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Transfer fee and salary caps edge closer

January 23, 2009

Manchester City’s failed 100 million euros plus bid for AC Milan’s Kaka now begs the question: should there be a limit on the amount of money a club can pay for a player or should there be a salary cap?

Some of Europe’s top soccer clubs and the game’s European governing body UEFA seem to think so, with the news that they have started talks on curbing the amount of money that can be spent on player transfers or wages.

Sources familiar with the discussions have told Reuters that the European Club Association (ECA) — which represents the continent’s leading clubs such as Manchester United, Real Madrid and AC Milan — has proposed clubs should only be allowed to spend around 51 percent of their revenue on transfers or salaries.

Under the ECA proposal, revenue would be determined as money received only from ticket sales, sponsorship, merchandise and television income. It would not include any financial investment by owners or major shareholders.

Any money from shareholders, or billionaire owners, would be invested into the infrastructure of the club, such as building or renovating the stadium or investing in youth development such as an academy, the sources said.

But, there are concerns that smaller clubs who cannot accumulate large revenues from ticket and television sales may suffer from the ECA proposal.

The English Premier League, bankrolled by these wealthy businessmen, is likely to oppose such a move which would in effect take away a lot of the incentive for these rich owners to invest in a club.

On the plus side, those in favour of the ECA plan say it would also prevent disputes over who owns a player, such as the so-called “Tevez affair”, from happening again.

In November, EU sports ministers mulled the possibility of a pan-European financial regulator for sport, much to the anger of FIFA, UEFA and the Premier League.

Is this latest proposal a step in that direction? More importantly is it a step in the right direction?

PHOTO: AC Milan’s Kaka salutes supporters at the end of their Serie A match at home to Fiorentina, Jan. 17, 2009. REUTERS/Alessandro Garofalo

Comments

Excellent article raising some interesting points. Personally I would like to see a salary and transfer fee cap – for moral reasons if nothing else. Although I am realistic enough to know it will probably never see the light of day.

Posted by David | Report as abusive
 

I fear the fact that the ECA are in favour will not mean that it will work. EU competition law may be the ultimate sticking point and the freedom of movement of labour and capital. If a club wants to bankrupt itself by buying and playing or indeed put all its eggs (and its supporters eggs) in one bastket, then under EU law it should be allowed to do so.
One avenue might be to make directors legally responsible to act with a fiduciary duty to shareholders, fans and the league. ie force them to only make decisions which would not damage the club nor the league in which it plays

Posted by Joe LYnam | Report as abusive
 

hmmmm, very true

Posted by Riley | Report as abusive
 

The idea may look bright but in truth it is to keep the control of the game on the big clubs

 

Football prices are just getting stupid!!

 

I think it’s interesting to see this development. It appears that much of the economy might move towards this kind of structure. The Spanish banks have to put money aside during good times to help them through bad, for example, I think football teams having to cap wages or save in good times is a good development too. It will help sustain teams, if they go bust it’s the communities that suffer.

Posted by Michael | Report as abusive
 

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