Why is the individual talent premium so much higher in the AFL than the NRL?

After a year of reading about relative salaries in different sports, salary cap breaches, player unrest and defections in the NSW press, I only just learned that the salary cap in the AFL is $7950000 compared to the NRL’s $4100000. This set a little bell off in my head. This might explain the huge AFL salaries which the NRL players were coveting, but I thought AFL teams were huge.

So I ran some back of the envelope calculations (if anyone can improve the data, please do so).

The AFL has a cap of $7.95M on TPP for the clubs top 40 players (excluding “veteran” players – rookie list players who are discounted I’ve excluded for simplicity). This gives a mean salary of $198750.

The NRL has a cap of $4.1M for the top 25 players. This gives a mean salary of $164000. The differential isn’t surprising considering the better administration of AFL over the past 20 years, the lack of a split in the 90s, the lack of a controlling party who buys TV rights and simple greater popularity – they all result in greater revenue.

But what has really got the NRL players going is the likes of the $1.5M being dolled out to Israel Folau. Granted this is a trophy buy by a club with looser cap restraints, but Chris Judd is still paid a reported $1.2 million a season. To the best of my knowledge (here I hope for correction) the best paid NRL player is Darren Lockyer at $660000 a season. If not him or this amount, it is very close.

To put it another way, the top NRL player is being paid  3.43 times the mean salary. The top AFL player is being paid 6.04 times the mean salary. The premium for being better than average is far greater in the AFL than in the NRL.[fn1]

This is quite strange on first impressions. An AFL player is only one amongst 18 on the field. An NRL player is one among 13, so the influence of any one player at a given time should be more. Moreover, rugby league play tends to channel through a few positions more than other, with the hooker, halves and fullback registering far more touches than any other positions, which would imply securing talent in these positions is worth enough to bid up the price of talent here instead of maximising average talent accross the team. Lastly, other codes and another league in Britain are willing to bid up the price of leadingNRL players where (apart from a couple of NFL punters) no such option exists for the AFL players.

They’re both team sports. Why does individual brilliance get deemed by clubs to be so much more important in Aussie Rules than in Rugby League?

This initially leads me to confirm existing impressions. If Aussie Rules favours athleticism more than tactics in a grand old muscular christianity fashion, than the differential makes perfect sense. Athleticism is determined mainly by genes, which (outside dystopian nightmares) remain scarce and unsubstitutable. Tactics can be created, modified and copied cheaply. Athletes with appropriate genes will continue receiving rents on their genes, which have a perfect inelasticity of supply. Tactics can be copied and learned easily – there is no intellectual property on it, and the advantages of a top tactical player can be appropriated by the opposition. NRL athletes will still earn rents on their genes, but these are not as valuable as they are in Aussie Rules.

But I’ll be intellectually honest and explore some other possibilities. There are similarly huge (actually vastly larger given the size of the sport and lack of salary caps) differentials in football (soccer). There, the most noticeable differential is between defenders at the lower end and attacking midfielders (there are no longer any strikers) at the top end. There we have a skill/genetic premium clearly, even where tactics are perhaps greater developed than any other sport on earth. But this is also to do with the fact that goals are what win matches, and are the scarcity that is being chased. I don’t watch enough of the AFL to know, but perhaps Judd and his fellow ultra high earners are being rewarded for a rare ability to score goals. That said, there are league players with a notably higher higher try and point scoring ability, but the likes of the Morris brothers, Aku Uate and (in the past) Nathan Blacklock don’t get a premium for try scoring, and Hazem el Masri ddn’t earn a ridiculous premium for his kicking percentage.

There’s another intriguing possibility. AFL juniors are subject to a draft, whereas NRL players usually begin with a club that nurtured them. This might give the clubs a sentimental discount. AFL players probably feel loyal to their first club, but maybe it’s something they put a lower price on than NRL players do. After all, the NRL club has been there for them longer, and they chose to be there. The AFL club was the result of their ability against a club’s failure. A top player (such as Lockyer, or in the past, Johns) will tend to remain at his first club and take a lower salary to do so. AFL player are more willing to move, and they demand higher salaries as a result. But is this worth hundreds of thousands of dollars?

I’m still leaning towards my prejudice…

[fn1] At this point I wished I had the full data set of salaries so I could get median salaries and standard deviations etc.

