Back in 1887, everyone was already playing soccer in England. The Premier League didn't exist -- nor did any other league. Instead, there was the Birmingham Cup, the Staffordshire Cup, the Lancashire Cup, the English Cup, the Welsh Cup, the FA Cup and plenty of other tournaments that were seemingly being created at random every other day.
The problem with the ad-hoc, knockout-only schedule is that, as the founder of the Football League William McGregor put it, there was no "fixity of fixtures." Teams would get knocked out of multiple tournaments early and have nowhere to play. Or they'd make a deep run in the FA Cup and have to cancel their games in Lancashire Cup because, how were they supposed to know they'd make it to the semifinals of the FA Cup?
Fans didn't love it either. McGregor said they "became disgusted by the intermittent fare provided for them."
Born in Scotland, McGregor emigrated to Birmingham around 1870. He owned a small drapery shop and eventually became an administrator for one of the leading, nascent football clubs in the area: Aston Villa.
"A great many people saw the difficulty which football and footballers were in; I happened, luckily, to be the one man at that particular time who saw the way out," he said, according to The Story of Association Football, written by J.A.H. Catton in 1926. "It appeared to me that a fixed program of home-and-home matches between the leading clubs in the country ... would produce football of a more interesting nature than the average game we saw."
In March 1888, McGregor suggested to five of the other leading clubs in England that they form a 12-team competition with this "fixity of fixtures." By September, the Football League played its first matches.
Historians initially suggested that McGregor came up with the idea of a "league" from cricket, the country's other most popular sport. However, as shown by Andrew Zimbalist and Stefan Szymanski, authors of "National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer," it seems more likely that McGregor was inspired by the success of baseball's National League over in the United States.
But the inspiration ended with the schedule. The National League was a closed system where the owners would only welcome new clubs if they all thought it would increase everyone's profits. Sport and business were tied together from the start.
Instead, the Football League accepted its place within the Football Association, England's larger governing body for the sport. From day one, league rules included language about the worst-performing teams being replaced by the best-performing teams from a lower league. The FA imposed a rule that no team directors could be paid for their services.
In contrast to the front-and-center business interests of the National League, McGregor envisioned the Football League as an organization founded on "the joint principles of self-interest and mutual advantage." He proposed that the attendance revenue from matches -- at the time, the only source of revenue -- be shared equally by the hosts and the visitors.
With the home-and-away fixtures and the promotion-and-relegation structure eventually adopted by the majority of sports leagues created across the world over the next 100 years, it's not inconceivable that everyone would've adopted this principle of financial equality, too. But instead, 10 of the 12 Football League clubs voted McGregor's proposal down.
All of which, eventually, led us to where Manchester City and the Premier League are today: an English club that is essentially owned by a trillion-dollar sovereign wealth fund from a natural-resource-rich Middle Eastern nation is facing expulsion from the league that McGregor created because those owners artificially inflated their revenues by more than $1 billion so they could compete with the biggest teams in a competition that now makes close to $10 billion a year.
In short, it led to a scenario in which Manchester City cheated the financial rules because, well, they kind of had to if they wanted to win a Premier League title.
Which is more competitive: The NFL or the Premier League?
There are lots of inherent contradictions in the way we decide to determine our champions.
By some definitions, American sports are way more competitive than European soccer. Six different teams have won the past 10 NFL titles, nine teams have won the past 10 NBA championships, and seven different sides have won the past 10 World Series.
These leagues have salary caps and tax penalties to prevent any team from spending too much money, and they all seek to increase parity by allowing the worst teams in the leagues every season to hire the best amateur players in the world through their annual drafts.
But to an economist, American sports leagues are the exact opposite of competitive: they're monopolies or cartels. There's no real punishment for losing -- if anything, you're rewarded for losing. And new teams can only be added to the existing leagues if the other owners agree to let them in and if the new owners agree to pay billions of dollars in fees to join.
