Salary Cramp: The Illusion of Parity in North American Sports

How could North American sports benefit from removing salary restraints on teams?

Author's note: Bruce Dowbiggin is a Canadian author and columnist whose latest book “Cap in Hand” explores the potential for North American sports leagues to break free of their salary cap-imposed shackles and let the free market reign. He was kind enough to discuss his latest book with me.

Hockey fans of the two biggest and best leagues in the world (NHL and KHL) are familiar with the pains of the salary cap. Both the Los Angeles Kings and Chicago Blackhawks are two big teams who have been forced to shed important players following Stanley Cup Championship success in order to pay their stars and prevent them from testing free agency. All this in the name of staying under the league’s mandated ceiling of how much teams are allowed to spend on their players. How the salary cap came about is a long history, but ultimately comes down to the fact that team owners needed something to protect them from themselves as well as maintain complete control over players.

In this book, Dowbiggin and co-author Ryan Gauthier discuss some of the legalities surrounding sports, namely collusion and antitrust. According to the authors, “Antitrust law generally does two things. First, it either prohibits or restricts monopolies. If there is only one business in a particular market, there is a higher chance that anti-competitive practices harmful to consumers will occur. Second, antitrust law prohibits ‘collusion’ by businesses in a particular market.”

In other words, businesses are not allowed to set prices or agree not to buy from a specific supplier as this harms consumers. How does this apply to sports? Since sports leagues are considered an interstate commerce, this affects a player’s right to determine where and how he wanted to play. In essence, salary caps are a form of collusion against paying athletes their fair market value. However, as Dowbiggin notes, “the players themselves traded away these rights in exchange for other benefits in collective bargaining.”

Dowbiggin and Gauthier argue that salary caps are bad for sports by thinly spreading elite talent, rewarding failure, and promoting mediocrity. If this is this case, why do the owners love the salary cap so much?

“Owners continually try to operate under a monopoly status to operate how they want when they want,” Dowbiggin says. They want to be able to do things how they want to, when they want to, and they don’t want anyone, players or government included, to get in the way of that.

According to the book, “Leagues and owners have touted the salary cap as the silver bullet that will ensure their sport greater stability—and so greater profits. This claim is treated as received wisdom by the owners, as though any sport without a salary cap is somehow sub-par and destined for the dustbin of history. [...] Owners and league commissioners...have claimed that a salary cap is vital to the survival of their leagues.”

But when one examines this idea against the ever-popular and growing European football (soccer) leagues, then it seems like a farce. So, then, in theory, the players can band together and demand changes in their favor, right? Yes, says, Dowbiggin, “but the unions have all buckled under pressure.” While MLB has the strongest union (and therefore no hard cap), every other players’ union has succumbed to pressure. In 2004, the NHLPA broke down after lengthy negotiations and finally agreed to a salary cap while the NFL has had a history of undermining the union by offering lucrative marketing contracts to individual star players, and the NBA’s biggest stars couldn’t agree with the “rank and file” players.

Okay, No Cap. How Would This Work?

Dowbiggin and Gauthier address this in the last section of the book. They use the example of the English Premier League, which has “Premiership, EFL Championship, League One and League Two. Instead of failure being rewarded at the bottom of the table, teams are relegated and promoted. Instead of young talent being awarded to the laggards in the league, prospects are sold up the food chain until they, and their paychecks, reach the top levels of the sport.”

Essentially, League Two acts as a development league of sorts, allowing athletes to thrive and play with lower competition and as they—and teams—get better, are able to move up. Teams that can’t afford to compete in League One are able to develop players and “sell” them to teams that can afford to be with the best. This, the authors argue, creates healthy competition and incentivizes players and teams to continually improve.

The best part of the transfer system is that a new deal is negotiated once a player’s old contract has been sold. This can greatly benefit both the player and the club to which he has been transferred to, especially if the athlete has shown vast improvement.

