In my last post on MLS’ future, I postulated that the television rights deals of the future will determine the level of play we will see on the field. I also stated that it is my belief that MLS must offer a better quality product on the field in order to achieve higher fees. Kind of a chicken or egg dilemna.
A quick review. The major domestic rights deals, with Disney(ABC,ESPN) and Univision, expire in 2014, two World Cups from now. The impact of the success or failure of the US Men’s National team is a subject for another post, but it will definitely have an impact on MLS of some sort.
As I mentioned in the last post, the Forbes – September 2008 article on the 2007 season stated that each of the 13 teams received around $800,000, or about 45% of the tv rights in place at the time, around $23M total. Note the domestic rights are down to $21M as the $2M HDNet contract was not renewed after the 2008 season.
So, with $2M less and 2 more teams, the amount teams would receive would drop to around $633,000 if the distribution percentage remains the same.
As a point of reference, using a 45% distribution rate, here are the approximate per team domestic tv rights for the ‘Big Four’ professional leagues in the US: NFL(53):$43.8M, MLB(40): $14.35M, NBA(15): $14M, NHL(23): $2.57M.(Roster sizes in parentheses)
OK, back to the point in this post. I believe that MLS is currently in an optimal position to improve the on field product. MLS and SUM have come off of a monster cash generating ‘Summer of Soccer’. SUM and MLS owners, by virtue of their interest in SUM, also have a fairly steady stream of new franchise fee payments coming in. Now I suspect that some of that money went to reply some of the $350M in losses the league reportedly incurred in its first decade, but I can’t be sure of that. Of course, the money hasn’t just begun to flow.
But while over half the clubs are expected to lose money this season(and I’m being generous here), that doesn’t mean the entities that own the franchises will lose on their investment in professional soccer. Remember, every franchise owner shares in the revenues generated by Soccer United Marketing. And there’s nothing to say that those revenues make it onto the club’s books. That also goes for the fees generated in team owned stadiums, i.e.; concerts, field rentals, etc.
It is amongst this backdrop that the upcoming Collective Bargaining Agreement(CBA) discussions will transpire. The CBA expires on Jan 31, 2010.
Jason Davis did a fine job doing an early preview of the CBA negotiations back in May and as an old professor of mine once said, ‘why reinvent the wheel?’. Below I’ve posted the most relevant salary sections of the current agreement.
The main section covering salaries in the current CBA:
For each year covered by this Agreement, MLS agrees that the Player Compensation shall be no less than the following: (a) 2005: Player Compensation paid for 2004 plus $200,500. (b) 2006: Player Compensation paid for 2004 plus $216,500. (c) 2007: Player Compensation paid for 2004 plus $333,500. (d) 2008: Player Compensation paid for 2004 plus $511,500. (e) 2009: Player Compensation paid for 2004 plus $599,500.
Note from Peter C: The 2004 ‘Player Compensation’ was in the neighborhood of $1,730,000. Source: SoccerTimes
Section 10.5
Bonus Pools: The following Team bonuses will be paid, with the allocation among players on the Team to be determined by the Team’s players:
(i) MLS Champion: $165,000
(ii) MLS Runner-Up: $60,000
(iii) Regular Season Conference Champion: $31,000
(In lieu of, not in addition to, bonus for Qualifying for Playoffs.)
(iv) Qualifying for Playoffs: $15,000
(v) U.S. Open Cup Champion: $100,000
U.S. Open Cup Runner-Up: $50,000
(U.S. Soccer will pay these bonuses or such other sums, if any, that U.S. Soccer may make available. If U.S. Soccer does not pay such bonuses, MLS will have no obligation to do so.)
(vi) Regular-Season Game Winner: $2,750
The Union will consult with MLS regarding distribution of the regular-season
game winner bonus.
Notwithstanding the above, in the event of format changes, MLS and the Union shall
meet and confer concerning amendments to the above bonus schedule. In no event shall
the total dollar amount of the bonus pools decrease as a result of format changes (except
as to those bonuses paid by U.S. Soccer).