European sport, in turn, is as competitive as it gets -- at least, from the economist's point of view. You win the league by winning the most matches across the same exact schedule of games as everyone else in the league. If you finish too low, you get dropped down to a lower league. Win enough games in that lower league? You get rewarded by promotion to a more prestigious competition.
The advantages to this approach are clear. Anyone can, theoretically, create a team and get promoted up the pyramid. So, there are soccer clubs just about everywhere in England. While fewer than half of the states in the U.S. have an NFL team because of the closed structure, there are 17 professional soccer teams in London alone.
Fans benefit with more access to attending games at home this way, and they also benefit by not having to sit through uncompetitive matches where both teams are actively trying to lose and jockeying for a higher draft pick.
The structure seems to serve the players, too. While contracts for the best soccer players pale in comparison to the major American sports, the player pool is so much bigger across the wider soccer economy. On top of that, Premier League clubs, on average, put 66% of their revenues back into player wages. Across American sports, teams only spend about 50% of revenue on salaries.
Of course, if baseball players are making way more money than soccer players despite getting a smaller chink of the pie, then it's clear which structure is better for business: the one where everyone gets to stay in the league no matter how bad they are. It aligns the interests of owners and makes revenues way more consistent, year after year.
The problem with professional soccer -- the issue that's constantly pulling at the core of the idea, the thing that McGregor seemed worried about 150 years ago -- is that the structure only remains fair and truly competitive when the financial resources of the competitors remain somewhat equal.
Without those guardrails in place, the economy of the world's most popular sport eventually came to mirror the economy at large: those with initial, inherent structural advantages kept winning, while everyone else floundered about in varying degrees of precarity.
It's no coincidence, then, that of five Premier League clubs to win multiple Premier League titles, four have never been relegated. It's also no coincidence that the fifth one -- the only team to be relegated at some point and win more than one Premier League title -- is Manchester City.
Why the Premier League was unfair even before Man City were found guilty
When every game matters and everyone else is spending as much as they can, what are you, the wealthy owner of a mid-table club, going to do?
A small-market billionaire owner in Major League Baseball can hide behind the notion that they can't spend more money since there's no punishment for cutting costs and winning fewer games.
A Premier League owner could try to devote less of their revenues to wages in order to post a higher annual profit -- but then they risk getting relegated, which both craters revenues and tanks the team's valuation if you wanted to try to sell the club. That means even less money available to go to wages next year.
Club directors weren't even allowed to take salaries until 1982, when suddenly the sport became a big, global business. The boom came with the expansion of the UEFA Champions League beyond just, you know, league champions throughout Europe, along with the rapid expansion of broadcast technology at the beginning of the 1990s and the Premier League breaking away from the Football League to form England's top-flight league.
In a way, the open structure of the sport was such a bad business idea -- everyone spends all of their money; nobody knows what their profits will be in a year, let alone three -- that it was actually a good business idea. It led to the proliferation of teams across England, which led to a generational, emotional connection between fans and clubs.
The open structure meant every game mattered. The stakes combined with the impossible-to-fake atmosphere created by the generations of local fans made for a great television product. That TV product made lots of money, and that, in turn, made the stakes of every game, literally, worth even more.
The potential revenues on offer from being in the Premier League or competing in the Champions League were so great that so many clubs were willing to push themselves to the financial brink in order to shoot the moon, have that one great season, and establish themselves in a new financial tier. By 2011, according to UEFA, all of the first-division clubs on the continent had combined for a profit of ... just kidding. The clubs combined for losses worth a total of €1.67 billion.
Now "rich owners losing money to make their soccer teams better" isn't a pressing societal problem. But unlike in American sports, where teams are franchises and so the money the New York Jets spend is the same as the money the New York Jets owner spends, soccer owners who spent on their teams were actually loaning the money to what were still viewed as something closer to local institutions. So, all of that debt was, technically, money that these important institutions owed to their rich owners.
