Wednesday, May 14, 2008

Sailed ships

Some topics in and around MLS have been covered to death, so I'm going over a few of them one more time to gauge validity.

Invalid: Stadium location complaints
Is there really any point to railing about the locations of MLS stadiums once they're actually built? They're not going to tear them down now.
Granted, I'm still griping about Toronto FC's surface, and I don't think they're planning on changing that any time soon.

Very little validity: Promotion/Relegation
I suppose the fact that MLS eliminated the shootout gives proponents of promotion and relegation in the States some hope (a few have implied to me that Sounders FC, as the USL champion team, is getting promoted - no they're not. They are simply folding the USL team and forming an MLS one with a similar name. It's not promotion in any sense. It's that they had the money and paid to become the next MLS franchise.) that MLS is moving in the direction of pro/reg. Don't hold your breath there. Few owners would ever fork over 40 million for a franchise that might slip down to a lower level.

A little validity: Marketing the league better will bring in more fans.
It makes sense on the surface, but on the other hand, soccer fans can be fickle. Red Bull New York pulled the stops out when they first took over the team, and yet the core NY attendance remains not great. Chivas USA has trotted out a host of promotions and came into the league with the most sponsors, but there are challenges, there, too. The bottom line is that the example of TFC pretty much wipes out much conventional wisdom on this topic. People will come for a fancy stadium, said some - TFC's is simple. People will come for a winning team - TFC lost in record fashion. People will come for a big name - who had ever heard of Danny Dichio before? People will come when the MLS standard of play improves - MLS remains a growing league. Thing is, TFC fans come for the most basic and profound sporting reason of all - they have claimed their team, and they care. No amount of marketing enticements can replace or create that.

Valid: The salary cap debate
"Raise the cap!" seems a simple enough proposition, but it's a bit trickier when one notes the millions of dollars most MLS owners continue to lose every year. There's also no guarantee that raising the cap wouldn't just lead to more spending on the higher end of the scale. Financial responsibility to the league itself and to the players in it is going to be a tough balance, so this is a worthy argument, with solid points to different sides.

That's my take on a few of the topics that seem to be on a continual discussion turntable. What MLS issues do readers consider most relevant now?


El Rey said...

The league is still losing money? I thought they had finally begun making some or at least breaking even.

A.C. said...

Not really. A lot of teams are closer to the break-even point, but from what I've heard, only the Galaxy have ever turned a profit. Considering that AEG still owns the money-losing Dynamo, though, one can't really say an MLS owner has made a profit, because, on balance, AEG hasn't.

jon e said...

(This turned out longer than I'd thought. But now it's all typed up and everything.)

You're right that merely raising the cap won't necessarily help, and you're right that it makes sense to be careful with salary cap increases given that the owners are still losing money.

Still, didn't most of these owners buy in knowing that they were looking at a long-term investment? If so, the question is about how to make the league profitable. Seems to me that a lot of that has to do with improving standard of play (and therefore both credibility adn the fan experience). Raising the cap properly would almost certainly do that. Here's my half-thought-out version of how to do so:

1) MLS should mandate that teams increase the senior roster to at least 20 and allow them to increase it to at as many as 25.
2) MLS should mandate that teams bring on at least 8 developmental players and bump the ceiling to 12.
3) MLS should increase the developmental players' salary to $20k.
4) MLS should increase the senior roster player's minimum salary to $45k.
5) MLS should allow allow for a cost of living increase of up to a fixed percentage (say 15%) for developmental players and the lowest-paid 5 senior-roster players. (Nobody would make less than the new minima.)
6) Above and beyond the mandated amounts required by the increased pay and expanded rosters above, MLS should raise the cap 25%.
7) And, now that I think about it, MLS should rule that no player may be a developmental player for more than four years (and no more than three at any one team).

Here's my thinking on the above:
1) MLS teams need to be deeper, period, especially teams that want to succeed in international competitions. So at least 2 new players would be good; some teams may want more, some might not.
2) MLS needs to be able to develop more young players to make sure that the best ones (especially the late-bloomers) get a shot. Also, it needs a credible reserve-team system, which will only be possible with more roster slots of all kinds.
3&4) Self-explanatory (I think).
5) Developmental players in expensive cities are paid an unsustainable pittance and need some help. Something like a 15% boost would be enough to help them out without being a recruiting advantage for teams in expensive cities (which are also likely to be big-money teams).
6) I'm not especially attached to 25% as a figure. It just seems significant without being unrealistic. I'm sure people with access to better numbers could come up with a better figure.
7) The developmental player slot should be what it says it is, not a way to bring in non-union workers. If a player has spent four years (or so) in MLS without making a clear claim to senior-roster status, he should move on to the USL or look into other careers.

I'll freely admit this is a bit silly without my knowing the following: what percentage of the average MLS team's operating budget actually goes to salaries? I'm guessing that, unlike Man Utd's, it's relatively low.

Brant said...

I think the increase in salary cap must be paired with a similar increase in minimum salaries for everyone. Developmental players can't make practice b/c they have day-jobs. Hardly the way to run a league.

