Salary Caps’ Role in the Future of Professional Sports

Professional sports are businesses, and they sell competition. The most elite of elite athletes competing against each other attracts viewers, who become fans. With fans, sports clubs can sell tickets, merchandise, and sign TV deals. Without good competition between teams and players, sports leagues like the MLB, NBA, and NFL would not accumulate or maintain the huge fanbases they have today. The survival of a sport is contingent on many factors, including duration of the competition and strategy involved in the competition. Ultimately, however, the long term success of the sport is determined by the level of competition it can produce between teams.

Fans and sports teams alike place higher value on games against rivals and teams that are known to be good. A Red Sox v. Yankee game is going to sell more tickets and the tickets will be more expensive than a Sox game against the Orioles. The competition from the rivalry and the history between New York and Boston fuels interest in the game.

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After the introduction of free agency into professional sports, competition levels were brought into question. Owners of clubs needed something to implement as labor control, and salary caps were their solution. Although the specific details of a league’s salary cap differs between leagues, the main idea is the same. To maintain competition and interest in the sport, teams are limited by what they can spend on players.

Salary caps help to maintain inter-team competition. Without limiting the salaries that a team can pay out to its players, “competitive balance between teams would be destroyed, driving weaker franchises out of business”. The NFL has an issue with player compensation that Leigh Steinberg brings up in his Forbes article (listed below). He says that NFL teams’ tendency to pay their star players top-of-the-market prices leaves them minimal funds to pay for backups. These backups wind up having to settle for the minimum salary set by the league, whether they are seasoned veterans or fresh rookies. Thus, if a starter gets injured, the quality of performance out of that position drops significantly, as the backup comes in untested and is simply not close to being equivalent to the starter.

 

Steinberg goes on to blame the pattern of players often switching teams on the salary cap, not on the practice of free agency. “Teams are forced to discard fan favorites because of cap limitations”, and this can be seen all over professional sports in the US. When a team loses a crowd-pleasing player who makes the big play and has an appealing off-field personality, much of the fanbase will be dismayed. This is not to say that the fanbase will or should fall apart when a star player is traded or leaves the team, but with an increase in switching teams, sports leagues will suffer the economic consequences of fans abandoning player loyalty. Jersey and ticket sales could suffer as interest in the sport declines.

Finding the right balance between salary caps/floors and revenue sharing seems to be possible, but it is sport-specific and needs to be implemented to ensure the continued success and growth in popularity of American sports.

 

http://onlinelibrary.wiley.com/doi/10.1111/j.1465-7295.2010.00330.x/abstract

 

https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/leighsteinberg/2015/08/06/negative-impact-of-nfl-salary-cap/&refURL=https://www.google.com/&referrer=https://www.google.com/

 

https://priceonomics.com/are-salary-caps-for-professional-athletes-fair/

 

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2 thoughts on “Salary Caps’ Role in the Future of Professional Sports

  1. connor smith

    What about the luxury tax in terms of the salary cap? Creating a more balanced and fair salary cap obviously would help the smaller teams, but at the end of the day if you are a wealthier team it wont matter what the salary cap is. If a team like New York Yankees want to sell more tickets by signing big name free agents they will just pay the luxury tax, take their medicine and give the fans the players they want to see play on their team. As we know being able to afford the best players does not necessarily always translate to success, but I think it would be interesting to see how the luxury tax plays a roll for the wealthier teams in professional sports.

    Reply
  2. lukemadden19

    The money issue is very important in relation to what you had referred to as well as the larger issue of competition. If the big teams are able to pay the big players then the competition will weaken as has been the case with the Golden State Warriors. They are able to pay 5 all-stars on their roster and are prone to return the championship every year, which only weakens the idea of competition in sports.

    Reply

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