Salary Caps: MLB vs EPL
By Alex Cabo
Major League Baseball "MLB" is North America's highest level of professional baseball. It is one of the major league sports with teams in both Canada and the Unites States. It consists of 30 teams, split into 2 divisions the National League (NL) and the American League (AL) with 15 teams in each. The leagues were formed in 1876 and 1901 and joined together in 1903. Teams play a total of 162 regular season games, and then 6 teams advance to a four round postseason tournament. The final series is a best of seven called the 'World Series'.
The MLB is the second wealthiest professional sports league, generating 10.32 billion in 2022. This revenue is generated from broadcast rights, ticket sales, merchandise and sponsorships. MLB teams are owned by a majority of individual owners, and a few by investment groups. The MLB does not have a salary cap - instead there is a luxury tax called the "Competitive Balance Tax", which regulates the total amount of money a team is allowed to use on their roster. A team's Competitive Balance Tax figure is determined using each player on the 40-man rosters average annual contract value. Teams are allowed to go over this threshold but will receive a penalty. A club that goes over the threshold is subject to a 20% tax on all overages for the first year, if it happens for a second consecutive year, that number goes to 30% and a third year draws a 50% penalty. Currently there are 4 teams over the 2023 limit, the New York Yankees, New York Mets, Houston Astros and the Philadelphia Phillies.
The English Premier League "EPL" is England's top football league. It was founded in July 1997, after First division clubs signed the Founders Member Agreement. Their inaugural season started in August 1992, with 22 teams. Of the original 22 teams, 6 clubs have been ever present in the Premier League - Chelsea, Arsenal, Manchester United, Everton and Tottenham. In the 1994/95 season the Premier League dropped to 20 total teams, as four clubs were relegated and two were promoted. Now with the 20 teams, every season the bottom 3 clubs are relegated to England's second tier, while two of the second tier's best teams are relegated and the three through six seeds are placed into a four-team playoff and the winner of that is the last team relegated.
The EPL is constructed by teams that operate as their own entities which must follow rules provided by the EPL Rule Book, FA, UEFA and FIFA. The clubs each own a share of the league, giving them all equal votes and distribution of league revenue. The Premier League is made up of many different ownership structures, they consist of either a stock market model, domestic owners and foreign owners. The EPL generated 5.5 billion dollars last year, putting it at the fourth largest sports league by revenue. There are no salary cap restrictions in the EPL, there are financial rules, but they aren't very strict. The Financial Fair Play rules implemented by UEFA are the only rules currently.
The MLB and EPL both not having salary cap restrictions make the sports more similar than they seem. They are both leagues that are dominated by big markets and wealthy owners. The top three highest payrolls in the MLB are 1. Los Angeles Dodgers ($265,396,675), 2. New York Mets ($261,273,320), 3. New York Yankees ($251,889,255) and the top 3 highest payrolls in the EPL are 1. Manchester City (€263,176,160), 2. Manchester United (€246,588,160), 3. Arsenal FC (€208,586,560). The team spending is very similar across leagues, and they all are all owned by very wealthy owners. This gives them a serious advantage over other teams in their leagues as other teams cannot spend anywhere near these amounts. The Baltimore Orioles have the lowest payroll in the MLB at $43,645,896 and Sheffield United has the lowest payroll in the EPL at 26,329,680. The leagues have historically been dominated by the larger teams that have been able to spend more on big time players and providing large contracts to star players. There has been talk about both leagues and trying a way to level the playing fields. Though not much movement has happened as the revenue from the bigger markets still is a driving force in the leagues.
I never knew that for the MLB the tax rates go up depending on how many years you breach the threshold, it makes sense but I have never heard of any sports doing it that drastically (going up 10% each year) which I thought was interesting. I also never would have thought that the Dodgers have a higher payroll than Manchester City because futbol is known to be the most worldly sport so I would have assumed that a futbol club would have been higher. I do think that both the MLB and the EPL should implement salary cap restrictions as we have seen in multiple cases how not having these restrictions can negatively impact an organization.
ReplyDeleteI think this blog post provides a comprehensive comparison between the salary structures of Major League Baseball and the English Premier League. One aspect that I found particularly interesting is the exploration of the financial dynamics within each league, including the revenue generation sources and the absence of salary cap restrictions. You did a good job effectively breaking down the revenue streams of both leagues, shedding light on how MLB's Competitive Balance Tax and EPL's Financial Fair Play rules play a role in regulating team expenditures. I like how you mentioned specific figures for top payrolls in both leagues. This adds a quantitative perspective to the comparison, enhancing the reader's understanding of the financial disparities. The inclusion of the top and bottom payrolls in each league, such as the contrast between the Los Angeles Dodgers and the Baltimore Orioles in MLB or Manchester City and Sheffield United in the EPL, effectively illustrates the significant financial gaps existing within these sports. In terms of improvements, providing a bit more historical context on past attempts or discussions around implementing salary caps or financial regulations in both MLB and the EPL could enhance the reader's understanding of the ongoing challenges.
ReplyDeleteI have personally never been a big baseball fan so to me I found it really interesting the fact that the Dodgers out of all sport teams in the world have one of the highest payrolls in the world at $265,396,675 and following that is the New York Mets and New York Yankees which I thought was very interesting because as a futbol fan I would have never expected the MLB to be paying more than Futbol teams like Manchester City or Real Madrid.
ReplyDeleteThis blog post offers an enlightening financial analysis of Major League Baseball and the English Premier League. I appreciate the ample background provided on both leagues before delving into a side-by-side comparison of team spending, revenues, and ownership dynamics. Exposing the massive payroll gaps between the highest and lowest earning teams is striking, highlighting concerns around parity and access to talent. While mechanisms like luxury taxes and financial fair play rules aim to curb spending, the competitive advantage held by large-market, high-revenue clubs is unambiguous. Overall this is a thoughtful examination of the economic realities shaping two of the world's most lucrative sports leagues.
ReplyDeleteThis post was a great comparison between two of the largest leagues in the world and the more you look at soccer and the MLB you can see a lot of similarities. When only looking at the MLB it is the only league in America to not truly have a salary cap and like soccer we typically see the big market teams getting the good players but when you add taxes and stuff like that there may be more people that are hesitant.
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