High Rate of Star Footballer Contacts

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Table of Contents

Introduction
Background
Evaluation of Contracts and rates
Discussion of the high salary structure
Results of evaluation
Conclusion & Recommendations
Bibliography

Introduction

The continent Europe is believed to have contributed a great deal to the formation and structuring of the contemporary sporting framework. Formerly, sports and sporting affairs were subjected to guidelines and parameters. However, in due course of time, sporting events developed a variety of competitive aspects which in turn dependent on market conditions during the 1980s. Competition resulted in the conversion of an administrative sports structure into a scheme largely dependent on the economic constraints of costs and labour engagements. This system was toughened in 1995 when community powers conveyed little apprehension in relation to sporting activities on account of a verdict pronounced by the European Court of Justice declaring that players could from then onwards engage in free movement from one squad to a different team. This implied that with the lack of stringent regulations, the framework in which European soccer was played progressed autonomously. Nevertheless, this lack of a proper regulatory framework is being brought under the scanner as a consequence of this arrangement’s incapability to warrant the perseverance of the system of European soccer. In light of such circumstances this paper discusses crucial economic factors such as salaries, contractual obligations and transfer mechanisms involving soccer players and appraises its financial viability in this context. Further, the paper delves into aspects which could perhaps enhance and ensure betterment of the contemporary system under which soccer is played. (Dobson 2006)

Background

The game of football was first played during the latter parts of the nineteenth century in England. During the early days the conventions and laws of games such as rugby and football were not unambiguously characterized. Both of these two sporting events were comparable in a lot of ways and subsequent to a great deal of modifications did the existing structure of soccer come into existence. Nevertheless, both football and rugby were perceived as sporting forms which attracted the attention of the mass. Sheffield United was the earliest official football club to be established and is referred to as the ‘Mecca of football’ by numerous sports enthusiasts. The level of recognition the game received matured rapidly not only in England and across Europe but also in places like South America, Africa and Asia. (Szymanski & Zibalist 2005)In its present form, the economics of European club football has attained unimaginable heights wherein wealth has gained a vast amount of significance. Financially formidable football clubs deal with huge sums of money and are capable of buying new players and form a team over night. The current year’s transfer period witnessed deals worth millions when Real Madrid bought ace player Kaka from AC Milan, Cristiano Ronaldo from Manchester United, Raul Albiol from Valencia and Karim Benzema from Olympic Lyon. Altogether the club invested a staggering sum of 333 million dollars for buying only these four star footballers. Just to have an idea about the sumptuous earnings of ace football stars in Europe, one can note that they receive nearly 150,000 pounds each week after deducting taxes. (Michie & Oughton 2007) With the enormous sums of money being tossed around one may easily contemplate about the fact that football is being transformed from a beautiful sporting event into a means of procuring economic gains for a handful or people. Rather than forming teams constituted by youthful and able players, football clubs engage in a brutal bidding game to bring experienced but average talents into their teams. Winning games has apparently become financially advantageous to the extent that in recent times clubs have nearly relinquished the creative aspects of the game and have adopted a more aggressive, tactical, and reticent approach marking a dent on the spirit of the game.

Evaluation of Contracts and rates

At the outset, economic factors resulted in the instantiation of various soccer squads by reason of the prospective returns that administrators and sponsors expect to procure from the wide-ranging marketing strategies aimed at both live spectators and television audiences driven by the extensive competitive attitude. European football developed over time to accommodate itself into the peculiar framework of the competitive structure in sports. The deficiency of a proper regulatory structure gives rise to uncertainty which in turn induces an enhanced level of interest in the game that corresponds to a soccer event’s market value. However, of late this configuration appears to have miscarried with respect to the European soccer framework as a consequence of the double collapse in both economic and regulatory arrangements. This occurred for the reason that the soccer structure has played down the authoritarian role of regulations in the game and competition alone was unable to present the requisite policies to the labour market and combined team endeavours. It should be noted that there exists no system of coping with conflicting entities with varying financial potentials. (Gorman & Calhoun 1994)

