The Practical Effects of MLS's Newest Rule by Mike Fotopoulos

The new Targeted Allocation Mechanism (TAM) does a lot of things right for MLS. It creates another loophole to get more big-name players into the larger clubs, and creates some interesting pressure for smaller clubs. Overall, it tips the scales once again towards a star-driven league, as bigger clubs capture most of the benefit while their competition can only watch as the table stakes rise. It is an interesting development to the capgeeks out there, as it sets a precedent for more open spending and other, more balanced roster rules. If the league’s goal is for bigger and better plus (some) parity, TAM adds another building block. With a little bit of reorganization, the latest version of the MLS rulebook could be its best.

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MLS CBA has Owners seeking “League of Rights” by Mike Fotopoulos

By Mike Fotopoulos (@irishoutsider)

The winter of our discontent is over. MLS Season 20 is here and the new CBA is in the books. While we will likely have to wait for most of the details and watch new rules inevitably “reveal” themselves, there is a lot to learn here. The process has given us another look into the league’s overall goals, and more importantly, the owners’ priorities. 

The results have been largely disappointing. If you are an idealist, this is a compromise delivering more of the same, and maybe just a little bit more on top. The cap will increase 7% a year for five years, topping out at about $4.2M in 2019. DP slots remain unchanged, though the cap hit will likely increase to remain a fixed % of the overall cap. Finally, free agency arrives for players 28 and up, with at least eight seasons of MLS service time. Those of us looking for a utopian MLS “letting the bull run,” will need to keep dreaming.

The owners’ position here and their motivations all seem to point in the same direction, maximizing the value of the franchises. This is accomplished primarily by increasing sponsorship and broadcast revenues while keeping labor costs down. These streams are crowding out gameday revenues as the league’s primary source of income. Both also have the potential to grow further and faster than traditional staples like tickets sales and merchandising. As a “brand,” the league has an attractive business model here, with more likely suitors lining up for a piece of the action. These new potential markets aren’t viable without the ROI possibilities of a growing media property. 

For the average American sports fan, the value of the league is primarily governed by its star power, not the rank and file. Take a look at any MLS advertising and they are taking pages right out of the NBA / NHL playbook. Dempsey! Bradley! MLS ON ESPN! Talented unknowns on global average salaries aren’t going to move the Nielsen meter. To draw a completely unfair comparison, the vast majority of the football viewing world watches Barcelona for Messi and friends and not for the triumph of skillful team counterpressing. Relating this back to MLS, the league needs to save as much of the coming windfalls for “talent.” 

Dempsey (and very likely Beckham) set the precedent here, showing that the owners as a group will pool their resources to bring in a star player. While he can only play for Seattle, he can increase their local gates once or twice a season and pay dividends on future league sponsor / rights deals. Gerrard, Villa, and Kaka, etc follow this trend to varying degrees of league involvement, though the overall goal is the same: create top-line value by signing as few big contracts as needed, the minimum viable dose. Top-heavy rosters may not be optimal in a football sense, but they act as leverage for franchise value.

Under this system, it becomes much clearer why free agency would be a non-starter, especially for owners like RSL’s Dell Loy Hansen. While RSL is a model small-market club, Mr. Hansen’s investment is controlled by the league’s ability to generate a national audience and his ability to field a team with strictly defined costs. Without accusing development efforts as lip service, part of that cost structure is producing homegrown talent at low cost, and retaining that talent efficiently. This also requires keeping existing core players together as long as possible. If Mr. Hansen can also control a youngster’s rights long enough to profit from a foreign transfer, that’s excellent business. Where the CBA has settled on this protects these issues for RSL and clubs with similar views. 

Those that have directly lost the most from this perspective are the once and future journeymen of MLS. The system has them in purgatory for at least the near-term, unable to massively outperform current contracts, and highly unlikely to see stronger offers from outside of the league.  This is the core position taken during the negotiations, and it has to be cut and dry from the owners’ perspective. They don’t have the resources (yet) to consistently improve rosters in the 150-350k range. That money is better spent on the latest shirt-selling import. More optimistically, once a player reaches 28/8 the DP thresholds are now high enough that teams could double up a salary without locking down a slot. Overall, the deal stretches out their clocks more than they would like without serious breakout seasons.

The future is positively blinding for the league if they can maintain the current tack. The potential is there to earn legitimate multiples on their salary costs, and we likely won’t see an equitable split for the players until the stakes get much higher. Owners want to position the league to earn eye-watering broadcast rights, but the current situation will be harder to maintain if they succeed. The main deal with ESPN/FOX resets after eight seasons, so it may actually benefit the owners to have a five-year agreement with the union. While there is a likely future where MLS’ ratings and revenue continue to grow, it would be optimistic to expect this to occur between the TV deals. With that in mind, this may be the last CBA discussed in strict dollar terms versus percents of league wide revenue. 

Major League Soccer has promoted itself as a “League of Choice” for the best players in the world and certainly the best America has to offer. The new CBA lines up with that vision. Even if many of us would like for the league to spread the wealth around a bit more, the strategy is sound. By focusing on the very top of the rosters and locking down on the rest, the league creates value where it wants it most: broadcast rights and franchise value.

Visualizing MLS Salaries Compared to Other U.S. Leagues by Drew Olsen

By Drew Olsen (@drewjolsen)

With the MLS season rapidly approaching and players talking tougher about their demands for the new collective bargaining agreement (CBA), it helps to give some context for where MLS players stand compared to other leagues. Data is hard to come by for foreign leagues because they don't disclose much about salaries, but the other major American sports leagues are more forthcoming. By looking at the other major US leagues, we can examine how MLS wages match up against their fellow pro athletes.

