Many professional sports leagues have a requirement that teams must observe a salary cap in the amount they pay their players.
Here is the reason. A team in a major metropolitan area (a large market) will typically have greater revenue than a team in a minor metropolitan area (a small market). This is because the large-market team has more potential fans in its geographical vicinity, which can boost ticket sales, souvenir sales, and broadcast revenue. If there are no restrictions, a team that can pay higher salaries can of course obtain better players. The consequent lack of parity would raise the likelihood that that large-market teams would prevailingly defeat small-market teams, with such predictibility reducing the excitement of play, and diminishing fan interest in the league as a whole.
Most methods of controlling player payroll turn out to be complicated, the result of extensive negotiations between the players' union and the league. Still, there are two general approaches:
The soft cap is particularly beneficial for teams that, if they slightly exceed the ceiling, can greatly improve their roster.
This report proposes a different system, simple in principle:
Here are some characteristics of the system:
The feature of proportionality is important, because teams do not know in advance what the league payroll average will be. In most cases, however, they will be able to form an estimate close enough for prudent financial planning.
This plan has somewhat the same effect as revenue sharing, which is sometimes used in professional sports leagues.
What follows are detailed examples with specific numbers. They use a league of ten teams in the United States, each in a major metropolitan area as shown in the table below. The towns appear in approximate descending order of population, each with the kind of three-letter abbreviation often used in sports reporting:
PHI | Philadelphia, Pennsylvania |
HOU | Houston, Texas |
SEA | Seattle, Washington |
DEN | Denver, Colorado |
ORL | Orlando, Florida |
CHA | Charlotte, North Carolina |
IND | Indianapolis, Indiana |
NAS | Nashville, Tennessee |
MIL | Milwaukee, Wisconsin |
BUF | Buffalo, New York |
Spreadsheet one, below, uses round numbers to make the calculations obvious. Amounts are in dollars, although many professional leagues pay far more than these figures. Several sample percentages of pay and receive are shown.
spreadsheet one — round numbers
team | total | payroll above | average below | average 5%
| 10%
| 15%
| 20% | pay | receive
| pay | receive
| pay | receive
| pay | receive | PHI | 470,000
| 170,000 |
| 8,500 | 0
| 17,000 | 0
| 25,500 | 0
| 34,000 | 0 | HOU | 360,000
| 60,000 |
| 3,000 | 0
| 6,000 | 0
| 9,000 | 0
| 12,000 | 0 | SEA | 330,000
| 30,000 |
| 1,500 | 0
| 3,000 | 0
| 4,500 | 0
| 6,000 | 0 | DEN | 310,000
| 10,000 |
| 500 | 0
| 1,000 | 0
| 1,500 | 0
| 2,000 | 0 | avg | 300,000
| |
| |
| |
| |
| | | ORL | 280,000
| | 20,000
| 0 | 1,000
| 0 | 2,000
| 0 | 3,000
| 0 | 4,000 | CHA | 270,000
| | 30,000
| 0 | 1,500
| 0 | 3,000
| 0 | 4,500
| 0 | 6,000 | IND | 260,000
| | 40,000
| 0 | 2,000
| 0 | 4,000
| 0 | 6,000
| 0 | 8,000 | NAS | 250,000
| | 50,000
| 0 | 2,500
| 0 | 5,000
| 0 | 7,500
| 0 | 10,000 | MIL | 240,000
| | 60,000
| 0 | 3,000
| 0 | 6,000
| 0 | 9,000
| 0 | 12,000 | BUF | 230,000
| | 70,000
| 0 | 3,500
| 0 | 7,000
| 0 | 10,500
| 0 | 14,000 | total
| 3,000,000
| 270,000
| 270,000
| 13,500
| 13,500
| 27,000
| 27,000
| 40,500
| 40,500
| 54,000
| 54,000 | |
Spreadsheet two, below, is similar except for using non-round numbers.
spreadsheet two — non-round numbers
team | total | payroll above | average below | average 5%
| 10%
| 15%
| 20% | pay | receive
| pay | receive
| pay | receive
| pay | receive | PHI | 462,930
| 157,338 |
| 7,866 | 0
| 15,733 | 0
| 23,600 | 0
| 31,467 | 0 | HOU | 370,427
| 64,835 |
| 3,241 | 0
| 6,483 | 0
| 9,725 | 0
| 12,967 | 0 | SEA | 345,761
| 40,169 |
| 2,008 | 0
| 4,016 | 0
| 6,025 | 0
| 8,033 | 0 | DEN | 312,064
| 6,472 |
| 323 | 0
| 647 | 0
| 970 | 0
| 1,294 | 0 | avg | 305,592
| |
| |
| |
| |
| | | ORL | 289,539
| | 16,053
| 0 | 802
| 0 | 1,605
| 0 | 2,407
| 0 | 3,210 | CHA | 274,683
| | 30,909
| 0 | 1,545
| 0 | 3,090
| 0 | 4,636
| 0 | 6,181 | IND | 260,912
| | 44,680
| 0 | 2,234
| 0 | 4,468
| 0 | 6,702
| 0 | 8,936 | NAS | 257,861
| | 47,731
| 0 | 2,386
| 0 | 4,773
| 0 | 7,159
| 0 | 9,546 | MIL | 251,495
| | 54,097
| 0 | 2,704
| 0 | 5,409
| 0 | 8,114
| 0 | 10,819 | BUF | 230,256
| | 75,336
| 0 | 3,766
| 0 | 7,533
| 0 | 11,300
| 0 | 15,067 | total
| 3,055,928
| 268,814
| 268,806
| 13,438
| 13,437
| 26,879
| 26,878
| 40,320
| 40,318
| 53,761
| 53,759 | |