A Comparative Study between Europe and USA sport industry.
Today sport industry plays a vital role worldwide, sports have left a great impact on many aspects of life especially the economic one. This industry is considered a large one because of its high expenses as well as the high revenues sports clubs obtain (the global sports market grew from $354.96 billion in 2021 to $496.52 billion in 2022 at a compound annual growth rate (CAGR) of 39.9%). Sports laws and regulations give a great attention on athletes’ contracts which organize the relation between players and their clubs.
Americansand Europeans have different approaches to sportsindustry affected by their legal and economical background.
To understand the difference between each of US and Europe approaches’ to sports we have to understand the two models of sports in these two areas. In Europe we have the socio-cultural model while in US the commercialized model prevails.
The European model is based on sporting competition as the major organizational motive taking into account democracy or autonomy of parties.
While In the US, sport model is based on profit as the major organizational motive which pave the way for high state intervention.
Sports System in Europe:
In Europe, sport is based on a pyramid structure accompanied with league classification that works through promotion and relegation systems, for example, English football league consists of the FA Premier League (1st Division), the EFL Championship (2nd Division), EFL League One (3rd Division), EFL League two ….ext.
In this sport system, teams that fail competitively, finishing in the bottom few positions in the league, are relegated – removed entirely from a tier and forced to play with another lower echelon before they prove themselves worthy of returning.
In European sport, leagues are owned by clubs who make the league, for example: the Premier League is owned by the 20 clubs who make up the League at any one time.
The main characteristic of European sport leagues is that clubs or teams act like independent entities; however teams must work in accordance to the rules applied by internal and European laws.
This type of structure leaves a great impact especially on the status of players and their relation with clubs and the league.
First the player is owned by the club not the league. The relationship between the club and the player is left to their agreement which is based primarily on contractual freedom.
Moreover “In Europe, the sports employment relationship and its regulation is basically left to the parties controlling the particular sport.”.
In Europe there is no salary cap, this provokes the owner(s) of a club sometimes to pay millions to build up a powerful lineup. Here a problem occurs where, most of the time, sports power and results reflect money power.
This problem is inflated by the fact that teams at the top grab enormous amounts of prize money, allowing them to secure the best players on the best wages, which lead to minimize the scope of competition in the league even further.
In Europe regarding the transfer of players: if the player’s contract is expired then he will be a free agent and the transfer will be free where no transfer fee should be paid. However, if the contract of the player with his club is not expired the club seeking the transfer must pay them a transfer fee, where you get the feeling that the club is “buying” the player.
The player in Europe has the freedom to negotiate his own transfer regarding the destination of the transfer as well as his wages. This freedom which reflects the players interest may sometimes collide with the clubs own interests. For example, during the 2022 summer transfer window teams of Barcelona, Arsenal and Chelsea were interested in signing the Brazilian player Raphinia who played for Leeds United. Chelsea’s offer was the best offer that suits Leeds United, but the player opted to sign for Barcelona to fulfill his dream of playing there. This case shows that players in Europe have more bargain power towards their teams than they have in USA.
Sports system in the US:
Professional sports in the United States are almost a world by themselves when it comes to labor relations. Professional sports franchises in the United States usually have separate owners but the interests of the owners are unified as a league. The collective bargaining process in the US sports industry has commenced as a tool to protect the welfare and rights of professional athlete employees. Where the approach of the league in US is a collectivist one.
In the U.S. Leagues are considered as one company, and league owners are business partners.
This system of collective bargaining minimizes the contractual freedom of the parties; where agreements for a specific league put forward how the league operates regulating: relation between players and their teams, salary cap, transfer of players etc…. .
In this regard “The labor relationship between athletes and leagues in the US primarily comes down to the language of their contract. These contracts typically incorporate the league’s constitution and by-laws”.
The indication of the level of salary caps on the clubs is considered a remarkable feature in the US sports system where all the games in USA except Baseball have salary caps. The reason behind salary caps is to reach a minimum equality and stability in the league, by prohibiting richer teams to build powerful teams in a way that it dominates the league.
For example, in the NBA the salary cap for the 2022-2023 season has been set at $ 123.655 million.
This type of regulation reflects the way the US deals with sports. In USA Success is hailed, yet curtailed, and failure rewarded: The worst-placed teams get the first pick in the following season’s draft of new players, allowing them to restock on talent, a form of redistribution rejected elsewhere in the American economy. There is no relegation for those who finish last. In other words, in the US sports industry equal opportunities are given to all teams in order to maintain competition between them. It’s true that we have wealthy teams but this wealth must not be used to establish disturbance inside the league.
The structure of the sports leagues in USA and the collective bargaining agreements have an impact on the status of the players regarding their relation with the league and the teams.
In the US players are owned by the league not clubs. transfers from a team to another is done through one of two ways. Either they transfer as a free agent when their contract expires, or they are traded between teams, thus no transfer fee is paid. This is due to the fact that – as we mentioned before – leagues are considered as one company.
In USA sport leagues, in principal, the player doesn’t have the freedom to discuss when or where he\she is traded, except in the case that the player’s contract contains a non-trade clause, this clause prohibits the trade of the player without his\her approval or consent.
Finally, it is important to point out the conflict between theory and fact in both European and American sports system. While the European system theory is based on freedom of will and freedom of competition, the fact reflects sovereignty of clubs with financial power that undermine the ability to compete. On the other hand the US sport system theory seems to have much more restrictions on freedom and competition, while the fact represents a more suitable environment for fair competition. These points of notice drive us to study the positives of both systems in order to reach a better sports environment that reflects both freedom and fairness as essential part of any system.
List of references:
- Sports Global Market Report 2022, https://www.thebusinessresearchcompany.com/report/sports-global-market-report
- Tom McTague, AMERICA’S WILDLY SUCCESSFUL SOCIALIST EXPERIMENT, The Atlantic, https://www.theatlantic.com/international/archive/2019/09/us-europe-soccer-football/598012/
- About the Premier League, https://www.premierleague.com/about#:~:text=The%20Premier%20League%20is%20a,to%20English%20and%20European%20law.
- COLLECTIVE BARGAINING AGREEMENTS IN SPORTS: HOW DO THEY WORK IN THE UNITED STATES VS EUROPE, https://moneysmartathlete.com/2018/08/29/collective-bargaining-agreements-in-sports-how-do-they-work-in-the-united-states-vs-europe/
- Tara Lee and Nathan Swire, Organization of sports clubs and sports governing bodies, The Sports Law Review: USA, https://thelawreviews.co.uk/title/the-sports-law-review/usa
- https://www.nba.com/news/nba-salary-cap-for-2022-23-season-set-at-just-over-123-million