Anonymous said...

in addition to jon e's excellent analysis i'd like to see mls allow teams that turn a profit (i imagine teams with SSS must be getting close) be allowed to use part of that profit to make their team better.

the economic specifics need to be worked out by someone far smarter than me, but for the sake of argument lets say teams are allowed to spend 20% of their profits on players and that 20% would not count against the salary cap. there would need to be a maximum you could spend again for the sake of argument let's say you could only increase the cap by 50% regardless of how much money your team made.

this would

1) reward teams that have put together and executed a successful business plan without giving them an insurmountable advantage.

2) light a fire under those teams/cities that are dragging their feet on an SSS - a major component to profitability.

3) light a fire under those teams that cannot get fans out to the stadium.

4) make ownership of a team more appealing to outside investors (if they see mls teams as being profitable).

in opinion this would lead to current investors in struggling teams (attendances/sponsorship) to redouble their efforts in getting fans out to the game. eventually teams in markets that cannot sustain a successful soccer team would be relocated. if 8 of the 16 teams are turning a profit an outside investor could easily see the appeal of buying columbus and moving them to one of the cities petitioning for a team. historically all the expansion teams in the league post-contraction have all done very well because the ownership groups and mls have done their homework.

Anonymous said...

More than just the galaxy are making money, FC dallas and I beleive Chicago are also in the Black according to multiple reports and the commsissioner. Also witht their new jersey sponshorship I beleive that Columbus might be over the hump. Don Garber keeps saying that the league will be profitable by 2010. Same time there is a new CBA. It will be interesting to see what happens. But for sure there are other teams making a profit. It has already been reported bu various sources including but not limitied the Sports Buisness Journal I beleive.

CACuzcatlan said...

As another poster said, FC Dallas has claimed a profit and if Chicago and Toronto weren't profitable last year, they'll never be. The Crew were breaking even last year, hopefully the jersey sponsorship and concerts from the stage will put them in the black this year. I hope Colorado also turned a profit, but I have no idea on that one.

A.C. said...

I guess I'd like a link to the statement from FC Dallas that they broke a profit. The one I'd read (as well as I remember it) was Michael Hitchcock, their GM, projecting that the team would make a profit in 2006. However, attendance didn't meet projections, and I never read that Dallas was able to make a profit anyway. A lot of places then said that Dallas had made that profit, but i'm not sure the club ever revealed that. If they did, I couldn't find it in the 15 minutes or so that i just looked for an article citing any Dallas source on that.

Eugene said...

I think the last thing we need to be worried about are billionaires turning profits. If they were worried about losing millions of dollars, I don't think they would be involved in this venture.

Since MLS is not a non-profit charity, I'm quite confident that the owners are acting in their own self-interest and have run the numbers to understand how much they're going to lose, when they're likely to make money, how they plan to make money and what milestones they have to hit to get there. They're definitely not in this for altruism.

Now what we as fans *should* be worried about is product on the field, because that's what *we're* paying for, both in ticket sales and merchandise, and what we lend our eyes and attention for on TV. In order to improve the product on the field, its clear the salary cap needs to go up and needs to go up by a lot. Perhaps doubled or tripled. And the minimum wage needs to go up by a lot as well. Most good leagues in the world have put rules in place like a minimum salary in order to set the bar for players teams can buy. That's exactly what the Eredivisie has in Holland. It used to be $400k minimum (converted from Euros, so higher now), but that's what guaranteed that teams were signing completely crappy players.

The market reality is that the guys getting paid $15k are likely only worth $15k as professional soccer players and when the salary cap and minimum salary go up, those guys won't be playing in MLS at all. They won't be worth paying $100k minimum, for example.

That will definitely raise the quality of product on the field, which according to Ivan Gazidis, is a major priority for MLS now.

Eugene said...

"weren't" signing crappy players -- fixed my post.

AC, the other issue that always makes the rounds is getting MLS on the international calendar, can't leave that one out!

A.C. said...

I'm not saying anyone should worry about profitability for the sake of the owners, but for the future of MLS itself. It's too soon for anyone to forget what happened to the NASL.

diane said...

The salary cap and owner/league investment issues are both interesting and relevant to the league's success, so I guess they'll stay valid to me. Come to think of it, the same issues just get magnified as the clubs become more valuable--take it from a Liverpool fan!!!

Luis is probably right in commenting a while back that the salary structure won't change much until the union contract is renegotiatied in 2010 (my only hope is that it expires on January 1st). I do think by that point that the league will be forced to make some major adjustments.

jon e hits the nail on the head in talking about investment in these teams being long term. Even in the "big three" sports most owners make their big profits when they sell teams, and a few only show a profit then. MLS league/owners are missing a HUGE opportunity if they don't up their investment more quickly.

[Just saw eugene's comment re not worrying about billionaire's profits, which is always a good point. Not only when thinking about getting better players but the treatment of the ones we have -- more than a bit embarrassing, that.]

