Money talks in sport – the more you pay, the better you do
The more money a team spends on players’ wages in elite professional sport, especially in top-level European club football, the greater the chance of winning titles and championships.
Although many might wish to believe that sport is governed by higher ideals than hard cash, the old adage that you get what pay for rings truer in many athletic disciplines than other areas of life.
Money buys success: a complex model simplified
In some ways it should be no surprise that teams paying the most get the most success. All things being equal, if you have more to spend on hiring players, then you will be able to attract better players. Sportsmen, like any workers, will generally be attracted to positions with the best benefits.
Thus the ‘big’ clubs, who have the most fans, and the highest earnings from ticket sales and commercial income, and therefore the biggest budgets, will be in a position to spend the most on wages – the biggest single item of expenditure most professional sports team will have in any given year.
The biggest teams in English football (ie, the richest by income), are for example, Manchester United, Chelsea, Arsenal, Manchester City and Liverpool. And which five pay the biggest salaries? Those five, although the order is ever so slightly different with City at No.1, then Chelsea, United, Arsenal and Liverpool. Who generally wins the English Premier League title? Those clubs.
Who are biggest salary payers in Spanish football? Barcelona and Real Madrid. Who generally wins the title there? They do but Atletico Madrid in 2014, the third biggest wage payers in Spain, were an exception that proved the rule. Who are the biggest payers in Germany? Bayern Munich. Who dominates in Germany? Bayern Munich. Who pays the most in Italy? Juventus, and before that Milan and Inter. Who wins in Italy? Juventus, and before that Milan and Inter. France? PSG. And on it goes.
The phenomenon of the highest payers doing best stretches well beyond football. Go to MLB baseball in the USA, NBA basketball and even ‘democratic’ NFL football in America and the same patterns emerge to a greater and lesser extent: the more you spend on salaries, the better players you can afford, the more you succeed.
Cash can be transformative in sport
Arguably the most clearly defined example of money transforming a team’s fortunes in recent years has been at Manchester City, the Premier League club bought by Sheikh Mansour of Abu Dhabi’s ruling trillionaire family, in 2008.
City had been an also-ran team for decades. Their total wage bill for all staff in the season before Mansour bought them, 2007-08, was £54m, with the stars of the ‘first-team’ squad earning around £1.4m each. They finished 9th in the Premier League that year.
By 2010-11, the wage bill had more than tripled to £174m, with an average star earning £4.5m, and they were third in the league. The following season they were the No.1 payers in English football, and champions. Cash transformed their ability to attract top names.
Money talks even at a World Cup
The influence of money stretches to the World Cup. There was a strong relationship between the collective annual earnings of the teams at the tournament that ended on Sunday 13th July and the final finishing positions.
If you added up the income of the 23 players in each of the 32 national teams competing, then six of the top nine filled six of the eight quarter-final places. And Germany, the second-best paid team, beat Argentina, the fifth-best paid team, in the final.
The key point about best-paid teams is that dominance will become apparent over time. One-off matches can buck a trend but resources will always tell in the end. Having said that, in nearly all the World Cup matches from the group stages onwards, the better-paid teams won, with the exceptions of Costa Rica and Colombia bucking the trend.
Pitfalls of wages
The best paid team at the World Cup were Spain and they crashed out at the group stage. They epitomise the flaw of using wages as a predictive tool: the randomness of sport can always undermine you. And Spain’s sustained success over many years has led to salary levels that arguably don’t reflect any downturn that should be expected with age. That said, wages remain as good a predictor of success as any other single metric in football. You get what you pay for.
Nick Harris is an award-winning sports writer who has worked, among others, for the Independent, the Sunday Times and the Mail on Sunday, where is currently chief sports news correspondent. He is also the founder and editor-in-chief of www.sportingintelligence.com, which specialises in the business and finance of sport.
Entertainment and Media Group, July 2014
The views expressed are the author’s and not ICAEW’s.