NRL – Abolish The Salary Cap

Canterbury Bulldogs star, Sonny Bill Williams, wants more money. He is currently in the first year of a five year deal with the Bulldogs worth $400,000 a season. He says he is being underpaid.

He is right.

The NRL is starting to lose players to European clubs, not so heavily constrained by such meagre salaries. The wages and sponsorship of Williams, Gasnier, Lockyer et al, on the other hand, are kept artificially low by the NRL salary cap of $4.1mm per club. Williams supports the cap but wants the chance to earn more via sponsorship. This, the NRL correctly replied, is effectively the same as raising the salary cap.

NRL introduced a salary cap in the early 1990s with the laudable goal of increasing competition amongst the League’s teams. Who, goes the thinking, would want to watch a League in which only the richest three or four clubs stood a chance of winning?

Well, half the population of the U.K. for a start. The British Premiership is such a League and you’ll not find any salary caps here. In fact Christiano Ronaldo is currently negotiating a new contract with Man United worth $15mm in wages alone, three times as much as the entire Bulldogs squad combined. At the start of each Premiership season, everyone knows that only Man United, Chelsea and Arsenal have a chance of winning (i’m sorry Liverpool fans – it ain’t going to happen). The rest are there solely to make up the numbers. Hence fan attendance has plummeted and ticket prices are being slashed to try and bring back the fans.

Except it hasn’t and they aren’t.

This season, attendance is up 5% (and that is despite the Top 4 teams already operating at full capacity and hence showing no growth in attendance) and ticket prices being hiked an average of 8%.

The Premiership attracts the world’s best players and is watched each week by a global audience of nearly 500 million people. So successful is it that FIFA President Sep Blatter recently demanded that the Premiership restrict the number of foreign players per team. His reasons verge on the xenophobic, are inherently illiberal and are as useless as any other protectionist logic. In reality his opposition stems from the fact that a truly free market in players has created the best teams in Europe. And he doesn’t like it.

In short, the Premiership is a golden example of a fully functioning free market. The fans are coming in ever increasing numbers (despite the annual season ticket price moan), players are free to negotiate contracts bilaterally and come and go as they please and English teams are now the best in the world.

Keep Mr. Williams in Australia. Abolish the cap.

15 thoughts on “NRL – Abolish The Salary Cap

  1. Lots of employers have salary rules for their departments. And lots of franchise schemes set buying and selling rules for their members. Of course such internal rules are frequently put under pressure by market forces. Which is what seems to be happening in this case. As such it would seem that the market is functioning.

  2. Yes, but it’s worth noting that the NRL is a free market solution as well – in the sense that somebody could set up a competing league with their own salary cap rules (or lack thereof).

  3. You are making an apple v oranges comparison. If the NRL was as well run and had the equivalent income of the Premier League, you’d have a point.

    At the moment, the salary cap is the least of the NRL’s problems. The NRL is stuck in outmoded business models (especially some of the Sydney clubs) and that needs to change first.

  4. I could never agree with ditching clubs, or the rationale behind the ARL/Superleage “peace deal”.

    If the AFL is making inroads to the GC and Western Sydney, why not the NRL into Perth and Sydney.

    If the AFL succeeds in expansion and the NRL fails, it doesn’t mean the NRL should cut back, it means the AFL is doing something better than them they need to imitate or better.

    Don’t start me on the pointlessness of a scrum where you can feed the ball into the second row.

    The salary cup simply seems like a stupid rule. NRL/ARL teams have had the earning capacity to breach it since it’s inception.

  5. Don’t start me on the pointlessness of a scrum where you can feed the ball into the second row.

    indeed. what the hell is that all about?

  6. The reason that the NRL is unable to make inroads is simple – not only is the game poorly administered, the game is rubbish.

  7. The Indian 20/20 competition also doesn’t have salary caps does it?

    I often tell AFL fans I work with how salary caps aren’t needed – using British Premier league as an example as one of the best sports competition set ups in the world.

    I love the way everyone tries to knock off a few key teams.

  8. AFL – isn’t that a weird version of Gaelic football?

    Indeed it is. Large quantities of beer (especially Guinness) are needed to make it comprehensible. Even when you understand it, it’s not worth the effort.

    But NRL is played by men with cauliflower ears and no necks, who eat raw meat and drag their knuckles on the ground. No amount of beer makes it understandable.

  9. Pommy you aren’t going to win any NRL supporting fans with that argument. The consequences of lifting the cap would mean the end of a lot of under performing clubs. Some are looking at the chop as we speak.

    I surprised my friends by not supporting a demand for the NSW government to hand out 10 million to upgrade Brookvale oval (Eagles will be premiers in 08 btw). Their point is that clubs like Penrith and Cronulla got hand outs so why not us?

  10. Ben

    It seems to my untrained eye that NRL clubs are going out of business because
    i) there are too many of them and
    ii) the star players are leaving for higher wages in europe.

    go Manly 🙂

  11. I’m not disagreeing with you on any points. I’m just pointing out that unlike a “normal” business, a club has loyalty beyond normal product loyalty. IE: Just because a team is rubbish doesn’t mean the die hard fans will go for another team. Seeing clubs go because they are not bringing in the revenue would be abhorrent to those fans.

    What the English premier league has going for it is the relegation system. If a club is struggling financially they can keep their head above water by selling off more expensive players and getting in cheapies. They can then sit down in a lower division while they sort their act out.

    With no relegation in Rugby league the teams do not have that option. If they consistently lose then the fair weather fans leave and the club starts losing money. The NRL demands a high standard from the clubs for Stadium quality (there was talk of Manly losing it’s televised home games, because brookie is in a poor state) so if they are not getting money in then there is every chance they will go under.

    The relegation system I think could win favour with lots of NRL fans. In particular with fans who lost their teams during the ARL Vs Superleague stoush. Fans of Norths, the Steelers (even Newtown Jets fans!) would really benefit from a relegation system; it would give their teams a crack at former glory.

  12. As the article points out the EPL is a prime example of a market unconstrained by artifical boundaries competing on a global scale. Another key point about the EPL is that it has a promotion and relegation system in place, so unsuccessful teams are weeded out and replaced by more successful teams.

    The NRL struggles on two counts, it imposes an artificial limit on salaries which results in the best players going overseas, but also rewards failure by not having promotion and relegation. If promotion and relegation existed then the market could decide if there are too many teams in Sydney as there would be a mechanism for the Perth Reds to gain promotion to the top flight. Entry to the NRL would be on the basis of on field results and not decision by the NRL board to create a new team on the Gold Coast. It would also allow old clubs like Newtown to recover and return to the top flight.

    Although the English Super League is about to abondon promotion and relegation for a few seasons this has in the past allowed new teams to enter the league, the Super League also runs a salary cap but it is I beleiev related to the amount of profit a club has, so the more profit the larger the cap, this provides an incentive to clubs to improve profit for on field gain, somthing else missing in the NRL model.

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