Is International Football Just Like Major League Baseball?
By Evan Weiner
September 5, 2009
(London, U. K.) – Over the past few months, United States banks and financial institutes that have accepted taxpayer’s money have been warning that they need to pay big bonuses to employees because they could lose talented people elsewhere if they didn't cough the stipends. Where would these people, who helped break the economic system, go?
They might follow the lead of international football players headed to Barcelona or Madrid because of new and very favorable tax laws that were designed to attract foreign nationals to the country in good paying jobs. It is not much different from Florida or Texas having no state income tax. The tax laws where it is in Spain, the US, Canada or the UK have definite consequences in sports.
It doesn’t seem to matter when you are in the world, sports leagues and organizations seems to have become very money conscience all linked through government policies. Football, the kind played on a global basis not the American version of the game, has a lot in common with the North American big four sports, baseball, basketball, football and hockey.
Major League Baseball’s rich and poor divide among the 30 clubs was caused by big television money and government regulations. The New York Yankees can out spend the Kansas City Royals, Oakland A’s, the Pittsburgh Pirates and virtually any other baseball team to get free agents and the same can be said of the Barcelona club of La Liga in football. Because of television money and Spain’s tax laws, Barca or Real Madrid can ante up huge contracts and pay large transfer fees for top of the line players. In the English Premier League, one London newspaper pointed out the difference in payrolls in the Manchester City-Portsmouth match, it seemed Manchester City had a Boston Red Sox-like payroll while Portsmouth resembled the Florida Marlins. Some Premiership teams print money because of their brand name.
Manchester United's red kit or shirt is adorned with a big AIG logo which is costing United States taxpayers about $25 million annually in licensing fees. That deal ends in 2010. ManU is one of the biggest sports brand names internationally.
Spain’s tax laws were not necessarily passed to strengthen Barca or Real Madrid but foreign players can sign with Spain-based teams and pay just 24 percent tax on their earnings for the first five years they are in Spain. The tax rate in England for top paid players will be 50 percent starting in 2010. Real Madrid’s gets far more money from TV than other teams, which sort of mirror’s Major League Baseball’s problems with the New York Yankees. Real Madrid is in the middle of a seven year, 1.1 billion euro deal with the Spain's Mediapro and gets about 150 million euros a year to spend like is more than the New York Yankees local cable TV deal. Real Madrid gets a bit more of a third of operating revenue from TV deals, another third from licensing deals from marketing partners and less than a third of the 290 million euros in revenues the team earned in 2008 from fans in the stands. Real Madrid has a North American business model, use government laws to the team's advantage, get huge TV money and have big spending corporate partners and marketing partners. Fans come in fourth in the economics of the team which is the New York Yankees business model.
Real Madrid may be heavily in debt, but Spain’s bankers have no problem giving the club a large line of credit. Barca also enjoys a good relationship with banks in Spain.
Real Madrid spent 258 million euros to improve its roster for the 2009-10 season. The TV and corporate partners will cover the costs of the salaries. Barca parted with about 40 euros to get Zhatan Ibrahimovic which sounds like the New York Yankees business model again. Spend top money for top players and hope that translates to wins and revenue.
Both La Liga and the English Premier League have a global presence and that means more eyeballs in front of TV screens watching them and buying merchandise. La Liga and the Premiership beam games into Asia.
La Liga and the English Premier League seem to be on a collision course when it comes to spending but the Premier League’s top teams, Manchester United and Arsenal, are crying foul and that they cannot keep with them the spending. Another Premier League, Chelsea, was part of the arms game when the team signed Gael Kakuta of Lens but football’s governing body, FIFA, found that Chelsea illegally signed the player and has barred Chelsea from acquiring players during two transfer periods in 2010. Chelsea is appealing the ruling but the London-based team might use European Union laws which allow youngsters the right to work anywhere in Europe as a basis for the defense.
The English Premier League clubs, particularly Manchester United, Chelsea and Arsenal, have been going after players under the age of 18 from France, Italy and Spain. La Liga is fighting back by signing some of England’s top players. Some Americans are also looking for contracts in Europe as Major League Soccer has all sorts of salary restrictions and Americans can make more money elsewhere. The MLS is not considered even a middle tier league.
There will be no owners-players labor unrest in football although some club owners are pushing for some sort of cap on the player transfer fees which have been skyrocketing.
Only the National Hockey League in North America has a transfer fee as the league has some deals in place to purchase the contract of some players in Europe. The NHL does not have a transfer fee deal in place with the Russians. The NHL also has a transfer fee agreement with Canada’s Junior A teams. Major League Baseball, the National Basketball Association and the National Football League have no transfer fees. Europeans and South Americans can join NBA teams once their contracts with local teams expire.
Major League Baseball can bid on Japanese players if a player is posted and the winning bidder.
Sports, no matter which side of the Atlantic, seem to follow the same rules, use government to get ahead, hope for big local TV contracts and sell tickets to customers, not fans. There is also something else that North American major league franchises and European football teams have in common. Both entities feature clubs that have huge debt services. North Americans sports followers and their European counterparts probably don’t feel that baseball, football, basketball, hockey, global football, rugby and other sports have a relationship, but they do. The games may differ but it is business except maybe in Glasgow where the two local football teams, the Celtic and Rangers, are still engaged in a blood feud that is rooted in sectarianism between the Rangers Protestant fan base and the Celtic Catholic supporters. The Celtic-Rangers rivalry is rooted in Glasgow's religion sectarian past although business interests along with other pressures. The Celtic-Rangers matches are the real deal and may be the last rivals in sports where fan interest comes before business although that is changing as business and social pressured build in Glasgow.
The trinity of government, TV and corporate support is the lifeblood of big time sports in the North America, the same holds true in Europe.