In a normal soccer event, two squads confront each other. The quality of the event banks on the sense of balance existing amongst the forces engaged in the match. There eminent worth of the match is clearly evident when the strength of the clashing line-ups is comparable. This implies that the probability of winning is not more for a certain team as compared with the other. Idyllically, this would result in greater interest in the event and enhanced revenues from spectators which in turn are converted into favourable pay packages for the players. However, in the practical sense match quality is not always excellent particularly in a competitive environment. This is for the reason that financially established and formidable team owners decide on investing specifically so as to warrant their winning streak in the upcoming games by designating higher spending on players’ salaries and proposing a better pay package to famous and talented players in other squads. With such a situation, the balance inclines on the side of the financially stronger teams as better footballers have a propensity for transferring to a different team which offers better earning opportunities. The teams which loose their top contributors due to such incidents are expected to loose matches on a regular basis, which leads to a declining in level of team strength which in turn translates into poorer returns for the team and decreased wages for the players. Teams which are not quite resourceful are incapable of contending with more affluent and better-accomplished teams. This leads to deteriorating performance in match situations resulting in heavy losses in terms of revenues and ultimately leads to a complete collapse. (Hoehn & Szymanski 1999)

Even though this arrangement is advantageous to the more affluent teams, it cannot be considered to be as favorable for the overall sport since barely a small number of wealthy and powerful teams can exist in this structure. These teams would thus be dominating the sporting arena reducing the aspect of uncertainty and consequently the viewers’ interest. Rooted in the financial aspects of growing or declining revenues, resources remain focused on a certain teams or clubs which makes it tough for other new teams to enter the competitive environment. This fact is primarily attributable to the deficiency of a proper regulatory structure in European football. The unfettered configuration of European football leads to the cropping up of relevant aspects like salary caps, player movement issues, competition amongst various leagues, and the opportunity of reforms.

Discussion of the high salary structure

One of the most relevant issues occurring due to the unfettered regulatory structure of European football is player wages. Factors such as competition and unregulated labour movement initiate the determination of wages of the players with respect to the market elements. Unregulated sporting configuration implies that there exists no upper limit in case of the pay packages offered to footballers by clubs or team owners. The non-existence of concepts like salary caps can prove to be advantageous as well as disadvantageous in some cases for the team members, clubs or team owners, and sponsors in European soccer framework. For the players the non-existence of salary caps is beneficial for the reason that better performing footballers have the opportunity to maximize their earnings owing to the fierce competition between financial sponsors to induct the best performing footballers to strengthen their teams in order to warrant wins. On the other hand, this is detrimental for players in teams wherein their ace players get transferred to teams where they are paid better. Lineups with restricted resources are unable to race with the payment offers made by more affluent clubs. Loosing their best players to other wealthier teams, the team’s output declines rapidly. This leads to heavy financial losses for the clubs and lesser earning opportunities for players playing for such teams. (Haas 2003)

In case of the affluent clubs or teams and financial sponsors, not having salary caps enhances the team’s playing efficiency as they are competent enough to meet the expense of acquiring the best players. A brilliant performance implies enhanced revenues which translate into the capability to warrant winnings in future matches and better profit or returns. Nevertheless, as mentioned before, the domination of a sporting event only by a certain number of sides or even a particular team in the long run reduces the element of uncertainty which is crucial in a competitive environment to keep spectators interested. The income and productivity may not be considered to be sustainable. Clubs with narrow resource bases are likely to participate in lower stages which lead to financial losses. (Szymanski 2004)