(vii) Tournaments and Exhibition Games: If an MLS Team or MLS receives prize
money by virtue of the Team’s performance and/or participation in a compulsory tournament
(i.e., where MLS is required to participate by U.S. Soccer, CONCACAF or FIFA), Players
competing in that tournament will receive the following:
(a) if the Team or MLS receives up to $200,000 in prize money, fifty percent
(50%) of such prize money; or
(b) if the Team or MLS receives prize money in excess of $200,000, the
Players will receive 50% of the first $200,000 and thirty percent (30%) of
amounts over $200,000, up to a maximum payment to the Players
(collectively) of $200,000.
(c) With respect to the CONCACAF Champions Cup tournament, the
following prize money shall be paid to each team, unless the amount in (a)
or (b) above is greater, in which case the amount in (a) or (b) above shall
be paid:
Team advances to quarter final: $11,000
Team advances to semi-final: $16,500 additional ($27,500 total)
Team advances to final: $22,000 additional ($49,500 total)
Team wins final: $27,500 additional ($77,000 total).
Notwithstanding the above, in the event of CONCACAF Champions Cup
format changes, MLS and the Union shall meet and confer concerning
amendments to the above bonus schedule. In no event shall the potential
prize money decrease as a result of such format changes.
Neither MLS nor any MLS Team shall be required to pay Players a portion of any
compensation MLS or the Team receives in conjunction with participation in
a Non-Compulsory Tournament, but nothing in this CBA shall prohibit MLS or
a Team, in its sole discretion, from voluntarily making payments to Players in
connection with such tournaments.
End of CBA snippets
Want to read the current agreement? The Collective Bargaining Agreement
Interestingly, if I read the salary section correctly, in 2008 18 players counted against the cap, while in 2009 20 players count against the cap. Calculating the caps for 2007-8 at $2,211,500 and $2,299,500, respectively, the average cap room per player actually went down from $122,861 to $114,975.(this excludes those teams that have more than 4 developmental players grandfathered in)
And, again if my calculations are correct, if an MLS team were to win 1) its conference 2) MLS Cup 3) US Open 4) CONCACAF Champions League 5) 16 league games, the players on the team would divvy up a grand total of $343,500. A 24 player split equates to $14,313 to each player.
If anyone out there can correct me on this, by all means, go ahead. If, on the other hand, my calculations are correct, a pretty slick piece of sleight of hand by the league.
==================================
What are the players looking for?
Liz Mullen and Tripp Mickle of SportsBusiness Journal reported that free agency and guaranteed contracts are important issues for the players’ union. The current ‘Contract Guarantee Date’, “the date on or after which a Semi-
Guaranteed Contract may not be terminated”(Article 2 vi) is July 1.
What do I suggest?
- $3.5M salary cap in 2010, escalating to $5M by 2014
- 2 DP’s per team, one exempt from salary cap(can be traded). $425,000 counts against cap.
- $40,000 minimum salary, senior roster and developmental players alike.
- Rosters expanded to 28, any mix of senior roster and developmental.
- Unlimited academy players, all exempt from salary cap, becoming non-exempt after 55 MLS game appearances.
- 10 international slots per team(can be traded).
- 50% of all tournament prize money allocated to player bonuses.
This would mean a payroll increase(within the cap) of $19.2 for 16 teams in 2010. With 18 teams in 2014, the differential from $2.3M to $5M means an additional $48.6M for player salaries($2.7M per team). Of course, I’m not forgetting that we could see 20 teams by 2014, in which case the additional salary cap total for the league would be $54M.The extra money won’t be coming from game day operations. Even with shirt(and other) sponsorships, only TV money will allow the kinds of salaries that will improve the league so that it is competitive on the field with any in the Western Hemisphere(gotta start with a goal).
