Time to ditch the Salary Cap

The fallout continues from the latest Australian rugby league salary cap breach which has seen champions Melbourne Storm hit with the largest punishment in the code’s history. The Storm were stripped of their 2007 and 2009 premierships, not allowed to compete for points this season, forced to return $1.1m in prize money and fined $500,000. Their breaches included $1.7m in salary over five years for the News Ltd owned team. News Ltd CEO John Hartigan has distanced himself from the fraud and former Club boss and now rugby Melbourne Rebels boss Brian Waldron has fallen on his sword as the supposed “architect” of the rorts. (photo:Getty)

However there are a lot of questions unanswered. As many commentators have pointed out, the case brings into question ownership of Australian sporting teams. There are also obvious conflicts of interest between News Ltd as owners and media reporting on the issue. It seems difficult to believe that senior administrators such as Hartigan are as innocent as they portray themselves especially as News have admitted it does not have a “satisfactory explanation” as to what the players’ agents knew and when.

But questions much also be asked about the efficacy of the salary cap system itself. None of this would have occurred if there was no salary cap and it has been of dubious benefit in keeping the competition open and clubs from falling into financial ruin. The salary cap is an American import. In the US sports administrators first brought in salary caps in the 1980s to avoid the ruinous escalation of player salaries and competitive imbalance leading to boring games. The positives also include the ability of smaller clubs able to keep their star players.

But some experts have viewed salary caps as a collusive resort by clubs to maximise league revenues by controlling labour costs at the expense of less competitive balance within the league. Although European football also has dangers of competitive imbalance and financial instability it never followed the American example. As the University of Zurich noted in a 2008 paper, The labour relations approach employed by the hermetic American major leagues is not feasible within the European association-governed football pyramid. Another key difference is European clubs are treated as win-maximisers and not as profit-maximisers in sports economics literature: Kesenne and Jeanrenaud argue the most important divergence between the USA and Europe is that American clubs are business-type companies seeking to make profits, whereas the only aim of most European clubs so far is to be successful on the field. However in recent years UEFA and the clubs have begun exploring options due to the general perception that competitive balance in European club football is declining and a large number of clubs are accumulating ever-increasing debt.

Like European football clubs, Australian sporting clubs were also considered win-maximisers for most of their existence. Matters began to change in the late 1980s as first Australian Rules and then Rugby League began to move to national competitions. In 1987 the then Victorian Football League (renamed to AFL in 1990) brought in the cap as the Brisbane Bears and West Coast Eagles joined the competition. Up to then the biggest Melbourne clubs Carlton, Essendon and Collingwood had dominated the competition and the salary cap was seen as an equalisation policy (as well as a means of ensuring the poorer Melbourne clubs would survive in a national setting).

The then NSW Rugby League competition (renamed NRL in 1995) also brought in a salary cap in 1990 after the Brisbane Broncos, Newcastle Knights and Canberra Raiders had taken the league beyond the Sydney suburbs. Unlike the AFL however, the NRL has to deal with the problem of players leaving to play in lucrative overseas markets but the league believes this is an acceptable price to stop richer clubs dominating. The problem is, however, it does not completely stop that domination. In the last 12 years, Melbourne and Brisbane have won three times each – and it is no coincidence both clubs are owned by News Ltd.

The fact remains that in both AFL and NRL codes the history of the cap has been most honoured in the breach. The new Sydney Swans breached the VFL cap in the very first season and were fined $20,000 for doubling the cap. In NRL there have been 13 known breaches in 20 years involving multiple clubs. In AFL there have been at least 16 breaches in the 23 years of its existence and there have also been breaches in the next level down including most recently in the South Australian SANFL when Norwood was fined $50,000 and excluded for 12 months from registering any players outside its promotional boundary zone after a serious breach of the 2008 cap.

Like many good ideas, the salary cap is one prone to the law of unintended consequences. As sport becomes big business, its owners and controllers will stop at nothing to achieve success. It is all too easy to avoid scrutiny and the Storm debacle was only uncovered by accident. In my view, it is time to remove the cap. It won’t affect lower income clubs who can barely reach the cap ceilings now and it will drive more honest behaviour in the big clubs and patrons will get to judge exactly how much their stars are earning. As in every other occupation, the market should be best judge of salaries not the administrators.

