1. Effects of Salary Caps in Professional Sports
By: Matt Dutro, Steven Dulisse, Jacob Drerup, Jeremy Falk

2. Salary Cap Limit a team can spend on their player’s annual salaries
Different for every sport
Punishments for going over salary cap

3. Alex Rodriguez Salary

4. Salary Caps National Football League National Hockey League
$128 million per team (32 teams)
National Hockey League
$56.8 million for the season
$11.36 million for a player

5. Major League Soccer $2.3 million as of 2008
Does not count the Designated Player Rule “Beckham Rule”
Implemented in 2007
One player will only count as $415,000 toward the salary cap no matter how good they are
David Beckham annual salary of $6.5 million dollars

6. National Basketball Association
$ million salary cap for the 30 teams
Luxury Tax- is a mechanism that helps control team spending
It is paid by high spending teams -- teams whose payroll exceeds a predetermined tax level
For the  season, the luxury tax level is set at $69.92 million
A team who exceeds $69.92 million, will pay a $1 tax for each $1 they go over
NBA is estimating the teams under the tax will each get around 4.4 Million for the teams over the tax

7. 2010 – The Year of the Free Agent
NBA 2010 Free Agency
LeBron James, Dwayne Wade, Chris Bosh, Michael Redd
Luxury tax will play key role in this market
Teams have cleared out line-up to make cap room
New York Knicks, New Jersey Nets, Detroit Pistons
Combined wins: 37
65 games under .500

8. Competitive Balance (NBA)
62 players make $10+ million
Only three teams without a $10+ million player
Oklahoma City
Portland
Sacramento

9. Major League Baseball
There is currently no salary cap in Major League Baseball
Luxury Tax system

10. Luxury Tax
Luxury Tax- tax on teams if their team exceeds a numerical figure, determined annually.
1st offense = 17.5% of the amount over the cap
2nd offense= 20%
3rd offense/more= 40%
Luxury Tax Caps from
2003= $117m
2004= $120.5m
2005= $128m
2006= $136.5m
2007= $148m
2008= $155m
2009= $162m
2010- $170m (estimated)
2011- $178m (estimated)

11. All Stars vs. Second Stringers
MLB – Teams are able to buy the best players
New York Yankees had ten times more money spent on players than the Washington Nationals
Result: NYY: (89-73)*
WN: (59-102)*
*September 30, 2008

13. All Stars contd. Competitive advantage can be bought in MLB
Alex Rodriguez 2006 salary
$21,000,000
Division rival Tampa Bay Rays 2006 team cap
$14,000,000

14. Positives of Salary Cap
Keep owners from squandering money
Less wasteful with monetary habits
Helps small market teams
Fair competition

15. Negatives of Salary Cap
Market forces can find ways around the salary limits
Endorsements – not included in salary
Under the table – cars, etc.
Team owners, not athletes, would keep more revenue.

16. Destructive Behaviors Salary caps: protect teams from themselves
Advantages
Disadvantages
Buy high-cost contracts to receive popularity and sell tickets
Immediate success figures
Eventual financial difficulty
Risk losing fans
Long term instability

17. Keeping the Fans Interested
Unbalanced leagues threaten weaker teams
If a fan’s team keeps losing they may gravitate to another team or sport

18. The Numbers Don’t Lie Cleveland Cavaliers (41-11)
Indiana Pacers (18-33)

19. Real Life Examples Houston Rockets star Tracy McGrady
Top five highest paid NBA player despite not playing
46 minutes played entire season
$22,843,124 annual salary
If he continues to not play, he will make $496, per minute

20. Overpaid, Underplayed Jermaine O’Neal Third highest paid NBA player
$23,016,000 this year
13 points, 7 rebounds per game

21. Performance Based Salary
Base pay dependent on total income of the sport
Different sports may have higher or lower base pay depending on revenue generated
Performance based pay rewards for personal athletic achievement and team success
Awards, records, wins, postseason, etc.
More incentive to perform at highest capability

22. Pro Bowl Some players no longer care about going to the Pro Bowl
Receive a bonus for being selected
NOT for attending
“Some of the guys missing make it not a true all-star game” - Antonio Gates
World’s best players?
Many players this year had to be filled in because players decided to not come

23. Putting the Entertain Back in Athletic Entertainers
If pay reflects success on the playing field, players will work harder to perform at a higher level
Better for fans
Top tier players less likely to sit on the bench