Summary
Here’s the idea. Better players means more viewers. More viewers means higher ratings. Higher ratings means higher rights fees. Higher rights fees means more money for salaries. And so on. MLS should take advantage of its current financial windfalls to definitively increase the salary cap in order to improve the on field product we are asked to support. If they fail to do so in the next CBA, we can expect MLS to remain mired in mediocrity for the foreseeable future.
Very good and well rounded thoughts and piece. I especially like the minimum salary figure you provided, as it would really set a bar for fringe players to be able to make a living in the MLS, and potentially blossom. I have two issues, though.
1) 55 games for an Academy player to become non-exempt? Is that a lot compared to other leagues? I have no idea, but when I read that it just seems like a lot.
2) You have to remember that only a handful of the leagues teams will be profitable this season. Only FC Dallas, Toronto, and LA were profitable in 2008 (wikipedia), to which we can add Seattle for sure (taking away the expansion fee). I think this will be a leverage point for MLS and its owners, as they would like to be profitable before they expand and make more financial commitments too soon.
Also, finally some MLS’ pieces are showing up. I know its been a fun and busy USMNT summer, but the playoff race is so tight this year and there has been some great games lately. Its time to shift some focus back to the league MLS Talk Staff…
Great stuff, Peter C!
Where to start?
First of all, you completely butcher the cap and “player compensation” and what they represent. This starts with you simply multiplying the 2004 cap by the number of teams and applying that to player compensation figures in the CBA when the two are apples and oranges.
The cap is a privately held number that is what MLS calls a “salary budget” which lays out the maximum amount a team is (supposedly) allowed to spend on salaries.
The “player compensation” part is the MINIMUM amount that can be paid out. The key phrase you failed to acknowledge is “no less than.” In other words, the CBA sets the salary floor. The league sets the salary ceiling. So your calculation of what they are spending per player is based upon the minimum, not the maximum. So when you started your figures, you were in error, then you made it worse by not understanding the terminology.
This is further exacerbated by you completely ignoring the next two or three sections of the CBA which clearly spell out how the minimum player compensation will be adjusted upwards in the event of larger rosters. So the figure is not static regardless of roster sizes. When the rosters expanded, so did the amount of money committed to players. Read 10.6 (iv). It’s right there.
And your math is off on the bonus pools.
16 wins * 2750 = 44,000 (and this isn’t a straight split among the players. Basically the union and league work it out).
44000 – win bonus
100000 – USOC
165000 – MLS Cup
31000 – conference
77000 – CONCACAF
——–
417,000
While you may have some interesting ideas about good ideas to include in the new CBA, you are unfortunately tripped up by being so wrong in all your other observations that your opinions are rendered moot. Par for the course for this site.
Sick burn, Fan! Love it.
It is chicken and eggs. Until they can get the league minimum up to $100k they are always going to struggle unfortunately. $40k is definitely better and needed, but does someone stay in MLS versus Europe for a $40k job…no.
Interesting piece. My biggest question comes from this sentence:
“MLS and SUM have come off of a monster cash generating ‘Summer of Soccer’.”
Just to be clear, a lot of the games from that Summer of Soccer (like that whole World Football Championship tournament or whatever it was called with Chelsea, AC Milan, Inter Milan and Club America) were NOT organized by either SUM or MLS, so you’re saying that MLS and SUM came off a monster cash generating summer off the other remaining games, right?
Peter C has kept good track of SUM organized SOS of events for the last few months. Please check some of our archives and you’ll see specifically which games he’s referring to.
I disagree with the 10 international player slots. Look at the J-League. They have 3 international slots + 1 AFC player slot, and they have a laegue that’s probably on par with the Eredivisie and a very good national team with most of their players playing domestically.
how much is awarded to teams in allocation though?
aren’t MLS teams already spending close to 3 million a year thanks to allocation. so does the potential raise to 5 million mean actually 6 million once allocation is factored in?
Juan-John:
You are correct that SUM had no part of the World Football Challenge. And it was certainly the biggest draw, but it was only 6 of the games. As I’ve noted in a previous piece, SUM was involved in one way or another with events that drew over 1,000,000 fans. So yes, what I’m saying is the SUM made large dollars this summer. And by the way, there will be 3 Chivas de Guadalajara friendlies played starting tonite and ending Oct 7. Chivas de G is handled by SUM when they’re in the US.
