Wednesday, May 29, 2013

How Much Should MLS Spend on Players?

Fans of North American soccer, by and large, are an insecure group.  It makes sense.  Many of the older generation remember the NASL flameout.  The younger generation may be imbued with more confidence in the sport’s future, but they also understand that MLS still exists on the fringe of the mainstream American sports landscape.  It is why they obsessively tabulate MLS attendance, engage in constant comment-section debates on the usage of “soccer” vs. “football,” and tweet every MLS “golazo” at Sportscenter.  The league is in a constant competition for exposure and respect.  However, this competition is not with the American cultural mainstays NFL, NBA, and MLB.  MLS is competing against international soccer (EPL, Liga MX, UEFA CL).  And right now it is losing.  In the United States there are many more fans of international soccer than MLS.  This is indisputable.  Yet, this current state is not immutable.

As was pointed out in Part I of this analysis, the main problem facing MLS teams is the lack of TV money being generated.  The comparison to the EPL is stark.

But how can the league boost TV revenues (estimated at a paltry $36 million league-wide)?  TV revenues are low because people are not watching. The league has put up these numbers on ESPN2 so far this year (Via Big Soccer):

Those numbers are not good.  By comparison, regular season college basketball averages 515k viewers and college football between 1.5 and 2.0 million viewers on ESPN2.  The EPL averages around 320k viewers during much poorer time slots than MLS. Without better ratings the league will never get the TV money that they crave.

The most obvious answer to boost ratings is to improve the product.  The most recent release of MLS salaries, nicely visualized by Steve Fenn, underscores just how little MLS pays their players vs. other leagues. 

Here’s the EPL.  They spend lavishly on talent.

These are the Top 20 Global teams.

I have heard many people comment that they would like MLS to pursue the Bundesliga’s more restrained approach to spending.  Compared to other leagues in Europe they certainly appear to be more prudent.  According to this report Bundesliga teams spend approximately 38% of their revenues on player wages, which is far under the approximately 64% the rest of the UEFA top flight spends. 

If you are wondering, this is what MLS teams spend as a percent of their revenue.  And the figures in red are what they would be spending if they operated like an EPL club, Global Top 20 club, or a Bundesliga club.

Being financially prudent is good, but the problem is the league is being financially prudent in the one area where they can’t afford to be.  If MLS wants to be thought of as one of the premier soccer leagues in the world, then it probably should be the best league in North America.  And right now that is not the case.  There are teams out there (New York, Los Angeles, Seattle) who want to spend more than they are able to under current MLS rules.  That is a problem.  These rules are potentially hindering a MLS team from participating in the Club World Cup, which would be massive for the league.

What is a potential solution?  MLS does not need to spend like the EPL to be successful.  If MLS teams spent like German teams their average wage expenses would be approximately $7.5M per team.  What would this “average” MLS team look like?  To test this hypothetical, a random number generator was used and a 30 person $7.5M team was constructed.  In fact, it came in under $7.5M.

Could this team win the CONCACAF Champions League?  Would more international soccer fans (not MLS fans) tune in to see this team play?  I think so.  It is up to MLS and its owners to decide what is best for their league, but perhaps it is time to ante up.  


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  2. I like what you've done here, and agree that the league does need to step up it's compensation level in order to attract better players (and keep domestic players with higher salaries). But my feeling is that the team you constructed wouldn't do much to the ratings of MLS games on V as well as crowd increses. Would it help? Yes. Would getting more $200k-ish players draw in that casual fan, I think not.

    An increase of salaries would be good, but the only way to see marked improvement in revenue is having more DP spots, and well known players in the league that will catch the attention of the fan who watched them ply for a top club in Europe in the past.

    I think a $5-6 million cap is reasonable, and can start to attract better talent to help the league grow and gain respect. It's going to be a long road/

    1. Indeed it will. An increase of the salary cap to $5M or $6M won't bring in big European names but it will make MLS immediately more competitive with Liga MX, who is the league's chief rivals in my opinion at the moment.

  3. Raising the quality of the product on the field is a great goal, but it has to be done without sacrificing the parity that exists in the league. Under your $7.5 million for every team, San Jose and Chivas wouldn't be able to be competitive at all, as they'd be spending almost their entire budget in player salary. What about transfer fees? What about stadium upgrades?

    The other thing you don't consider is pricing out the rookies and young players in the league. When those guys all lose their jobs, the player's union is going to have something to say about it.

    1. The rookies and young players would still have jobs if the league expands their reserve league.

      As for Chivas and San Jose, yes they would not be able to spend with the bigger clubs, but I still think they would be competitive. Also, Chivas frankly has the resources to spend more (their parent club makes a ton of money) and San Jose will have much greater financial resources when they move into their new stadium. Hopefully, increasing salaries will also increase television $, which can be distributed amongst the teams equally.

  4. Television is a lagging indicator. MLS needs to accept what it can, and focus on getting every market into a Seattle like situation locally. I also think the ratings game comparison is idiotic. One must assume, that given MLS is highly provincial in nature still (given it is only 18 years old), the viewers outside of MLS markets are going to be quite small.

    Does anyone really expect someone living in Mississippi or Minnesota is glued to the television for MLS, a league he/she has very little exposure to (in terms of history, current media attention, narrative etc..).

    MLS needs to compare rating in local markets for its games compared to other events. That is the main concern currently. It needs to begin to build narratives. I often thought that an NFL films style weekly show, paid for by MLS, and broadcast on ESPN (they need time slots filled) would do wonders.

    1. The league definitely needs to focus on making sure its media partners are committed to the league, whether it's NBC or ESPN. I agree with you about the non-MLS markets, though I do think the eventual footprint of the league will be the 30 or so teams we see in the other major sports, and hopefully that will help.