There are many caveats to this comparison. To start, an increase in the minimum salary doesn’t even seem to be the MLS players’ major priority; that would be free agency. Second, MLS is famously secretive, and does not release the exact terms of any player contracts. We get these numbers from the Major League Soccer Players Union (MLSPU), which publicizes the cost against the salary cap of each MLS player a few times a season. Often, that number does not necessarily match the player's actual salary, as teams often use allocation money and other magic to limit their cap hit (a good example is David Villa, who made much more than the $60,000 he was listed at most recently). Indeed, league officials can be counted on to claim the inaccuracy of these salary releases each time they are published. But until they provide proof, claiming foul while also refusing to release the the “real” numbers reminds me of when I ask my baby cousin how he knows unicorns live in his backyard. He usually replies “because they do!”

With those limitations aside, below are presented the five major US sports with a variety of arbitrary bits of salary information, as determined to the best of my ability using public data. We've also got all MLS player salary information in a sortable table here.

League Average MedianAve-MedAve/MedMinSalaryMaxSalaryMax/MinTop salary as % of league totalTop salary > X lowest salaries combined
MLS $226,454$91,827$134,6272.47$36,500$7,167,500196.375.53160
NFL $1,900,000$770,000$1,130,0002.47$420,000$22,000,00052.380.68*
MLB $3,818,923$987,500†$2,831,4233.87$507,500$30,714,28660.520.88
NHL $2,696,069$2,000,000$696,0691.35$550,000$14,000,00025.450.7224
NBA $4,153,249$2,245,886$1,907,3641.85$507,336$20,644,40040.691.0877

There are a few things to note when looking at these numbers. MLS has a much smaller average wage and a much smaller total wage sum than all the other leagues; the $226,464 average wage is less than the minimum salary of all the other leagues. Conversely, MLS has no official maximum wage, which differs from leagues like the NHL, NBA or NFL, where there is a max possible salary and a harder and harsher salary cap. Furthermore, the other four leagues are the apex of talent and competition in the world for these sports, while the most generous MLS fan would be hard pressed to argue that the league is in the top five soccer leagues in the world.  Lastly, MLS is a league that continues to grow, entering 2015 with 20 teams. The NBA, NHL, and MLB all have 30 teams, and the NFL has 32. Perhaps MLS' comparatively small number of teams contributes to some of the difference. We could go on here, but these all essentially boil down to this: MLS doesn’t compare perfectly to the other American sports. But you already knew that.

That said, these are still the five major professional sports leagues in the US, and these are the leagues that we MLS fans are constantly measuring ourselves against. It’s also why this is still an interesting and valuable exercise.

In some areas, MLS falls in right among the other major sports, while in others it is a clear outlier. For instance, when dividing the average salary by the median salary across leagues, MLS is on par with the NFL and more equitable than MLB. This is one way to say that MLS salaries as a whole are not as skewed upwards as those of MLB. MLS’s major differences come in the income disparity at the extremes – those with the biggest salaries are simply making much more than those at the bottom, especially when compared to other leagues.

When an unheralded young player gets his first callup to the Majors, he is usually making around $500k, which is about 1/60th of the $30 million Clayton Kershaw will make in 2015. Similarly, the NBA has the highest average salary of any other league in the world (beating out the Indian Premier Cricket League. Who would have guessed?), and Kobe Bryant makes about 40 times the rookie minimum. While MLS has the shortest average career of the major sports at only about 2.5 years, the NFL is second shortest, and presumably comes with a more severe wear and tear on the body. In that league, Aaron Rodgers’ salary is 52 times the size of the league's lowest paid player. Kaka, the flashiest name on the roster of the newly promoted Orlando City, makes about $7 million per season, which is almost 200 times what players like Dylan Remick and Bradford Jamieson IV made last year. Indeed, Kaka alone made more than the 160 lowest paid players in MLS… combined, and he accounts for more than 5.5% of total league wages; next closest is the NBA where Bryant is at 1%.

*NBA and NHL Salaries were prorated linearly to fit on the graph. X-axis is reverse-ordered rank of individual player's salary.

*NBA and NHL Salaries were prorated linearly to fit on the graph. X-axis is reverse-ordered rank of individual player's salary.

To put this disparity in perspective, if all 145 players that made less than $50,000 last season were given a modest wage increase to $50k, it would cost MLS about $900,000. That sum is less than 1/7th what players like Defoe, Dempsey, and Bradley made last year, and pales in comparison to the $200 million that is about to be spent to build a new stadium for DC United.

These numbers help us paint a picture of what this small portion of the CBA means. They help explain why it just doesn’t ring true when Don Garber and the MLS ownership group claims poverty, even after they’ve signed a record-breaking TV deal and brought in the likes of Kaka, Dempsey, Bradley, Altidore, Villa, Giovinco, and Lampard for many millions of dollars each. Without a doubt, MLS is in a different place in its history, operates under different rules, and competes in a different market compared to the other four major American pro sports leagues. But it is still the apex of pro soccer talent in the USA and Canada, and so when the MLSPU asks for a raise in the minimum salary, it might be time for the league to listen.

*I wasn't able to find the number of players that are measured to create the published average NFL salary, but each team has 53 players, and there are 32 teams, so I multiplied by the average salary to estimate the sum of all NFL salaries (53*32*1900000=3,222,400,000).

† Because of the majors/minors aspect of MLB, median is a bit hard to judge. This article states the average salary and the number of players (910) that played last year. The median would be the 455th, player, which I found here, a list that only goes through 468. This obviously presumes that the 400 or so players not listed made less than those who are listed. In other words, this estimate may not be exact but it's probably pretty close.

‡ I couldn't find a comprehensive list of all NFL and MLB contracts and their sums, and so was unable to estimate how many of the lowest salaries were roughly equivalent to the biggest in those leagues.