People who have been following MLS closely may not realize exactly how much more attention it is getting now. But those of us who just caught a look here and there in the past because we are fans of the world game can attest to the fact that it is being covered all over places where it has NEVER been mentioned before.

That coverage finally got my family going to games after years of saying we should. We appreciate football enough that just seeing it live makes it fun, plus our home team is across an ocean. But that's not enough for most people, serious fans or newcomers, who picture something a bit different when they hear major league and feel cheated by what they are seeing. (My husband still won't watch once the grid-lines are painted brighter in August, so I'm happy that's changing). Most people don't read about the team and player constraints and/or don't sympathize, they just want what's being advertised.

Anyway, my family is happy to have a new "home team" and we're hoping they can get paid better soon ;-) .

FC Uptown said...

The single entity structure is the biggest issue/question mark about the league which effects every other issue from top to bottom.

j said...

Great article. I would like to comment on the Salary situation. I agree in rising the cap, but I would also allow a luxury tax.

Teams must pay dollar for dollar into a fund that goes to expand the cap for entire league. So if any team wants to be a "superclub," it will serve to raise the play in the entire league. The key though is putting the luxury tax into the cap.

Finally, I would institute a policy of Ref's favoring the home team. It doesn't have to gratuitous. However, we need to have a home field advantage in MLS. People pay too much money to see a 50-50 call against their team.

The simple answer is to tell the Refs to be homers. This would help attendance. I believe the NBA does this and that is the reason for the significant home field advantage seen. Maybe this is a bad idea, but if you notice more movies have a happy ending than a tragic one.

j said...

Just to clarify my above post. The luxury tax allows any team to spend any amount of money over the cap, but they must pay an equal amount into a fund that goes to increase the cap throughout the league

CACuzcatlan said...

Wikipedia knows all, and if it doesn't, it can link you somewhere that does. This NY Times article from last year has Garber talking about FC Dallas profitability:

"Among the league’s 13 teams, the Galaxy and FC Dallas have shown a profit in their new stadiums, and Chicago, Denver and Toronto are also expected to finish this season in the black, Garber said."

CACuzcatlan said...

Looks like my link might have gotten cut off. Lets try this again.
Beckham Arrives to Find a Sport Thriving in Its Own Way

Anonymous said...

in no particular order and far from complete.

increase the salary cap - with the regulation to raise first and foremost the developmental contracts (the "poor" 17k guys) to an level where they can live from it without having to make burgers, cleaning pools.

The team roster should be increased (more senior spots)

the DP limitation (1 per team, maybe 2 should be keept) but the whole salary would have to be paid by either the club or investors and not the league. Additionally there would be no cap hit, but 400k to spend on senior roster slots.

This would do away with the punishment of a DP player (having a less balanced squad).
Make lots of teams who don't have one now, use a DP spot.
Improve the overall roster.


adam said...

re: relegation

"Few owners would ever fork over 40 million for a franchise that might slip down to a lower level."

a few americans have bought teams in england that might slip down to a lower level. isn't the consortium that bought derby county led by an american? and they bought derby when it was bottom of the league, clearly destined for relegation.

wasn't sunderland bought shortly after they were relegated? the new owner invested in the squad and got them back up.

the j-league is only a few years older than MLS (started in 1993? right?)and they have pro/rel.

unfortunately, I don't think it will ever happen here in the usa.

Anonymous said...

WHO CARES? since when do the opinions of us hobos mattered to the billlionares and the megacorporations that run and profit off the mls. please!

A.C. said...

Buying into an established soccer culture like the one in england is a lot different than doing so in a developing one like the U.S.

And as to the FC Dallas issue, it's still not really addressed by the NY Times article. What I was looking for was a link or a statement from the team verifying that they'd made a profit. I'd like to think that it makes sense that would be out there if it did happen. However, I haven't found it, myself.

papa bear said...

@Adam: that's specious reasoning especially considering how little money the owners of Derby actually paid and will be required to pay.
The structure is totally different in MLS. They have cash calls (though I think there hasn't been one for a while) and a number of other profit sharing functions that simply wouldn't be conducive to rolling out pro/rel

that's to say nothing of the idea that there is enough interest and population density to support at least 32-36 teams to have 2 viable levels in MLS. USL is a joke so simply saying that will be the second level is ridiculous. It won't happen for a long long time if it ever does. In fact, I would bank more heavily on a league in Europe moving to a closed league system before the US goes to pro/rel. There is more money to be made in a closed system...a ton more.

Also, do you really care about the 'relegation battle' that much? I know I don't. I'm not a fan of any team that has ever been near relegation so watching to see who the least biggest loser is (which is what it is) really isn't all that exciting when you have no rooting interest.

The big issues (other than increased cap space)I'd like to see more of are: increasing roster sizes, reducing midweek games and for the love of god, honoring the GDMFSOB'in FIFA international dates. I mean seriously, it is the #1 thing that bugs the hell out of me.

Diane said...

I love the idea of teams putting dollar for dollar spent above the cap into an MLS salary fund. Surely wouldn't have the higher-end player(s), but its a good concept.

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