About Richard Tsukamasa Green

Richard Tsukamasa Green is an economist. Public employment means he can't post on policy much anymore. Also found at @RHTGreen on twitter.
This entry was posted in Economics and public policy, Sport - Rugby League, Sport-general. Bookmark the permalink.

14 Responses to Why is the individual talent premium so much higher in the AFL than the NRL?

  1. I suspect it comes down to audience size. Rugby’s audience is divided, AFL’s isn’t. This means the AFL can obtain larger rents from TV stations, ergo more money can be granted to clubs to spend on their players.

    Hence the amazing salaries paid to Soccer players (Europe is the TV market). Or to Basketball / Baseball / NFL players.

  2. Richard Green says:

    You miss the point. Greater size and revenue explains greater wages overall (which we do observe), but not a greater disparity within each code. It’s not why AFL players earn more tha NRL players, but why the gap between top AFL players and the middling AFL players is so much larger than that between top NRL players and middling NRL players.

  3. Sean says:

    Part of Judd’s deal is a 3rd party sponsorship or employment contract with Visy which would be illegal under NRL rules. The AFL’s approach to sponsorship arrangements is to keep tabs on them, recognising that it can’t stop them. They probably occur under the table in the NRL too.

    Likewise the salaries being offered to Folau and Abblett and other marquee clubs are actually partially being paid out of a special advertising and marketing budget, rather than the salary cap proper. To the best of my knowledge there is not, as of yet, a player taking up over a million dollars of salary cap in the AFL.

    So my point is the headline figures may not be comparable.

  4. Sean says:

    Part of Judd’s deal is a 3rd party sponsorship or employment contract with Visy which would be illegal under NRL rules. The AFL’s approach to sponsorship arrangements is to keep tabs on them, recognising that it can’t stop them. They probably occur under the table in the NRL too.

    Likewise the salaries being offered to Folau and Ablett and other marquee players at GWS and GCFC are actually partially being paid out of a special advertising and marketing budget, rather than the salary cap proper. To the best of my knowledge there is not, as of yet, a player taking up over a million dollars of salary cap in the AFL.

    So my point is the headline figures may not be comparable.

  5. Right, I did mis-read it.

    Even so, there’d be some relationship. With a larger salary cap you can pay higher premiums without reducing the base pay of the ‘ordinary’ players. Just as in larger economies, the rich are both absolutely and relatively wealthier; but everyone is still better off. AFL is a larger economy.

  6. Patrick says:

    I will hazard a sporting guess.

    In Rugby League, the worst player on the field is quite important, since you can’t hide in a 13-man line across the field.

    In AFL, as in soccer, this is not so much the case. The fluid structure of the game increases the scope for a top player to be involved, and for the bottom players to hide.

    I think this is partly borne out by the fact that the best-paid AFLers are heavily weighted towards midfield/on-ball types.

    On a related note, what does it say about each code that in the 2012 AFL season, the two least experienced players in the whole league will be the second- and third- highest paid, neither of whom was the highest-paid leagie?

  7. Rafe says:

    Good point on the fluid nature of the game – shielding a weak link and giving more scope for the stars.

    But there is a factor that works in the other direction – the size of scores. The extreme example is soccer where the scores are really low, so every goal is critical and the superstars command astronomical salaries.

    The NRL has lower scores, making the try comparatively more important than a goal in AFL and that should push up the pay for the players who set them up in the key positions that Nicholas identified. You can see why Lockyer is the top man. So the other factors at work are obviously stronger than that one!

  8. Tim Watts says:

    Am I missing the point here? Isn’t the higher salary cap in AFL largely explained by there being more players on each team?

  9. FDB says:

    I think Richard has it in the post.

    Individual skill is far more important than team discipline in AFL. The latter is cheap to achieve, the former is a seller’s market and always will be.

  10. Rafe says:

    On the topic of soccer and the importance of goal scorers, can someone run up some stats on the salaries of the strikers vs defenders (apart from the goalie)?

    The goalie is a special case and could be paid on par with a striker.

  11. Patrick says:

    Rafe have you any idea about soccer?

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  13. Rafe says:

    No:)
    I can’t take seriously a game where a round ball is kicked.
    You kick oval shaped balls.
    Round balls are hit or propelled with bats, sticks, clubs, rackets etc.

  14. Rafe says:

    here are some soccer salaries, now someone tell us where they play.
    http://www.soccer-training-info.com/soccer_players_weekly_salaries.asp

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