The bottom line: after years of growth, a flailing world economy and staggering player salaries have forced some European and South American clubs to consider salary caps and, worse, bankruptcy - Statistical Data Included

Soccer Digest, June-July, 2002 by Clemente Lisi

SOCCER IS OFTEN CALLED THE simplest of games. Over the past 10 years, some would say it has simply become a multibillion-dollar global business in which 22 highly paid players chase around a ball for the financial gain of team owners and stockholders. Now, however, even that scenario, a win-win arrangement for clubs and players, has hit a roadblock.

The once seemingly endless supply of television network and sponsorship cash pouring into European and South American clubs has begun to dry. Late 1990s spending sprees and corruption have plagued teams even further. Many teams, now forced to answer to shareholders rather than fans, are in danger of collapse.

Even FIFA found that it wasn't immune to financial trouble when Swiss marketing giant ISL/ISMM went bankrupt last year, leaving the television rights to the 2002 World Cup in jeopardy for weeks. FIFA lost an estimated $120 million.

What's worse, television executives have admitted they doled out too much money for domestic league rights over the past few years and that teams should prepare for more modest deals in the future. Formerly deep-pocketed clubs, now aware of future cutbacks, have sounded the alarm, warning that teams can no longer spend millions on transfer fees and player salaries if they want to continue to stay in business.

Most European teams spend nearly 80% of their annual take on player salaries, raising real concerns if wages are not curtailed. "Although players should be well paid, there should be a limit to keep things sensible," says Coventry assistant manager Jim Smith. "Otherwise, I wouldn't be surprised to see some go bankrupt. Unless we are alive and alert to these issues, then inevitably in due course the bubble will burst"

Four years ago, Europe's wealthiest clubs formed the G14 group in an effort to counter UEFA and get its fair share of the TV revenue pie. The powerful lobbying group--made up of Manchester United, Liverpool, Real Madrid, Barcelona, AC Milan, Inter Milan, Juventus, Borussia Dortmund, Bayern Munich, Marseille, Paris St. Germain, Ajax, PSV Eindoven, and Porto--has even threatened to form its own league.

The prospect of a revolt convinced UEFA to increase the clubs' shares of the Champions League pot--yet that hasn't halted the demands for reform. Many G14 teams argue that they should be guaranteed entry into the tournament--at one time reserved for a league champions and the current Cup holders--based on their historical record, regardless of where they finish in their domestic league. Those clubs, needing revenue from TV broadcasts and extra gate receipts in order to pay for escalating salaries, are opposed to a UEFA plan limiting the number of Champions League qualifiers.

In February, the G14 warned that salaries had to be drastically scaled back if clubs wanted to ensure any long-term survival. Although it stopped short of implementing an American-style salary cap, the G14 agreed to have some sort of an income ceiling in place by next year. Ironically, Italian clubs, which started the trend of high wages following the 1995 landmark Bosman ruling--which allows out-of-contract EU players to move freely within EU nations--are leading the drive toward a salary cap. Lazio has voluntarily decided to cap its salaries at $68 million for the 2002-03 season, a 30% reduction of this year's payroll.

UEFA has said it could not impose a salary cap because of various European labor laws. The governing body would, however, back a salary cap if the clubs themselves were to put together a proposal. "Two years ago, if someone had suggested a salary cap there would have been an outcry," says UEFA chief executive Gerhard Aigner. "Now clubs are talking about it, pushing for it. They see money disappearing into this big black hole."

One team that has seen its money gobbled up is Fiorentina. The Italian club--without an owner and forced to sell some of its best players--has been plagued by unprecedented corruption. Fiorentina has been seeking a buyer since the start of last season after it was discovered that the team was beleaguered by a $46 million debt, which forced owner Vittorio Cecchi Gori to step down as team president.

Gori, a film tycoon, borrowed $35.5 million from the team in order to keep his media empire afloat. Making matters worse, he spent all of the team's TV income for the next two years and its season-ticket revenue for the next four years. The club even failed to pay its players for four months and it only did after they threatened to strike. Star players such as goalkeeper Francesco Toldo and midfielder Rui Costa were sold to ease the burden. Gori--already under investigation for money laundering and drug possession--has yet to sell the team. Fashion designer Luciano Benetton had been touted as a possible investor, but no solid offers emerged. To make matters worse, the cash-strapped team was relegated to Serie B.

UEFA has also agreed to create a licensing system for clubs participating in continental competitions. The system--expected to take begin in the 2004-2005 season--will deny a spot in the Champions League or the UEFA Cup to any team with overdue transfer payments or monies owed to players.