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  • Essay / Consequences of the abolition of the salary cap in the NFL

    10 years after the fact, this court decision was detrimental to the NFL because it deteriorated the competitive balance of the league, slowed down the growth of salaries of players and hindered the growth of the league's market capitalizationBy abolishing the salary cap, the Department of Justice's decision had a substantial impact on the competitive balance of the NFL. Since the salary cap was removed, over the past 10 years, big-market teams, or those with deep-pocketed owners, have spent money wildly. Small market teams have been marginalized to the point of having very little chance of winning because they cannot afford to spend freely on talent and do not have the revenue potential to make money. This progression is similar to what we have seen over the years in professional football, notably in the UEFA Champions League and in Spain. In the UEFA Champions League, 12 teams have combined to win 48 of 58 championships, or 82.76% of the championships. There has been such a lack of competitive balance in revenue sharing and in football without a salary cap that even among the best teams in the world there are large disparities. An even more extreme example can be found in the Spanish La Liga, where the top 2 teams have won 65.85% of the 82 league championships and the top 5 teams have won 93.9% of the league championships. This lack of competitive balance is almost certainly due to a lack of salary cap space, as the top 2 teams spend up to €190,000,000 per year on players while lower tier teams spend up to €14,000,000 per year in players. However, the NFL's continued revenue sharing has ensured that disparities within the league are not as great as in professional football. Despite these effects of revenue sharing, the lack of a salary...... middle of paper ...... mirrored that of the MLB, another professional sports league without a salary cap. Maintaining a revenue sharing system makes the NFL's market cap growth lower than other leagues without a salary cap like MLB because it reduces the ability to capitalize on lucrative television deals. Additionally, the reduction in product quality (resulting from the change in competitive balance) slows the growth of the league's market capitalization compared to the rate at which it was growing before the court's decision. Overall, this court decision was bad for the NFL because its elimination of the salary cap – but not revenue sharing – produced a worse product than would have been produced had there been no decision, which pays players less than it would have. if there was no decision, and that makes teams less valuable than they would have been if there was no decision.