MLS Economics – End The Salary Cap Mystery

Must we perpetually deal with the cloak-and-dagger nature of the salary cap situation in Major League Soccer?

Wilhelmsson - Another International Star For The Galaxy

There is nothing like watching international players enter the league, primarily to the Big Two teams of Los Angeles and New York, when it appears that they may have already reached their salary maximums, even with the Designated Player allowances. It has created this neverending saga of questioning whether the league is upholding its ethical duty to hold teams – especially corporation-backed Los Angeles and New York – to the rules. There is little chance for Joe Soccerfan to peruse the real numbers and perform his or her own level of accountability. It’s progressed to the point where it has become a laugh-a-minute punchline for most MLS-centered bloggers. “Oh gee, there they go again! The Galaxy just keep getting more and more great players! Oh, but those days are long gone of the shenanigans! Yeah!”

Today it was announced that the Los Angeles Galaxy have signed Swedish midfielder Christian Wilhelmsson. Yes, another international player who saw minutes in this summer’s Euro 2012 tournament. Wilhelmsson is coming from Ligue 1 and the oil-money flush Saudi club Al-Hilal, and would seem to have a steep salary. Nope, no reason to question that bit of finance, just carry on fans of teams who actually sell out their venue.

But why is that? What is the reason they can afford this guy, according to the lore of MLS accounting? It’s that mystical, incalculable substance known as “allocation money.” It’s impossible to know who gets what, and when they do, how much they receive – unless you’re someone in the League office with a trusty slide rule and a degree in multidimensional calculus.

Of course that’s a ludicrous suggestion, just as it’s ludicrous that fans of this League should be unable to be in full view of this system. It’s not like it’s to protect the confidentiality of player salaries. The MLS Players Union publishes that data twice a year. It’s not like it’s going to reveal some ugly truth that poor Junior Lopes is making less than 2% of what David Beckham makes in a season – we get to see that data regardless.

So then why keep this finance so quiet? That’s a good question, if everything is well within the rules (which I assume it is). If you’re going to insist that every team spend less than a salary cap, and let the public know the exact number of that cap (less the exemptions made for 3 Designated Players), then this information should be published.

We should be able to say, “Ok, LA has $500,000 worth of Allocation Money in their bank, and $400,000 of cap room. That means they can give Wilhelmsson up to about $850,000 salary for the next year to be sure he remains below the Designated Player figure.” Instead we’re sitting here , saying, “Ah, it’s just the way it is. Might as well just suck it up. They must have it under control, right?”

I don’t want to be glib about this though. It’s not easy to keep a league afloat, and the controls in place are well worth it for a league that is showing steady growth. All I’m asking is that you let us in on the secret. Can’t the guessing game that perplexes and gives conspiracy nuts like me sleepless nights be put to bed for once?

Maybe the reason it remains this way is that if one wall is broken down, then it would lead to skeptics asking for another wall to topple. First it’s the allocation BS, next it’s promotion and relegation. I don’t think so, those pleas for those issues are already there and are never going away. Slippery slope arguments suck nearly as much as the way this information is withheld.

So my position is this – just release the salary cap numbers and allocation money totals one of these years. Please?

25 thoughts on “MLS Economics – End The Salary Cap Mystery”

  1. The official reason MLS gives for the secrecy is that it would hurt
    their negotiations with players. They say that if agents knew how
    much teams had to spend, they would demand all of it.

  2. Fantastic article Earl. I definitely agree that more transparency
    is needed and that the salary cap needs to be increased faster than
    it has been.

  3. Absolutely nailed it! MLS has to come clean. The league has a
    serious perception problem. I appreciate you calling them out for

  4. I don’t know. On the one hand I don’t trust anyone and tend to
    think it should be better transparent. The league has already
    screwed up the parity with the DP rules to appease the casual fans,
    so they could easily make the allocation dollars in a way that
    favor LA and NY ( and Seattle too, but thats ok 😉
    )……………………..on the other hand, you can easily see a
    situation where a guy comes into to Seattle to negotiate a contract
    and says oh you have this much in allocation money and your bank
    account is WAAAAY beyond what anyone playing in the whole world of
    soccer, including what Messi gets paid. Negotiations could be
    compromised…am I wrong ?