Charles:
You have to start somewhere. And again my point is made. In order to have a $100,000 minimum, you need a lot more revenue and TV rights would be a significant contributor to the revenue stream.
Fan:
Yes, the cap is the theoretical maximum teams are supposed to spend and the CBA sets minimums. Does anything in MLS past indicate that they are an organization that pays beyond the minimum? If my calculations are at the minimums, where exactly is the maximum? Based on my numbers, the ‘minimum’ for 2009 player compensation is around $2,329,500(assuming the SoccerTimes 2004 number is close to correct). Have you ever seen a reference to the 2009 cap that exceeds $2.3M? If so, I’d like to see that.
Rosters were reduced, not expanded for 2009.
As for the prize money calculation …
Section 10.5(vii) a – if the Team or MLS receives up to $200,000 in prize money, fifty percent(50%) of such prize money(goes to player bonuses)
US Open winner prize = $100,000, as in UNDER $200,000, therefore the players share is $50,000, the same calculation is used for the CCL as the top prize is also under $200K.
And as I reread the section, I may indeed have made an error on the MLS bonuses by giving the $211,000 instead of your correct number os $196K for both a conference championship and the MLS Cup winner. But either way, we’re talking peanuts here.
I am not a lawyer or a busineess owner, just a fan, so I hope you’ll excuse me for not crossing t’s and dotting i’s. As for the accuracy of my calculations, I believe I’ve addressed that. Now, how about commenting on the IDEA behind the piece. Am I totally off base? Should MLS go in another direction? Do you have any suggestions? Or do you think MLS is doing it just right?
Rob:
You could be right about 55 game appearances being too much. In my head I just figured if a young player was going to ‘make it’, it might take 3 years to find out and in that time(90 games), 55 was a nice number. But I’m open to suggestions.
As for point number 2. Remember, MLS franchise owners share in the revenues from SUM. Check out SUM’s website(link in post), and see all its activities. Like I said in the piece, 3-5 teams may make money, but we’re talking just soccer operations. Owners make money(if they own a piece or all of a stadium) on many non-MLS events. They may not need, or want, the MLS team to make money. I’m not an accountant, but that wouldn’t seem out of the realm of possibility.
Hendrix:
Great question. Allocation amounts are difficult, if not impossible, to ferret out.
MLS allocation info.
http://web.mlsnet.com/about/league.jsp?section=regulations&content=overview
So you are correct that any club using allocation money for a player could be spending in excess of $2.3M. How much? Who knows? But it does show that there is more money in the pot to raise the ‘guaranteed minimum’.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Margaret
http://businesseshome.net
does better players mean more viewers? this is the most important issue to talk about for here in the U.S. I don’t think it is so clear cut as that.
Mitch:
You hit the nail on the head. I think the effect Blanco and Beckham have had is some evidence that it’s true. it may be that for the short term it will take marquee names to push the product, give it more visibility, which would yield more press, etc., all leading to better ratings.
Teams also get a larger cut if they sell players. I believe the league has enough cash reserves from selling franchises now so that they can allow teams to keep more money.
I still don’t care to watch 3 or 4 MLS games every week, I just don’t have the time. I’m a fan of the Columbus Crew not MLS. I’d prefer to have a highlight show so I can get familiar with all the league’s stars.
Given the extraordinary job here by Peter my only comment is thank you for the break down, it helps us all understand more.
“Does anything in MLS past indicate that they are an organization that pays beyond the minimum? ”
Um, the designated player rule?
Seriously, dude, give it up. You used a boatload of inaccurate information – mixing up the minimum and the cap, ignoring the fact that the CBA changes the minimum compensation based on additions or reductions to teams or player slots and getting the prize money wrong, which you try to conveniently ignore and change the topic.