Interestingly, high profile free transfers are quite rare. More often than not, if a team doesn’t wish to continue being in business with a certain player, said team will try to sell his contracts so they can at least get a transfer fee, much the same way that NHL teams will attempt to trade (a very North American idea, per Dowbiggin) a player so they can at least get a draft pick instead of letting him walk for nothing.

Imagine for just a second that the NHL operated this way. Imagine if a player like Artemi Panarin was pretty dead set against remaining in Columbus. Rob Blake would negotiate with Jarmo Kekalainen for a certain fee and Panarin could then negotiate a new deal with the Kings. There’d be no need to worry about salary restrictions, with an owner as seemingly hands off as Phil Anschutz. It would certainly make player movement much more interesting around the league in general.

What About Competitiveness?

In “Cap in Hand,” Dowbiggin and Gauthier discuss the idea of the franchise model. In the early days, before television (and to a lesser extent radio) broadcasting rights were a factor. In the 1920s and ‘30s and all the way through the late ‘50s during the so-called Golden Age of Television, it made sense to have sports franchises in every corner of the country to capture the broadest audience possible. This gave way to the franchise model, an idea, as seen with the Vegas Golden Knights and the yet-to-be-named Seattle team, still popular with owners today. But Dowbiggin believes the franchise model is outdated now.

One only need look at the Arizona Coyotes, who claimed bankruptcy in 2009, and the Anaheim Ducks, who, despite their on-ice success (they dominated their division for half the decade—not that easy to do when the league is hell bent on random variation determining winners), are struggling, lagging in both attendance and television ratings. (To boot, the Ducks are measured independently from the Kings and sit at the very bottom of the league in TV ratings, even though they’re in the same market.)

So if we scrapped the salary cap, wouldn’t all the elite talent concentrate in the biggest markets that can players the most? This is a two part answer that is both yes and mostly yes.

Keeping with the European football theme, it is true that the best players tend to be on the wealthiest teams because that’s where they’re likely to get the best deals. But that hasn’t hampered the sport’s popularity at all, with more than four football billion fans worldwide. The EPL, for example, is currently broadcast in 212 territories. In the book, the authors take note that the EPL sold its domestic broadcasting rights in 2015 for 1.712 British sterling pound (approximately $2.23 billion USD) and sold its global broadcasting rights at the same time for 2.8 billion BSP (~$3.65 billion USD). European soccer leagues have also recently boasted worldwide household names as Cristiano Ronaldo, Lionel Messi, and David Beckham among many others. Clearly they’re not suffering for having the best and most talented player spread among so few teams.

You may be wondering about the second part of the answer, “mostly yes.” In the 2015-16 season, Leicester City of the Premier League, went on an incredible Cinderella run, being the best team for 9 months and winning the PL Championship (the best team at the end of the season is awarded a trophy; no playoffs necessary to determine who truly is “best” in that league.) The year before, they narrowly avoided relegation to a lower league. They’re a much smaller club and got creative to win, which is what the best teams, regardless of size or wealth, have to do.

If you’re still skeptical, consider the NCAA. The same teams tend to dominate the championship series each year. In football, Ohio State, Michigan, and Alabama have some of the most storied programs and have all been in the top-20 rankings for much of the past decade. In basketball, it’s much the same with UCLA, Duke, North Carolina, and Kansas. With hockey, Boston University, Boston College, Minnesota University, Wisconsin University, and Denver University are consistently touted as being among the best schools and have all appeared in or have won the Frozen Four (D-I ice hockey championship) within the last 10 years.

But, Parity!

“Parity is just the notion that we make everything mediocre,” says Dowbiggin. The idea of parity is that a rising tide lifts all boats but in the era of the salary cap, it hardly exists. Dowbiggin and Gauthier observed that from 2000-2017, 20 different MLB made the World Series, of which there were 12 unique winners; the NFL sent 17 different teams to the Super Bowl, only nine of which were different; in the NHL, 19 different teams played in the Stanley Cup Final and only half of them were unique. The NBA was the worst offender, with only 13 teams playing in the Finals and 8 unique championships.