Protecting the FA Cup: the media and Australian football

The European football season is drawing to a close with tonight’s FA Cup final at Wembley between Everton and Chelsea. I say tonight as the game kicks off at midnight Brisbane time. It starts at its traditional 3pm time in London, which is about 50 minutes away as I write. The FA Cup may have lost its lustre in recent years due to the massive money poured into the Premier League and the Champions League but it still has a host of rich traditions befitting the oldest cup competition in the world. Curiously that tradition is honoured here in Australia as the cup final is one of the sporting events “protected” as a television free-to-air event until the end of 2010.

And so SBS will show the game and talk up the local angle as “our Tim Cahill” versus “Aussie” Guus Hiddinck. They delight in the fact the FA Cup sits on an anti-siphon list alongside World Cup, the Olympics, the Ashes, the Melbourne Cup, the grand finals, the Wallabies, Wimbledon, netball, and the V8s. There is something about that list that says much about Aussies, their sport, and also their debt to Britain. In many ways it is absurd that the FA Cup is on the list. How come legislation demands that English football’s second best trophy must be broadcast to 20 million while local football makes do with two million on Pay TV?

Yet it is fair to say the banishment does not seem to be doing the local competition any harm. The A-league is thriving after 4 seasons and here in Brisbane, the crowds at Suncorp for the recently renamed Brisbane Roar are catching and matching the league Broncos and the rugby Reds. Locals will flock to any successful sporting venture and as long as the Roar can afford to play in the wonderful football venue that is the revamped Lang Park, they will do well.

The state is quickly becoming a fulcrum of power in the game. The league is expanding to 10 clubs in 2009 and both newcomers are monied Queenslanders. In rugby-league mad Townsville, Don Matheson has put his cash behind the Fury and in an inspired move have brought God to North Queensland. God in this case is Liverpool legend Robbie Fowler. However Robbie Fowler performs in a Fury shirt, he has already been a success. Fowler's media coverage has been huge and the move will guarantee every Liverpool fan in North Queensland will go and watch him play. If Fowler can last half a season, the gamble will be confirmed as an overwhelming success.

Meanwhile down on the Gold Coast, Liberal National Party powerbroker Clive Palmer is financing Gold Coast United (a rare departure from American style team naming). Palmer is, or was before the recession, a billionaire who is putting together a very handy football team. Gold Coast have brought Australian international Jason Culina back from Holland to lead the team. Culina will be an integral part of Pim Verbeek’s team in the South Africa World Cup so this is a significant coup for the league. While Culina does not have Fowler’s drawing power at the gate, he has the capability to be the best player in the A-league.

While I have cringed at the continued reliance on the marquee player system, I can appreciate it serves as an economic safety salve from a salary-capped league. The clubs have a cap of $2 million in wages for 20 to 22 staff. However they may also have a 23rd player who’s salary is not counted in the $2 million. Curiously, no team may have more than four internationals (including the “marquis”) though it does not say what happens if a fifth player is capped during their stay at the club.

The system has attracted several players past their best such as Juninho and Dwight Yorke, though Yorke in particular was successful (and returned to play premiership football for Sunderland under Roy Keane). It has also attracted Australian internationals such as Craig Moore, Ned Zelic and John Aloisi with varying degrees of on-field success. But they have all added much needed lustre to the league. The A-league is working hard off the successful template of the J-league founded in 1993, it was the eleventh best attended league in the world by 2006.

Australian football could well overtake the J-League by the time it is also 13 years old. Its move into Asia opens massive investment potential overseas. It is also slowly breaking down the traditional power structures of AFL in the South and Rugby league in the north. Last week, the Sydney Morning Herald reported how football was even taking hold in remote Aboriginal communities. The Borroloola Cyclones travelled a 1000km to Darwin to play in the Arafura Games in Darwin and caused the upset of the tournament with a 4-0 win over the Northern Territory under-16s. Whitefella coach Glen Thompson noted how the natural speed of the Indigenous locals was ideal for the game. "I'll make a brave prediction … soccer will eventually overtake Aussie rules up here because it is a global game," said Thompson. "When you make the national Aussie rules team, where can you go? Ireland to play some bastardised form of the game?"

Rugby league also suffers from lack of international legitimisation with just three countries any good at it. Union has more competition but the game they play in heaven remains attached to the colonies back on Earth. Melbourne remains passionately wedded to its footy, but is not immune to the world game. The Victory are the most successful A-league team and get 50,000 to their home matches. With Pim Verbeek's national team needing just one point in three games to qualify for South Africa 2010, globalisation is marching on here in relentless fashion. Expect also the 2011 Cup Final to be siphoned off to the highest bidder, and no-one to be terribly upset. Less clear is tonight’s result and I’m going unconvincingly for Chelsea on penalties after two hours of 0-0.