As for my ideas, I think MLS needs to make some big changes and hope they come in the CBA. But I’ll spare you the details in a comment here because it won’t change the fact that you were wrong and refuse to admit it. Trust me, you will see (or have seen) my ideas somewhere.
“Um, the designated player rule?”
Yup, real generous of MLS. They’ll allow the entities that own the franchises to pay salaries in excess of $415,000, not a penny from MLS.
“CBA changes the minimum compensation based on additions or reductions to teams or player slots”
So minimal as to be irrelevant.
“getting the prize money wrong, which you try to conveniently ignore and change the topic”
In my earlier reply to you(sorry you couldn’t take the time to read it) …
“As for the prize money calculation …
Section 10.5(vii) a – if the Team or MLS receives up to $200,000 in prize money, fifty percent(50%) of such prize money(goes to player bonuses)
US Open winner prize = $100,000, as in UNDER $200,000, therefore the players share is $50,000″
mmm, guess reading comprehension isn’t one of your strong suits.
Just hope your readers are better at it than you.
hopefully when 2014 rolls around again MLS will be in a good position to renegotiate something more favorable in terms of TV deal- perhaps continued higher ratings on ESPN deportes, established new teams with strong support and strong regional TV ratings (like Seattle’s TV ratings- Portland & Van should get those), and more regional spread (if only LA could sign 2 big Mexican players to kill off Chivas…or at least have them sent off to SE), continued growth of CCL, as well as the Canadian trio. Of course, the Canadian trio would involve a different deal. By then, I think 50 or 60 mil is possible from ABC/ESPN/Univision for MLS & CCL. Throw in another very optimistic 25mil from Canadian TV…spread over 19teams. That would be healthy and 100mil total by 2014 is not out of the realm of possibility
re: Unlimited academy players, all exempt from salary cap, becoming non-exempt after 55 MLS game appearances.
This is an interesting idea I’ve not heard before.
When you refer to “unlimited’ academy players – does this refer to unlimited in addition to the traditional roster spots (20 in 2009 IIRC)? So if a team wanted to sign 45 of their youth players to minimum contracts that would be ok, assuming these players dont all end up getting 55 games?
Dont get me wrong its an interesting concept. Before replying I was thinking about how this could fit into the current MLS system. It seems to me that something like this would be a fantastic incentive for teams to develop players themselves.
How about something along these lines:
Like you suggest, teams can sign unlimited numbers of their Academy players to MLS contracts. I would suggest they can sign them to whatever contract value they please (be it $1 or $1,000,000)- they pay it from their own pocket (like much of a DP slot).*
Instead of 55 games like you suggest, what if these players would not count against the cap nor the roster spots on traditional rosters until they hit these marks:
Players under the age of 19: unlimited MLS games
Players aged 19 – 22: 1350 minutes in MLS games
This way, a bright (young) prospect could be signed early and allowed to play occasionally in MLS games to help his development. If he’s rare gem, and starting every game at age 18, then the team will benefit even more. If a player is ‘college aged’ and playing with the academy still, he should have some leeway – but I think 55 games is far too much. An MLS season is 30 games. Letting a player play almost 2 full seasons without counting on the roster/salary cap is a lot. I’d say a mark of 1350 minutes (15 full games) worth of time is sufficient to determine if a player can ‘make it’ or not, risk free.
If the mark is 1350 minutes, a young player can sub into the end of a season and a half’s worth of games, but if they are good enough to start well they will quickly become a ‘regular’ MLS player. Its still a great deal for MLS teams. They can give young players enough minutes to see their quality, and if they stick, then they’d still only have to pay 1/2 a seasons salary against the cap (ie, the first 15 games are salary cap exempt since they hadn’t ‘graduated’ yet)
*Once the player ‘graduates’ to a real MLS contract and roster spot, their Academy contract would have to fit within the MLS system. If it was lower than the minimum they would have to be given a raise, if it was more than the maximum then they’d have to be made a DP. Obviously the teams would have to make a roster and cap place available if there was none at that time.