Collingwood president Eddie McGuire fears the introduction of free agency could backfire on players and end up driving an AFL club to extinction.

McGuire said the new player movement system, to start in 2012, could create unsustainable inflation and was a step down a dangerous path towards viewing football as a business rather than a passion.

"My biggest fear is that it will drive a team down to Tasmania or out of the competition completely," McGuire told a Melbourne Football Club fundraiser on Wednesday.

"I think it's going to have a massive inflationary effect.

"I don't think it will be good for the players ... it will be good for some players, but I think the middle-ranking players are going to get squeezed out.

"They'll become cannon fodder, they'll get one-year contracts. You have a bad knee, at the end of the year: `Bad luck, see ya later, you're just a worker ant.'"

McGuire said players needed to be wary of starting to treat clubs as businesses, or the tables could be turned.

"If we become a real business we'll have footballers turn up and when one of them mucks up we'll sue them next time," he said.

"If we want to be fair dinkum in business, if a player gets done for (driving over) 0.05 and I lose a $1 million sponsorship with the TAC ... what do you reckon I'm going to do?"

The Magpies lost a TAC sponsorship in 2008, after a drink-driving incident involving player Sharrod Wellingham.

Western Bulldogs president David Smorgon also warned of the risks of free agency, particularly if the AFL was not vigilant enough.

"My concern is in the drive to keep your good players there is a temptation amongst some to go back to the old days and cheating the salary cap," Smorgon said.

"I've already had a discussion with (AFL chief executive) Andrew Demetriou to make sure that the AFL absolutely sticks to the salary cap.

"If they start tolerating and closing their eyes to breaches of that there could be an implosion of this industry and you might end up with eight clubs."

Meanwhile, Smorgon said he doubted Tasmania's dream of having their own AFL team would become reality.

"I don't think Tasmania has got a large enough economy to sustain a football team in their own right," he said.

"I don't think we'd get one extra dollar from the TV rights if it was in Tasmania ... I just don't understand why there would be any push."

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