Brisbane 1, Melbourne 1

Its all square after yesterday’s intercity sporting squabble between Brisbane and Melbourne. But it wasn't reported that way in any of the Australia media. Their sports pages today were dominated by last night’s rugby league grand final. Even Melbourne’s parochial Aussie Rules dominated Herald Sun (Australia’s biggest selling newspaper) reported the Brisbane Broncos 15-8 win over their hometown team Melbourne Storm. That result won the Queensland clubs its sixth Australian rugby league grand final at Sydney’s Olympic stadium.

There were 80,000 in attendance (not a full house) to watch that game. For the third year in a row, the final was played at night time, not because it suited either set of fans, (it didn’t, it is a long weekend in Sydney but not in Brisbane or Melbourne) but because Channel Nine so decreed so that the game would take place in peak TV rating time. Earlier that day down in Melbourne, 25,000 people turned up to watch a top of the league football (soccer, the name of the sport, must always remain bracketed in multi-football Australia) clash between the Melbourne Victory and the Queensland Roar. The home team won 4-1 to continue its 100% record after six games in the A-League.

Their rugby league cousins were expected to make it a southern double. They had won the “minor premiership”, the home-and-away season that in most other countries establishes a team’s credentials for it to be declared the best. But not in Australia. Here finishing first merely gives you a favourable handicap to get to the grand final. Here, regardless of sport (league, union, Aussie Rules, football, basketball, netball and probably tiddlywinks), it comes down to one game as a decider. It’s a peculiarly Aussie notion of a “grand final”. You must win a decider. And in the league decider, Brisbane were the better team. Its not the first time either. The Brisbane Broncos were formed as an expansion club in a Sydney league in 1988 and by the time they reached adulthood they were playing in their sixth premiership decider. Like all previous five times, Brisbane won. And the enigmatic Wayne Bennett has coached all six deciders.

This one had its controversial moments. In the first half two dubious penalties gave Brisbane four easy points. But it was a second defining moment which put video refereeing in the spotlight. Brisbane were leading 14-8 when the admirably woolly headed Matt King dived over the line for what would have been his second try. But the video referee wrongly ruled that teammate Ryan Hoffman had knocked the ball on in trying to grab the kick in the preceding play. Brisbane captain and talisman Darren Lockyer sealed the game with a field goal leaving Melbourne seven points adrift and two scores adrift with less than ten minutes to go. Brisbane probably deserved the win, if only to celebrate the farewell appearance of its improbably suave square-jawed prop Shane Webcke. Webcke is the proverbial brick shithouse around a country manor. He was also a Brisbane legend for 12 years and it was his fourth appearance in a grand final. Although players and officials alike pretended it wasn’t about him, he easily dominated the media coverage before and after the game.

The earlier A-league clash between Melbourne and Brisbane also had its share of dodgy refereeing decisions. The game was played at Melbourne’s Docklands stadium which was designed for Aussie Rules and has a capacity of 50,000. It was Melbourne’s second ever game at the stadium after pulling in 40,000 for their win over Sydney FC a few weeks ago. Though the crowd wasn’t quite as impressive this time round, it was still a rousing atmosphere for the 100% league leaders. Melbourne’s skipper is journeyman Kevin Muscat who was renowned as a hard man when playing in the lower English leagues for Millwall. His most famous international moment was scoring the winning penalty for Australia v Uruguay in the World Cup qualifier at the MCG in 2001. He was at it again against the Roar scoring twice from the spot after very soft decisions against the visitors.

Brazilian striker Fred came back from a three match ban to also score a goal. He is not the same Fred that scored against Australia for Brazil in the world cup. The more famous Fred plays for Lyon in France. But the fact that two Freds are scoring goals internationally is a bit of a worry for those that prefer their Brazilian names to have more of a poetic ring about them. Fred may have a prosaic name but he is an integral part of Melbourne Victory’s push to become a force in the round ball game in this country. Barely one day before, the West Coast Eagles and Sydney Swans renewed their astonishingly tight rivalry in the wonderful AFL grand final with the Eagles gaining revenge for the previous year’s defeat by 1 point. But with no Melbourne team in the decider for the third straight year, the Victory are ideally placed to capitalise on the World Cup fever that struck Australia back in June. Melbourne remains Australia’s sporting capital and there are 3 million sports-mad fans waiting to hop on a successful bandwagon.

