09/30/24
Inside the Finances of Professional Soccer
Author: Miles Solomon
Editor: David Sun
The NBA and major soccer leagues, such as the English Premier League (EPL), are both powerhouses in the sports world. Both leagues bring in billions of dollars a year, but how the monet is spent and made are very different. The NBA operates as a centralized league with 30 teams, and is governed by a commissioner. Each team has to follow the rules designated for them, including a salary cap, designed to maintain competitive balance. Soccer is instead highly decentralized, with multiple leagues across different countries. Leagues like the EPL set no strict salary cap on clubs, allowing clubs with richer owners to invest in better teams.
Two Premier League teams, Ipswich Town and Chelsea, show the difference between large and small clubs. Chelsea, a team owned by Los Angeles investors, has spent “€1.32 billion on signing players since Boehly & Co. took over the club in mid-2022”. Ipswich Town, on the other hand, has spent only £22.7 million on new player signings.
Lower-end teams in large clubs aren’t often competing to win their respective leagues. Instead, they are fighting to stay in the league itself. Unlike the NBA, the Premier League utilizes a relegation system, sending teams back and forth from league to league within the English professional soccer system. For Premier League clubs, the financial consequences of relegation are severe. A poor season leading to relegation results in a significant loss of revenue, particularly from the lucrative TV rights deals. Relegated clubs often see a sharp decline in revenue, with estimates suggesting losses of up to £100 million.
Currently, the soccer landscape is under massive change. Proposals like a super league comprised of the best teams from countries around the world playing each other, instead of teams like Ipswich Town, have been underway for a while. Saudi Arabia has started investing in soccer players, offering to pay billions to individual players to put their league on the radar of soccer fans. As soccer continues to evolve, keep a close eye on how financial decisions will reshape the landscape of the sport.
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