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MLS FutureWatch – Salaries, The CBA and TV

ch ching MLS FutureWatch   Salaries, The CBA and TV

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.