Hull City is about to be relegated from England's top soccer division, the Premiership, to the second division, which is called the Championship. In an effort to stave off administration, the UK's hybrid of bankruptcy and receivership, the club's going to try to cut player salaries next year from 39 million pounds to 15 million pounds (US $59.2 million to $22.7 million).
It's a little bit like the Florida Marlins of a few years back, except the Marlins didn't get busted down to AAA in the process. Hull's predicament is not unusual in British soccer either. England's top four divisions cover 92 clubs, all considered professional. Teams go into administration each year. Championship side Crystal Palace, which went into administration this year, can, by a scheduling quirk, avoid relegation with a result away to Sheffield Wednesday this weekend. Portsmouth became the first-ever EPL team to enter administration earlier this season.
It's no better elsewhere. Teams in Spain and Italy are threatened with administration, or extinction. Player salaries have gotten so high that running a top-division team is, in general, a money-losing proposition. The recent financial crisis has taken a lot of backers out of the game.
A salary cap seems to be the logical answer, but it looks nearly impossible to get all the leading countries' top leagues on board. These leagues' clubs are all competing for the services of the world's top players. Different countries have different currencies and tax rates, so it might, for instance, be far more lucrative for a player to be paid in Russian Rubles and get taxed in Moscow instead of getting paid in Euros and taxed in Madrid.
There are also legal ramifications: the EU tends to take the workers' side in labor-management disputes. The Bosman Ruling, which brought free agency to European soccer, confirms that soccer players are workers. European regulators could throw out a salary cap on the basis that it is collusive.
Salary caps do exist in lower divisions, but they're soft and team specific: in the lower leagues in England, each team's cap is 75|PERCENT| of top-line revenue.
On a more encouraging note, Rugby Union leagues in Europe have managed to install salary caps without EU interference. So maybe there's hope.
Aside from financial stability, another benefit of a salary cap would be increased competition—such as in the NFL. As we discussed Monday, Scotland's top league has been a two-team fight for 25 years. Spain might be headed down that path. At most four clubs have any real chance at the top prize in England. Portugal has three big clubs. With intermittent exceptions, Holland is controlled by three clubs. Rosenborg BK dominated Norway for a decade.
Let's see what happens. If more clubs keep losing money, something's gotta give.