The Difference Between an American Sports Contract and a European Football Contract

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I wanted to follow up Kartik’s excellent post on the nature of the MLS contract with a look at this situation from the MLS owner’s perspective.  If there is one thing the owners fear and will try to avoid at all costs, it is having a situation like what exists in Europe where a player contract is really a one-way street with the top players in a ridiculously powerful position.  In American sports, a player contract is a binding and respected document, but in Europe, it is really only binding to the team.

To illustrate the difference, let’s take the case of one of the best American athletes on a mediocre team – San Francisco Giants pitcher Tim Lincecum.  Lincecum may be the best young pitcher in a generation having won two straight Cy Young awards while the Giants have missed the playoffs for the past six seasons.  I am sure that a wealthy team like the New York Yankees have already photo-shopped pictures of Lincecum in pinstripes, but they know that Lincecum is contractually obligated to the Giants, in one form or another, until after the 2012 season.  Until that time, Lincecum is a Giant, and there is no way for him to realistically agitate for a trade to the Yankees and there is no way for the Yankees to “unsettle” him without violating Major League Baseball rules in a way they would not dare.  Lincecum knows that though he may be underpaid at the moment, he does have a humungous payday coming in 2012, and there is nothing he can do to change that date.  He just needs to stay healthy and keep pitching well.

As much as any other agreements like the sharing of TV revenue and the ordering of draft picks, it is the sacred nature of the guaranteed contract that keeps American sports operating at something approximating parity.  The Yankees may have more money than any team and more high-priced players on their squad, but they had to wait for those players to become available in the free agent marketplace.  They could not act like Real Madrid or Chelsea and simply go out and purchase any player they wanted at any time.  Because teams respect contracts, the pool of available players is narrow and the talent is spread around the league.

The same cannot be said for European football.  If predatory teams like Chelsea, Real Madrid or, lately, Manchester City, want a player, all they have to do is cough up enough money and they can probably get him.  The fact that Jolene Lescott was contracted to Everton or that Kaka had a deal with AC Milan is not a barrier – it is an obstacle to be hurdled with cash.  Teams are obligated to pay all they players with whom they have contracted no matter how injured they are or poor their performances become, but if a player achieves a certain stature, he can engineer a transfer for himself.  Though they might spend some time protesting, the teams holding the contracts are invariably forced to acquiesce.  In this regard, players are protected by both the ethic (or lack thereof) of the football leagues and European labor law which is enormously pro-employee.

From its inception, MLS was terrified of participating in this type of market.  Both because American sports fans appreciate parity in a way that is not valued in Europe and because they needed to control their costs in a start-up league, the MLS hierarchy needed to put into place a salary structure that would not spiral into what Europe has become.  In order to encourage potential investors to buy teams, MLS had to assure those investors that they would not be competing against a new incarnation of the New York Cosmos, which many believe started an arms race of high-priced superstars that ended up dooming the NASL in the late 1970s and early 1980s.

Thus, the MLS itself became the contracted entity rather than the teams.  The MLS executives, primarily Deputy Commissioner Ivan Gazadis, did the contract negotiations for every team, and were responsible for paying the players.  The individual teams were freed up  to concentrate on marketing and financing stadia.  With salaries under the strict control of MLS acting as a single entity, the team ownership groups knew that they could never be victimized like the smaller clubs of Europe and could begin investing in the infrastructure required to build a league with long-term viability.

That is what makes statement by FIFpro, the federation of international football players, about reverting to a system similar to what exists in the rest of the football world so unsettling for the owners.  In the last several years, MLS has allowed international owners to buy into the league in both the Chivas USA and New York Red Bull teams and their international perspectives have been helpful as the league develops.  However, FIFpro represents a lot of players who can effectively rip up their current contracts when a better offer comes around, and this is exactly what the MLS wants to avoid importing.

As the MLS enters its 15th season, it can probably use this round of negotiations to enigineer some steps away from its single-entity model.  As the MLS management becomes more experienced and sophisticated, it is may be ready to reward skilled ownership groups with a greater degree of autonomy over their actions and decisions.  But from the owners’ perspective, those steps away from single-entity have to be accompanied by cost controls and respect for contracts.  If they enter an arrangement where other teams within MLS or teams from European leagues can poach players with immunity, it would be disastrous for the development of soccer in America. 

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