Free Agent - Drawbacks For Owners

Drawbacks For Owners

The economics of free agency are disadvantageous for team owners; it can lead to bidding wars—and increased player salaries mean decreased owner profits. Restrictions on free agency have therefore been preferred by North American team owners since the abolition of the reserve clause. For example, a draft can be used to keep young and talented players from generating bidding wars and causing higher player salaries throughout the league. Furthermore, some teams which play in large market cities, and hence have a larger revenue stream, would be able to outbid other teams for talented players. Some leagues, such as the National Football League and the National Basketball Association have imposed salary cap rules in order to avert such bidding wars.

In Europe, the wages of the top players have increased dramatically since the Bosman ruling, although this is partly because of increased television revenues. Some club chairmen have called for a payroll cap in a bid to control player wages, but this would almost certainly be ruled anti-competitive and therefore illegal under EU law. As in North America, the number of transfers involving a fee are on the decline since clubs can wait for players to finish their contracts and become unrestricted. Also in Major League Baseball the larger and more successful teams often trump the lesser income teams from lack of a salary cap.