manchester United) are popular enough to pay dividends while remaining competitive on the pitch.  That is not a result of folly or chance. It is how the game works — or at least how it used to. Sports feature a powerful winner-takes-all effect: their rewards are for winning, not for hours put in. Cristiano Ronaldo will play just as much football for €10m as a journeyman does for €100,000; Liverpool need play no more games to win the league than to finish last.

What the rules of a league determine is the premium for winning and how the rest of the rewards are shared out. Economic features that promote high wages and low profits in European football include competition between different national leagues, the lack of salary caps beyond so-called “Financial Fair Play” and relegation of the bottom teams each season to a lower league. These structures create powerful incentives for owners to spend as much as possible on players. If you do not, others will, and you may get relegated. In the American version of football, by contrast, salary caps prevent any arms race on wages, nobody gets relegated and franchises can relocate if it is profitable to do so. The returns for US team owners are therefore far superior. 

 In Germany, member ownership under the “50+1” rule constrains wages and profits for the benefit of fans, but that structure is under pressure from the same forces encouraging a European super league. One reason for English football’s popularity is relatively equitable sharing of broadcast revenues, leading to competitive matches, although recent changes are redistributing income upwards. 

A European super league would look more like US sports. Top clubs and players would gain at the expense of well-loved teams left behind in national leagues. Small countries might get a lucrative team or two, but nations such as England would lose their disproportionate share of professional revenue and taxes. With no real competitor, a super league would find it easier to institute a salary cap, and might need one for balance. A cross-border game could end up like tennis or Formula One, where most players are so peripatetic they can reside in Monaco and pay no income tax in the countries that cheer them on. 

What would a football industrial policy look like? The goal is to create a game played within your borders but watched globally, with as much value as possible in easily taxed forms such as wages. Nations should want leagues that share revenues among their members, to create an exciting, competitive product. They should be wary of salary caps.  Most of all, they should not be indifferent.

 A European super league is not an invention from which its creators would deserve to gain, but a device that moves money between players and owners, or from one country to another. Nothing is ineluctable. The outcome is decided by the rules of the game. robin.harding@ft.com

https://www.ft.com/content/b76daa08-20ad-11ea-92da-f0c92e957a96

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