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The business of sports leagues is inherently intertwined with the finances that the franchises have. It may appear that the success of a club is determined by the performance of its players on the field. However, that is not the entire truth because, at the back end, there is an entire team of professionals who are trying to raise funds and spend them in the most efficient way so that the players are given the maximum probability of putting up a good performance on the field.
Finances do play a very important role in changing the fortunes of a club. There are many clubs that have been known for being middle-of-the-table clubs that have now come to occupy a dominant position in their respective leagues. This has generally been done with the power of money. The most notable examples of this can be found in European football leagues. This is the reason that European football leagues have created specific rules which limit the use of money in football. These rules are called financial fair play rules.
In this article, we will understand what financial doping is and why the European leagues have to introduce financial fair play rules in order to prevent it from happening.
Ideally, football clubs or any other sporting franchises are supposed to run as self-sufficient economic units. This means that the amount of money that the club has at any point in time is determined by their performance in the previous years. However, in some cases, the owners of football clubs have started infusing large sums of money into them. This sum of money is not derived based on the financial status of the franchise. Instead, it is derived by using the personal means of the owners.
This act of using the personal wealth of the owners of the sports franchise in order to gain a competitive advantage has been termed “financial doping”.
The term financial doping has been chosen in order to convey the negative connotation of this strategy. The intent is to compare this financial strategy with doping.
Doping is the use of drugs or other banned substances in order to temporarily and unfairly improve the performance of individual players. It is widely believed that this strategy is immoral because it puts the other players at a disadvantage. Similarly, by naming this strategy as financial doping, it is claimed that it helps one club unfairly improve its performance at the expense of other clubs that participate in the league.
The money raised using financial doping is then used by the clubs strategically to corner the best human capital in the league. Large sums of money are rewarded to top players in order to encourage them to jump ship from their old club and join this relatively new and unknown club. Not only does the strength of the team using financial doping increase because of the influx of top players but the quality of opposition teams also deteriorates since top players have been poached from them.
The end result is that the club is able to muscle its way to the top using money as its main weapon instead of using sporting skills and strategy.
The financial doping regulations came into play in the recent past when two clubs from the English Premier League started using this strategy. The use of monetary resources by Manchester City and Chelsea has brought the focus to this strategy of financial doping.
Chelsea is owned by Roman Abramovich who is a Russian billionaire whereas Manchester City is owned by Abu Dhabi sovereign fund. Both these owners come from the cash-rich oil business and have no qualms about taking losses for the first few years. Hence, they invested huge sums of money by poaching a large number of players and completely changing the face of their team. The performance of these teams drastically improved as a result of this and they started topping the tables. The large sums of money invested were recouped as the performance of the team improved.
This is when the opposition teams started protesting and the term financial doping was coined in order to refer to this strategy. Since then, other football clubs such as PSG have also been known for using this strategy.
There have been heated debates as to whether or not the use of excess funding in the initial years of ownership of a team can be considered to be a negative strategy. However, the European football leagues have ruled in favor of stopping the use of such a strategy. In order to do so, a set of rules called the financial fair play rules were created. These rules restrict the amount of cash that can be invested in a team in any given year.
These rules define a maximum cash limit that can be invested in a team in a particular year. This amount is defined as a multiple of the revenue of the team. As a result, the larger teams are able to invest a larger amount of money as compared to smaller leagues.
The fact of the matter is that financial doping as well as financial fair play rules are highly controversial topics. Right now, they are being followed only in European football. However, soon this might become a global issue. The pros and cons of these rules will be discussed in detail in the next article.
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