MLS Must Ensure Competitive Balance

At risk of becoming league of haves and have-nots
by Peter Muller   |   Friday, August 30, 2013

Major League Soccer (MLS) 2012 Season Preview

The Los Angeles Galaxy’s signing of Landon Donovan to a contract extension on Tuesday is a further sign that MLS is growing into a mature league that will spend the money necessary to keep and attract top talent.

Coming on the heels of Seattle’s groundbreaking move to lure Clint Dempsey home from England and the designated player contract L.A. awarded to Omar Gonzalez, the Donovan signing makes clear that certain MLS clubs have the wherewithal and the determination to recruit the best available players regardless of cost.

The commitment to American talent, as well as the signing of marquee players like Thierry Henry, Tim Cahill and Robbie Keane, has taken MLS to new heights and significantly improved the quality of the product.

These high profile signings raise questions, however, about whether MLS is at risk of becoming a league of “haves” and “have-nots” and what role the commissioner has in maintaining a competitive balance.

Without knowing the intricate details of Seattle’s financial situation, it is not surprising they were willing to spend the money on Dempsey given their regular attendance of more than 40,000 fans and their ability to sell more than 60,000 tickets for key matches.

Likewise, the Galaxy control their own stadium where their average attendance is more than 20,000 and they reportedly have a local television contract that brings in $5 million per year. These revenue streams allow them pay high salaries to Donovan, Gonzalez and Keane.

But where does that leave the “lesser” teams in MLS who cannot bring in the same level of revenue? And in a league that still has a single-entity structure, is it appropriate for a handful of teams to spend freely while others lose money year after year and lack the ability to bring in high-priced talent?

Across the American sports landscape it is common for there to be significant spending discrepancies between teams in the same league. The New York Yankees this year had an opening day payroll of $229 million while the Houston Astros opened with just a $24 million payroll.

But sports leagues in this country have put measures in place to bring some balance to the equation. The NBA and the NFL have strict, if difficult to comprehend, salary caps that try to maintain a competitive balance. Major League Baseball charges a luxury fee to teams that spend beyond a specified threshold and requires them to share revenue with smaller-market teams.

Major League Soccer’s approach has been to maintain a relatively strict salary cap (with many written and unwritten loopholes) while providing teams some flexibility through the designated player process. This has benefited MLS by allowing teams to bring in high profile talent that lend credibility to the league and increase its visibility in the United States and around the world.

But in the case of Dempsey’s signing, there were only 2 or 3 teams that were in a position to even consider paying the price that was necessary to bring him into their club. The same can be said for Donovan, who reportedly is set to earn $4 to $5 million per season.

And, more to the point, MLS picked up the cost of the $9 million transfer fee that freed Dempsey from his Tottenham contract and delivered him into the arms of the Sounders – an opportunity that was not available to the vast majority of MLS clubs.

D.C. United, an organization that loses money year after year and lacks a long term stadium arrangement, could not even consider spending that kind of money. The same could be said of the New England Revolution. And even the Columbus Crew, which does have its own stadium and a wealthy new owner, seems unlikely to be able to spend what it takes to bring in a Donovan or a Dempsey.

If the San Jose Earthquakes target a player who requires a $2 million annual salary, but can only afford to pay him $1 million, will the league kick in the rest? The cost would be far less than what MLS spent to aid Seattle’s acquisition of Dempsey.

MLS has never been afraid to manipulate its own rules for what it believes is in the best interest of the league. They arranged for Donovan to join the Galaxy, after one of his ill-fated stints in Germany, rather than his previous club the Earthquakes. D.C. United’s signing of Freddy Adu in 2004 also required intervention by the commissioner’s office.

And perhaps MLS is justified in spending lavishly on a transfer fee that benefits just 1 of its 19 teams.

Major League Soccer is a more interesting league with “superclubs” like the Galaxy, the Sounders and the New York Red Bulls signing high profile American and international talent. Interest in these clubs gives teams like FC Dallas and Colorado to sell more tickets when they come to visit.

But with its single-entity structure, MLS needs to do a better job showing supporters that its actions do not unfairly tip the competitive balance and are in the best interest of all teams in the league.


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Peter is a government relations professional in Washington, DC, and Los Angeles, CA. He has been a DC United season ticket holder since 1997 and has attended every MLS Cup except one – in 1998 when he was busy helping his boss get re-elected to Congress.