The Economics of Competitiveness: NFL and the Premier League

According to the Premier League website, their principal aim is ‘to stage the most competitive and compelling league’. But if we take a look at the Premier League, we see the same four teams cropping up. What do they have in common? Huge amounts of finances. Manchester City are the only team to have really succeeded in breaking this oligopoly and this was done through massive investment, again showing the stagnancy prevalent within a league dictated by economics.

Now compare this to the NFL, the last three seasons there have been three different Super Bowl Champions. The New England Patriots/New York Giants matchup this year, although admittedly a rematch of the 2008 Super Bowl, determined another new champion. But what it is that keeps the NFL so competitive? The answer lies in the economics.

Financially, the NFL incorporates a much fairer system than in the Premier League. For instance, each team has a salary cap set by the league. This means that the richest NFL teams can’t buy all the talent. It also means that NFL teams have to think carefully about where they spend their money.

The NFL: surprisingly fair considering it's American. There's no weight limit either!

Say a team wanted a quality quarterback, this would have to be subsidised by making other sections of the team weaker. A prime example of how this can affect a team occurred this season with Indianapolis Colts losing their star quarterback Peyton Manning for the season. The Colts, having consistently clinched a playoff berth since 2002, slumped to fourteen defeats- the joint worst record in the league. In football terms, the equivalent would be Manchester United losing thirty three games. This is somewhat unimaginable.

Additionally, 60% of the profits made by the NFL and its franchises are distributed amongst the teams equally. This means that the smaller teams in the league do not suffer so much financially and are able to compete more effectively. Every time a team sells merchandise, everyone gets a share.

This means, most importantly, very few NFL teams go into liquidation. An NFL Franchise has not gone bust since the Dallas Texans in 1952. For the last fifty years no NFL fan has ever felt the sting of administration or the threat of bankruptcy that has blighted many an English football fan; most recently Portsmouth and Darlington who risk having their rich histories disparate from the game.

These financial rules combined with the NFL Draft, a scouting system that allows the poorest performing teams of the previous season to select the best young talent, mean that the NFL has no ‘Big Four’. Instead teams go through cycles of prestige and then have to rebuild. The unpredictability of NFL was shown this year when the Detroit Lions achieving their first playoff berth since 1999- a mighty achievement considering they had only won 8 games in the last 3 seasons.

Yes, the Premier League is a competitive league and no game is a given result; Swansea’s 3-2 victory over Arsenal was the perfect advertisement for the league’s competiveness. But we all know at the end of the season, Swansea will not be challenging for a Champions League spot whilst Arsenal almost certainly will.

The Financial Fair Play rules set out by UEFA will only serve to further the stagnation allowing the clubs at the top to further their superiority. They specify that a club must ‘compete within their revenue’. All well and good if your Manchester United with a world-wide fan base and 75,000 seat stadium, but what of Norwich, Stoke and Fulham? How are these teams meant to compete at the highest level?

Perhaps a more logical solution would be that of a salary cap, a system that is being incorporated into the newly founded I-League, in India, potentially proving that such a system could succeed in association football. This would not only limit extravagant losses but also allow teams to compete on a more financially fair basis and perhaps in turn, create a more unpredictable league.

There is no doubt that the Premier League remains one of the most entertaining football leagues in the world and will continue to have fans glued to their TV screens on a Saturday. But wouldn’t it be nice if for once we saw Alex Ferguson test his mettle in a relegation battle? I know a certain set of Liverpudlians who would relish the prospect.