Not implementing measures like salary caps can also be beneficial or an inconvenience as well for European soccer as a whole. With non-existent salary caps, club sides are allowed to bid freely for footballers permitting the entrance of various teams and clubs into the framework leading to the vitality in European soccer system. The free competitive atmosphere provides a favourable environment for anyone with possession of essential assets to build a team or engage in partnership dealings and venture into other business opportunities to endorse a team. Nevertheless, in due course European soccer will have to put up with the concentration of teams into a small number of groups endorsed by financial sponsors with the wherewithal to back the side. The cost and other consequences of competition have evolved into major obstructions to access the competitive structure in European soccer for prospective upcoming teams. It may also turn out to be extremely difficult for some normal or under par sides to continue competing with major sides. This has an effect on the overall sustainability of the system if not the vitality of European soccer. (Dobson 2006)

Results of evaluation

Earning opportunities i.e., player salary is the most significant issue that drives the movement of footballers from one team to the other. Without salary caps in place transfers become a frequent phenomenon due to the predisposition of team members to seek offers bidding the highest pay packages after the cessation of their contractual obligations to their former clubs. There may be two ways of contemplating the player transfer system in European football and understand the transfer fee in that context.

Firstly one may adhere to cost-based approach in analysis and understanding the phenomenon of player transfer. In such an approach the user worth of players computed either from the viewpoint of the club or the player is taken into consideration. From the point of view of the club, the transfer fee is determined founded on the labour value. Club owners invest in players and various team requirements in order that this comes with the authority to gain payment on the wages of the player in addition to the expected input of the player. One should note that this is the normal course taken provided the player is bound by an already existing contract. However, if a player not bound by any contractual commitment, the approach reflects on human capital and the player himself estimates a justifiable transfer fee derived from opportunity cost, costs of the player on improving the worth of human capital by means of training and has to be not more than the projected returns. Another means of understanding the transfer phenomenon is the talent-based approach. In this approach a similar value system is made use of wherein the calculation of the transfer fee is based on experience level of the player as a regular member of elite clubs, sporting achievements, playing position along with the age and nationality. Market elements influence the cited value and this is very much cost-effective in instances where pure market elements decide the worth of the transfer fee. However, in reality other aspects like the risk associated with signing and training a certain player and the charge of releasing the player are also considered in the process of evaluating the value of the player(s) in question. (Michie & Oughton 2007)

The unfettered movement or transfer of footballers from one team to the other implements the cost-based method where there is no predetermined upper limit placed on the transfer fee sum and it becomes a topic of arbitration and settlement. The unregulated structure also amplifies the price of inducting players into squads. This manifests as a risk factor in instances when the club may possibly have overestimated itself in terms of its projected revenues proportionate to the expense of obtaining rights to a new player.

Competitive balance is yet another key topic of contemplation in the European soccer context. Competitive balance is associated with the fiscal worth or economic quality of a certain sporting event. Four criteria may be listed for event to be characterized as a quality contest. These are legality of the game, Quality of the players, uncertainty about the result, and the implications of the contest. Legality is associated with fair play and the ease of accessibility allowed for the entrance of new entities to participate in the contest provided that they are competent enough. Quality of players denotes the capability to match the equivalent competencies of team members belonging to the two sides to enhance the element of uncertainty in the outcome of the contest. Uncertainty about the result of the contest symbolizes the veracity of the event due to the lack of obviousness on the part of the spectators. The outcome not being obvious subsequently generates interest amongst the viewers about the contest. Implications of the contest denote the by and large features of the event. Competitive balance is believed to be a major prerequisite for the perseverance of European soccer framework and its financial practicability. (Goddard 2003)

To realize satisfactory levels of competitive balance, quite a few policy implementations may permit the individuals implicated in the organizing process of sporting contests to get involved in several key aspects of the event. To accomplish desired goals, one such measure that can be implemented is introduction of constraints on the movement of players by means of policies like a reservation system. This may be considered to be a direct measure resulting in a direct outcome. Nevertheless, this has to be applied across all competitions, tournaments and teams in the European soccer. The negative response received on the part of the sponsors to adhere to the constraints or their persistence in the transfer process would conflict with the rationale underlying the action, which is to uphold strong levels of competitive balance by avoiding the concentration of talent only amongst a particular or a small number of clubs.