This was, theoretically, one of two reasons why UEFA introduced "Financial Fair Play," which essentially limited the losses a club could post to a preset amount. All of the other financial regulations that have come since FFP are some version of the same idea: limiting spending based on how much revenue the club brings in.
Theoretically, FFP was successful. In 2017, first-division clubs posted over €1 billion in profits. After a couple years of reversion due to COVID-19, profits and losses were essentially even for the last financial year. The first-division clubs of Europe are expected to turn a profit whenever the next set of numbers are posted.
How much of this is due to FFP is unclear. A recent meta-analysis of various FFP studies found that the legislation did improve the profitability of clubs but that it had no effect on the actual indebtedness of teams. This is mostly due to how transfer fees are accounted for: as immediate lump-sum profit for the "selling" team but spread out across the years of the player's contract for the "buying" team.
Other studies determined that rising broadcast revenues of the past 20 years explain the improved financial performance as much as, if not more than, the new financial controls.
But while there is at least some evidence of FFP making clubs more sustainable, there is no evidence of it making the sport more "fair." If anything, there is evidence that it's done the exact opposite.
A recent study of 24 first-division leagues in Europe from researches at Sheffield Hallam University found the following over the 20-year period after FFP was introduced: "Seven of the 24 leagues examined have seen a statistically significant worsening of league concentration post-FFP, 14 leagues experienced a decline in the number of top-four finishers and 13 saw a reduction in the number of unique title winners. The weight of evidence indicates that FFP has adversely affected competitive balance in several European football leagues."
And, well, of course this happened. By limiting clubs to spend roughly how much they make, you are locking in the biggest and richest clubs as the best clubs.
It's no coincidence that these rules happened when they did, either. Right after the turn of the century, Russian oligarch Roman Abramovich turned Chelsea into one of the richest clubs in the world by spending billions of dollars of his own money before the FFP regulations were in place. Abu Dhabi United Group bought Manchester City in 2008. And Qatari Sports Investments bought Paris Saint-Germain in 2011.
If Abramovich-style spending were allowed to continue, then the owners of Liverpool, Arsenal, and Manchester United would've had to spend even more of their money to keep up -- especially if other oligarchs or sovereign-wealth funds or, god forbid, tech billionaires bought their own clubs. Instead, FFP told the owners of the biggest clubs in the world that they could spend less money without risking their place atop the global hierarchy since everyone else was told they had to spend even less.
The main difference between Chelsea and Man City is that Chelsea spent most of their money before the FFP regulations were in place. They did keep spending after the regulations were established, but since Abramovich was forced to sell the club in May 2022 after Russia's invasion of Ukraine and the new owners self-reported the various violations they uncovered, they were only punished with a fine.
Manchester City, of course, spent around $1 billion extra after the regulations were in place. They cheated the rules 114 different times. They lied to the league. They hindered the investigation. They created fraudulent accounting on a barely-believable scale.
Other clubs, like Newcastle and Aston Villa, have clearly wanted to spend more money than financial regulations have allowed them to, but rather than creating their own "sham" contracts, they were forced to dismantle their entire rosters and totally rebuild Champions League-level and trophy-winning teams. Man City must be punished, severely, to uphold some semblance of integrity under the current regulatory regime.
And by no means should we look at Abramovich, or QSI, or the UAE as heroes of this story. If we did, then the logical end point is ... what? Every team should be a sports-washing vehicle of someone or some country who is trying to find a new way to influence the various levers of the global economy?
Instead, what the Manchester City scandal hopefully, eventually, makes clear is just how unfair this sport is -- even when someone isn't illegally spending billions of dollars to build the best team that English soccer has ever seen.
Because when Arsenal won the title last year or Liverpool the year before or Manchester United (back when they used to win titles too), the main reason isn't that they're smarter, that they have the most passionate fans, or that their club has something that makes it inherently better than everyone else's.
No, the main reason they've won -- and will keep winning in the future -- is that the rules let them spend more money than everybody else.
