A payroll control scheme for professional sports leagues.
Version of Friday 19 March 2023.
Dave Barber's other pages.

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:

PHIPhiladelphia, Pennsylvania
HOUHouston, Texas
SEASeattle, Washington
DENDenver, Colorado
ORLOrlando, Florida
CHACharlotte, North Carolina
INDIndianapolis, Indiana
NASNashville, Tennessee
MILMilwaukee, Wisconsin
BUFBuffalo, 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
teamtotal
payroll
above
average
below
average
5% 10% 15% 20%
payreceive payreceive payreceive payreceive
PHI470,000 170,000  8,5000 17,0000 25,5000 34,0000
HOU360,000 60,000  3,0000 6,0000 9,0000 12,0000
SEA330,000 30,000  1,5000 3,0000 4,5000 6,0000
DEN310,000 10,000  5000 1,0000 1,5000 2,0000
avg300,000               
ORL280,000  20,000 01,000 02,000 03,000 04,000
CHA270,000  30,000 01,500 03,000 04,500 06,000
IND260,000  40,000 02,000 04,000 06,000 08,000
NAS250,000  50,000 02,500 05,000 07,500 010,000
MIL240,000  60,000 03,000 06,000 09,000 012,000
BUF230,000  70,000 03,500 07,000 010,500 014,000
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
teamtotal
payroll
above
average
below
average
5% 10% 15% 20%
payreceive payreceive payreceive payreceive
PHI462,930 157,338  7,8660 15,7330 23,6000 31,4670
HOU370,427 64,835  3,2410 6,4830 9,7250 12,9670
SEA345,761 40,169  2,0080 4,0160 6,0250 8,0330
DEN312,064 6,472  3230 6470 9700 1,2940
avg305,592               
ORL289,539  16,053 0802 01,605 02,407 03,210
CHA274,683  30,909 01,545 03,090 04,636 06,181
IND260,912  44,680 02,234 04,468 06,702 08,936
NAS257,861  47,731 02,386 04,773 07,159 09,546
MIL251,495  54,097 02,704 05,409 08,114 010,819
BUF230,256  75,336 03,766 07,533 011,300 015,067
total 3,055,928  268,814  268,806 13,438 13,437 26,879 26,878 40,320 40,318 53,761 53,759