In general, European football clubs operate with less constraints compared with other sports league around the globe. European football clubs are free to operate with regards to spending on player signings and how they go about constructing a team.
The main restrictions placed on clubs are in the form of UEFA’s Financial Fair Play (FFP) regulations. The introduction of FFP was in response the growing trend in European club football of clubs operating at a financial loss and building considerably large liabilities in the form of debt. Essentially, it was an attempt to dissuade clubs from irresponsible, unsustainable financial operations.
In contrast, in many sports leagues around the world, harsher constraints are placed on sports teams with regard to how they operate. These measures are usually implemented to preserve the competitiveness of the league and ensure that each team starts on an even playing field as much as possible. The common mechanisms that are used are salary caps and player drafts. The former restricts the spending of each club on player salaries whilst the latter controls the supply of new talent distributed to each team annually.
Furthermore, it is common for sports leagues to decide their champion using a playoff series that is generally a series of knockout ties between teams. This feature adds more variability to the season, as inferior teams are more likely to prevail in one-off upsets than they are across the regular season.
FFP restricts the outgoings of a club to not exceed its income over a three-year assessment period. Income includes, for example, gate receipts, TV revenue, advertising, merchandise, prize money, and player sales. Outgoings include transfer fees, employee salaries, finance costs among other items. Funds invested in infrastructure are excluded are not considered. Failure to comply with the restrictions results in disciplinary actions ranging from warnings and fines through to exclusion from competitions.
A salary cap is a set of rules dictacting limits on player salaries, whether individual player salaries or salaries aggregated across the whole team. These measures are common in North American and Antipodean leagues as a way of esuring competitive balance. Each football league's cap varies in its implementation, but they primarily seek to prevent any one team grossly outspending all other teams.
As above, player drafts are common in specific regions and often coincide with closed leagues (no promotion/relegation). The overarching premise of player drafts is to control the supply of new, young talent to the league each year and to ensure its distribution is skewed towards teams with poor performance. In the long-run, this skewed assignment of players should contribute to competitive balance.
The National Football League (NFL) is the highest division of gridiron football in the USA. It currently consists of 32 teams split into two conferences, which are then further split into four divisions each. At the conclusion of the regular season there is a playoff series culminating in the Superbowl, which decides the champion for that season.
Unlike other sports leagues, in the NFL, teams are not guaranteed to play each other in any given season. In fact, two teams may never play, or only play against each other in the Superbowl decider. This a fundamental difference to most sports leagues where each team is guaranteed to play each other at least once in a season.
The NFL uses both a salary cap and a player draft to promote competitive balance. The LEI measures have been high over the last 20 years (75+) with 8 distinct Superbowl winners over the last 10 years.
The Australian Football League (NFL) is the highest division of Australian rules football in Australia. It currently consists of 18 teams located in five states. There is a finals series each year to determine the Premiers. Teams will generally player each other once or twice in a given season, depending on the fixturing.
Like the NFL, the AFL uses both a salary cap and a player draft and we can observe its effect with the \(\text{LEI}_{\infty}\) measure being very high (90+).
The main difference with the NFL in terms of the outcome of these measures is that, in the AFL, there are more frequent periods where one or two teams are dominant. This is why we see a more volatile \(\text{LEI}_{10}\) that at times drops to around 50.
The MLS is the top division of football in the US and like other North American sports, it is a closed league. Currently there are 28 teams competing across two conferences. The winners of the MLS Cup are crowned the champions after a playoff series.
The league has experienced substantial growth in recent years with the introduction of many expansion teams. Overall the LEI indicators are high with both sitting at 80+.
The league has both a player draft and a salary cap but clubs are still able to participate in transfer windows outside of the draft. The player draft is generally for recruiting players from the college system. Furthermore, clubs are able to spend beyond the salary cap by signing players as designated players.
The A-League is the top division of football in Australia and, when founded, was the birth of professional football in the country. Like many of the other professional non-football leagues, it implements a salary cap to ensure a fair competition. The current salary cap is roughly AUD 2.5 million with further allowances outside the cap for signing foreign marquee and designated players.
Generally, only a handful of clubs with sufficient financial resources are able to consistently spend outside the cap and make use of these extra provisions.
In addition, the league culminates in a finals series each season to determine the winner. It is often the case that the team finishing top of the table does not go on to win the Grand Final.
Despite the short history of the league (17 seasons), we can see that the LEI measures are high, usually 75+. This indicates the salary cap is generally working as intended, with even smaller clubs like Central Coast and Newcastle United managing to win a title each.
The English Premier League (EPL) is included for comparison as it is has the highest LEI across the European football leagues.
\(\textbf{LEI}_{\infty}\)The LEI measure for the AFL, NFL, MLS and A-League are all high, generally in the 75+ range. The EPL also has a similar measure, although other European football leagues would not compare well.
Despite the absence of salary caps and player drafts, the EPL has a distribution of success not dissimilar from these other closed leagues.
We begin to see differences between the leagues emerging when looking at the short-term measure. There is naturally more volatility in each league's series, however for the EPL we can see a sudden decline from the mid 1980s onwards. This period coicides with a seismic change in English football with the founding of the EPL and the emergence of financial super clubs.
The lower LEI indicates the composition of the distribution of titles has changed, with individual teams experiencing longer periods of dominance. This phenomenom isn't observed to the same degree in the closed leagues.