For now its congratulations to the Broncos and the West Coast Eagles. But watch out for the Victory and Roar. And watch out too for Benito Carbone. Late this afternoon, the little Italian genius, out here on a 4 game contract, destroyed Adelaide on his Sydney FC debut today, scoring one and making two other goals. And now Adelaide have signed Romario...viva calcio!

John O’Neill quits Football Australia

In a surprise announcement yesterday, John O’Neill quit as chief executive of Football Federation Australia (FFA). In Sydney, the 55-year old O'Neill said he would finish his tenure when his contract expires in March. He turned down the option of staying on for a further four years by mutual agreement with the FFA. Chairman Frank Lowy said "I expected him to sign a new contract for the next four years but he has indicated his need for a change of direction, which I respect.” John O’Neill was appointed in 2004 and oversaw a revolution in the sport of football in Australia.

John O’Neill was an executive at the NSW State Bank before he was appointed managing director and CEO of Australian Rugby Union in 1995. In eight years at the helm, ARU revenues increased seven-fold from $10 to $70 million while participation grew 50% from 100,000 players to almost 150,000. He was named the Sport Executive of the Year in 2002 for securing Australian sole hosting rights for Rugby World Cup 2003 which was initially due to be shared with New Zealand. The event itself in November 2003 was hailed as a great success and made a profit of almost $90 million. At the time O’Neill said the tournament's success had returned Australian rugby to financial health and stated that "Seven years ago we struggled to pay our electricity bill.”

Just as he did yesterday, O’Neill resigned as rugby boss unexpectedly in December 2003 after a falling out with his employers, the ARU. There were serious concerns within the organisation that he had turned the World Cup into "the John O'Neill show". This was due in part to a TV documentary on the event where O’Neill had the starring role. He was also criticised for spending too much time with Prime Minister John Howard and not sharing the plaudits of the successful organisation of the tournament with other key officials. His relationship with team captain George Gregan was also poor. O’Neill wanted to replace him as captain and he was forced to deny claims that he was the source of leaks to the News Limited media to destabilise Gregan.

In June 2004, the new football supremo Frank Lowy hired O’Neill to be his chief executive. The job was considered one of the toughest in Australian sport. Sectarian and ethnic rivalries, financial crises, state jealousies, poor attendences and bad administrative practices had left football in ruins. In 2003, the situation was so bad that the Government instituted the Crawford Report to investigate the problems. This inquiry (named after its chair David Crawford, retired Chairman of KPMG) recommended a series of reforms to the game. The board of Soccer Australia resigned en masse and billionaire business and football fan Frank Lowy was appointed chair of a new board charged with implementing the Crawford reforms.

The appointment of O’Neill was a crucial factor in improving the governance of the game. Under the Lowy/O’Neill axis, the old National Soccer League was abolished and a new A-league was planned with major corporate sponsorship and live TV coverage. The foundation clubs had no ethnic-based affiliations and required proof of start-up capital of at least $1 million before gaining entry to the league. The inaugural 2005-2006 A-league season was considered a slickly-advertised success with average crowds of over 10,000 in large well-appointed stadia. The next major achievement of O’Neill was overseeing the move of Australia into the Asian Football Confederation (AFC). This has long been a dream of Australian football - they and New Zealand were both rejected Asian membership in 1964. The change of confederation had two benefits; it would ease the torturous World Cup qualification path and also gain access to lucrative Asian markets and tournaments. Australia officially resigned from Oceania in March 2003 and were accepted as a new member of the 45-country AFC.

The third plank of O’Neill’s success was the hardest of all to achieve. Australia had not taken part in a FIFA World Cup finals since its sole appearance in 1974. The intervening years had seen nothing but quadrennial heartache including the most infamous loss in 1997 when Australia threw away a two goal lead to crash out to Iran in front of 100,000 people at the Melbourne Cricket Ground. In 2005, Lowy and O’Neill appointed highly respected Dutchman Guus Hiddink as team coach. Hiddink duly provided the miracle as Australia qualified by defeating Uruguay on penalties in November. Hiddink continued to work miracles by coaching the team to a last 16 finish in the World Cup itself. Football achieved its highest ever profile in Australia during the World Cup with massive media coverage and huge crowds in all major cities attending open-air TV screening in the small hours.

With Hiddink and now O’Neill no longer in the picture, Lowy will need to act decisively to ensure that Australian football does not lose its hard-won gains. Like Hiddink, the master administrator O’Neill leaves the Australia job with his already glowing reputation greatly enhanced.