By Aris Barkas/ barkas@eurohoops.net
EuroLeague presented today the revamped version of the Financial Fair Play rules, which was approved the first week of September by the ECA general assembly.
EuroLeague decided to present the details of the new system with the most important change being the inclusion of the “Competitive Balance Standards”, essentially being the European version of the NBA luxury tax.
While there were reports about a “salary cap”, the major change in the new system is that the teams that spend more than they should according to the Financial Fair Play, are paying money back to the league which will be divided to the fiscally responsible teams.
Per the press release: “The Assembly of Syndicate Shareholders of Euroleague Commercial Assets (ECA) has approved the implementation of the Competitive Balance Standards (CBS), a new set of regulations that amplifies the scope of the current Financial Stability & Fair Play Regulations (FSFPR).
The Financial Stability & Fair Play Regulations were first deployed in the 2014-15 season with the objective of protecting the collective interests of the clubs from the financial risk of individual clubs by limiting the contribution of club shareholders and promoting business performance. The CBS will coexist with the already-active Financial Stability & Fair Play Regulations, like the overdue payables system or controls on the clubs’ overall financial position, among others, in order to:
- Align stakeholders’ objectives by referencing minimum and maximum remuneration levels to the clubs’ collective generated revenue, strengthening the commercial partnership between them.
- Promote sustainability and competitive balance by establishing player expenditure ranges that are equal for all teams in the competition based on the clubs’ collective generated revenue.
- Prevent inappropriate practices by monitoring each club’s compliance with pre-established levels prior to the registration of players each season.
- Grow transparency among the participating teams.
The new CBS was developed over the last two seasons following a collaborative process with a committee of clubs. It was presented and agreed to by the EuroLeague Players Association (ELPA).
The CBS represents the natural evolution of the existing Financial Stability & Fair Play Regulations to meet the current realities of the clubs and league by providing equal remuneration levels for all clubs based on the average collective revenues of EuroLeague clubs, rather than each individual club’s revenue. This concept builds on the pan-European ecosystem of the league, harmonizing the impact of the different taxation models around the continent by valuing all indicators on net amounts.
The updated FSFPR will introduce three common remuneration levels for all teams – Base, High, and Low – that will be calculated using the clubs’ average defined revenues (LCDR: game day, commercial, and others) generated over a two-season period.
These levels will mark the minimum and maximum spending for each club on remunerations while allowing exceptions for certain players with the aim of attracting, developing and retaining the best talents. This is the first time that a mandatory spending floor on players’ remuneration has been introduced within the FSFPR, guaranteeing that a minimum net of 32% of all collective revenues will be spent on EuroLeague athletes, thereby strengthening the partnership with the players whose contribution to revenue growth will directly impact their remuneration levels.
Key Competitive Balance Standards (CBS) concepts
Low Remuneration Level ‘LRL’ (32% of the average Licensed Clubs’ defined revenues (LCDR), calculated at fair-market value over a two-season period): The minimum net amount that clubs must spend on registered players’ salaries. Associated clubs, meaning clubs not participating under a long-term license, will be allowed a reduction on the Low Remuneration Level.
Base Remuneration Level ‘BRL’ (40% of the average Licensed Clubs´ defined revenues (LCDR)): The maximum net amount that all clubs may spend on all registered player salaries, excluding: Anchor Players, U23 Players, Extended-Tenure Players, Long-Term Injured Players and Medium-Range Exceptions.
High Remuneration Level ‘HRL’ (60% of the average Licensed Clubs´ defined revenues (LCDR): The maximum net amount that any given club may spend on registered players’ salaries, including Anchor Players, and excluding U23 Players, Extended-Tenure Players, Long-Term Injured Players and Medium-Range Exception.
Competitive Balance Compensation ‘CBC’: Any given club that spends above and beyond the set Base and/or High Remuneration Levels will be required to compensate all the other clubs that stay within the set limits”.
The (complicated) example
Considering the many exceptions and concepts like anchor players (two key players’ contracts chosen by the team who will not be counted on the base remuneration level), extended tenure players (25% of their salary will not be counted if they complete more than three seasons on the same teams) plus the medium-range exception which applies to one contract, it’s expected that most teams will stay near the Base Remuneration Level.
If they exceed it, then they pay a CBC of 0,5 euro per extra euro if they spend 10% more, 0,75 euro per extra euro between 10% and 30% more, and one euro per extra euro in the 30% to 50% territory.
In case they also exceed the High Remuneration Level, then the “tax prices” change to 0,5 euro per extra euro if they spend 10% more, one euro per extra euro between 10% and 30% more, and 1,5 euro per extra euro in the 30% to the 50% territory.
Since the theoretical maths are complicated, EuroLeague provides the following example for the CBC calculation: If a team spends 15,1M euros on net salaries (taxation is not included in any calculation) with the Base Remuneration Level being 8M euros and the High level at 13.5M euros, then the team will end up paying to the league a CBC of 900.000 euros as “penalty”.
The money paid for CBC will be divided after the end of the season between the teams which will stay within the proper limits and the key to this calculation will be the average income of the clubs, which will decide the annual remuneration levels.
And while the CBC is an important penalty, there’s no limit to the money each club can pay for players’ salaries.
The CBS system will have a transition period of one full season (2024-25) for the participating clubs to adapt to the new regulations, while measures will be progressively introduced over the following two seasons, reaching full implementation for the 2027-28 season.