LeBron James-led teams have been to eight consecutive Finals (2011-2018) and the Golden State Warriors have won three of the last four championship titles (2015, 2017, 2018). The authors even point to the NBA’s playoffs being rather dismal, given that the west will almost assuredly come down to the San Antonio Spurs or the Warriors while the Cleveland Cavaliers swept six of nine non-finals series and none have gone beyond six games. And all of this is happening in a league with a strict salary cap.

In the NHL, the Pittsburgh Penguins became the first team to become back-to-back champions for the first time since the Detroit Red Wings did it nearly 20 years earlier. The salary cap remains hotly contested as team owners press to keep it low while players want to see it keep growing in order to increase their own salaries.

Parity, like the cake, is a lie.

What Would an EPL-esque NHL Actually Look Like?

Dowbiggin proposes expanding the league to 48 teams and dividing it into two tiers—the Premier Conference and the Championship Conference and then re-divide those conferences into two divisions.

“Eliminate ceilings and floors, back-diving deals and other restraints that keep a team with resources from acquiring a Connor McDavid from Edmonton or a Patrik Laine from Winnipeg. Let teams pay partial salaries of players they trade or acquire in trades. The only restriction would be on the number of contracts a team could control. Say, 25 pro contracts. Top teams could have the best players, just not all of them.”

Dowbiggin also suggests scrapping the amateur draft, as it creates scarcity where it once did not exist. With this in mind, the AHL could potentially merge with the NHL to form a super league a la the EPL. Teams concerned about player development could create academies, which hearken back to the farm system (something Dowbiggin dislikes, again equating it to causing a scarcity issue as it inhibits player movement), and players can still be sold up or down, depending on skill level and need of the teams in question.

Could This Actually Work?

Sure, why not? Football (soccer) is deeply ingrained in the culture in Europe. In Canada, hockey is one of their two official national sports. By removing the shackles of the salary cap, who’s to say that a Canadian team won’t finally be able to bring home Lord Stanley’s trophy?

It would take a little tweaking and a little patience, but there’s no reason to think it wouldn’t work in North America. The Swedish Hockey League has implemented somewhat of a similar practice with team promotion and relegation. Instead of rewarding inept management or ownership (cough cough Edmonton) through draft picks and tanking (looking at you 2015 Buffalo Sabres and Coyotes), the worst teams are forced to defend their pride and their position in the league. Their system of relegation/promotion is rather complicated, but suffice it to say that when it comes down to it, the playoff-style series are extremely exciting.

Baseball’s “Soft” Cap

Most leagues seem “fine” with their current salary cap situation. However, a niche sport like hockey has shown signs of chafing against the strict constraints they’ve placed upon themselves.

The luxury tax works better than a salary cap but it’s still a drag on salary

Perhaps total agency is too much for teams. After all, owners all too often can’t seem to help themselves. But a luxury tax similar to MLB’s could work for the NHL. Any concern for building a “super” team that’s sure to win can be easily swayed. In 2015, Molly Knight penned a book called “The Best Team Money Can Buy” about the Los Angeles Dodgers, detailing how they would constantly spend over the luxury tax limit in order to give themselves the best chances at wining the World Series. Nothing really ever amounted of those teams. It wasn’t until 2017, after they’d changed owners, managers, general managers, and presidents that they got the closest they’d been in nearly 30 years and still fell to the plucky Houston Astros in seven games.

“The luxury tax works better than a salary cap because it creates some flexibility, though it does create some drag on salary because most teams tend to stop spending when they get close to the luxury tax,” says Dowbiggin.

This “soft” cap could end up being the best of both worlds. Super teams don’t always work out. After all, literally everything has to go right and an extra pinch of luck is needed in order for any team in any league to win the championship—whether it be a regular season trophy similar to EPL or playoffs series.