Sports Team Owners Like to Win

Professional sports present an unusual financial puzzle, in that they reward finding clever ways to lose money. Most owners of companies would prefer to make a profit, and probably most owners of sports teams would also prefer to make a profit, but there are other prizes in sports, and some owners of sports teams do not care that much about profit. Some owners would prefer to lose money and win a championship, because winning a championship is cool and fun and why you probably got into sports ownership in the first place. But only one team can win the championship in each competition, and athletes are expensive, and it would be bad for the owners collectively if they all spent too freely trying to win.

And so many big professional sports leagues have rules — salary caps in most US leagues,1 financial sustainability rules in European soccer — to prevent teams from spending too much money on their athletes. And then there are some owners who (1) have more money than the other owners, (2) really want to win and (3) have achieved their financial success in part by, you know, understanding all of the possible paths around a rule. And those owners will have thoughts like “how can I be in technical or at least apparent compliance with these rules, while also spending a ton of money to buy all the best players to win a championship?”