Another measure is the circuitous infliction of layer migration by controlling the inducements offered for transfer by enforcing salary caps. This may possibly be practicable step for the reason that it has been proved that uncapped wages and transfer fee amounts are having their toll on the economic potential of clubs and teams resulting in the categorization of a small number of teams among the elitist and rest of the teams fall down to the lower echelons with a little or practically no possibility of up gradation, which hampers competitive balance. Yet again, regardless of the numerous benefits of such as measure and its contribution to the perseverance of European soccer, the measure could possibly be exposed to overt opposition and criticism particularly from the members and sponsors of the premiere clubs and teams. With the lack of complete and unconditional support of all teams and clubs, the implementation of the step could be disastrous. (Michie & Oughton 2007)

A further step that indirectly has an effect on competitive balance is the rearrangement of revenue distribution processes so as to accomplish revenue parity by enforcing measures for instance, dividing gate revenues and the concentrated sale of media privileges. This is not easy to put into practice for the reason that this may not be perfectly cost-effective or even inequitable particularly to top-level or best performing teams or clubs. However, from the standpoint of warranting the practicability of the European soccer system overall this may be a achievable proposal as it guarantees the success of a large number of individual leagues and teams enhancing the vitality of sporting events and improving high competitive balance to procure higher income. (Goddard 2003)

Conclusion & Recommendations

In the end, a different alternative is to streamline or rearrange the tournament structures to make sure that the participants in the competition are comparable in terms of economic potential. This can be achieved either by stopping teams having a negligible economic existence or by not including them into the recently forged super leagues which are comprised of big market or top level clubs and teams from the various existing leagues. This is an additional means of guarantying effective levels of competitive balance. By grouping clubs with equivalent economic competencies under the same bracket, the element of uncertainty is increased and consequentially interest in the contest is also heightened. In this case too, support of the various individual leagues, teams and clubs are essential prerequisites in order to put such measures into practice successfully. (Michie & Oughton 2007)

The perseverance of the European soccer system largely relies on a number of issues but the most significant factor is the capability of the soccer teams and clubs to uphold an effective competitive balance to make sure that the viewer’s interest in the game is converted into revenue. At the moment, European soccer presents only a satisfactory level of competitive balance, which possibly will not be enough to maintain the games viewer bases. European soccer is in dire need of reforms given that the unregulated structure is not advantageous for the overall sport. There are numerous approaches to developing and upholding a sustainable competitive balance but the most significant are the imposition of salary caps and streamlining of the tournament structures. However, these measures necessitate wholehearted support of the individual teams and clubs. Thus, it comes down to the synchronization of the entities implicated in the European soccer systems on which its sustained subsistence depends.

Bibliography

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Dobson, S & Goddard, J. A. (2008) The economics of football. NY: Cambridge University Press.

Dobson, S. (2006) ‘Managerial efficiency and human capital: an application to English association football’, Managerial and Decision Economics, vol. 23, 8, pp. 471-486.

Goddard, J. (2003) ‘Team performance and managerial change in the English Football League’, Economic Affairs, vol. 17, no. 3, pp. 30-36.

Gorman, J. & Calhoun, K. (1994) The Name of the Game, London: John Wiley & Sons, Inc.

Haas, D. (2003) ‘Technical Efficiency in the Major League Soccer’, Journal of Sports Economics, vol. 4, no. 3, pp. 203-215.

Hoehn, T. & Szymanski, S. (1999) ‘The Americanization of European Football’, Economic Policy, vol. 28, pp. 203-233.

Michie, J & Oughton, C. (2007) ‘The Corporate Governance of Professional Football Clubs in England’. Corporate Governance: An International Review, vol. 13, no. 4, pp. 517-531.

Szymanski, S. (2004) ‘Promotion and Relegation in Rent Seeking Contests’, Economics, Management, and Optimization in Sports, vol. 8, 289-299.

Szymanski, S. & Zibalist, A. (2005). National Pastime: How American play baseball and the rest of the world plays soccer, LA: Brookings.

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