    1. So here’s a question Charles – how do NFL teams make it work then? They even have a hard salary cap – if a wide receiver knows a team has $10MM left in cap room, and they go to the negotiating table, isn’t the same true? It’s a fallacy. No club is held hostage to simply capitulate to what the agent and player wants. Clubs walk away from the table all the time in all kinds of leagues. Is Eidur Gudjohnsson or Christian Wilhelmsson the best or only option out there? Heck no.

      1. I am for transparency (sp ? ). Everyone in Seattle is, after we
        lost a secret coin toss for home field in the LH USOC and then
        found out halfway through the season that the playoff tiebreakers
        favor NY and LA and not Seattle’s second best goal
        differential………………………………………I am just
        asking questions and I think your NFL question is off base and here
        is why. One, there are very limited options for an NFL player. 32
        teams. Tons more options for soccer players. So the NFL teams
        already have way more power than MLS teams. Two, the trades are
        done differently in soccer. Buying the rights isn’t done. So
        opening up the books to let other teams know the amount available
        might not be prudent………………I actually agree with you,
        maybe you even convinced me, but I can see scenerios where being
        open is not perfect.

  5. I was looking for the MLS preview by Graham Parker, great if you
    have never read it, when I found this relevant article.:
    Pretty funny to see that not one time does anyone mention making
    the league “fair” by my standards. The Royalty mentality is very
    evident. The big guns want to keep winning, and the middle table
    teams want to keep making money, the relegation zone teams want to
    start making the big money. Almost like they don’t care who

  6. Earl- Nice Article I think that teams are paranoid about players
    having or gaining some leverage in negotiations although that is
    not likely to be the primary reason they wont tell us whats up. The
    bigger issue for them is that they probably want to be able to
    change the rules at will without having to look like 1) they don’t
    know what the hell they are doing, 2) they are favoring any one
    team at an opportune time and 3) they surely don’t want to have to
    defend their changes to the fans.

  7. Get rid of the salary cap entirely. It is not needed. I’ve never
    heard a good argument for it. The salary cap prevents MLS from
    dominanting CCL. If MLS starts to dominate CCL they then can enter
    Copa Libteradores which after awhile they would do quite well in.
    CONCACAF should consider something similar to financial fair play.
    You don’t want teams going into the red because of wages and
    transfers. But at the same time you don’t want to hold back clubs
    from reaching their potential. SOCCER IS THE GLOBAL GAME. This
    needs to be repeated because some people don’t get it. The salary
    cap weakens MLS.

    1. Never heard a good arguement for the salary cap? I dont believe
      that. Here it is……..Columbus, Colorado and Salt Lake all won
      MLS Cups in the last four years. Nuf said.

      1. They’d win them anyway without a cap. The MLS champion is decided
        by playoffs. Just look at the money NY Red Bull spends now – $15
        mil a year ($13 goes to 3 players) and Columbus $3 mil with highest
        paid player making 350k (Chad Marshall) only 4 points separate
        these teams.

        1. I think there are arguments for a salary cap; but personally I
          don’t mind inequality. As a Colorado fan, I wouldn’t want to
          prevent LA and from NYB from signing stars, partly because it is
          fun to beat them (well, not this year), and also it is fun to see
          them play. But I don’t have a problem with some capping of salary
          or capping roster size (I think MLS does this). I’d like to see the
          EPL cap roster sizes, I hate the stock piling of players that the
          bigger clubs are able to do.

          1. The EPL table is the best argument for a salary cap. The top 4
            teams already are the top 4 teams you would expect, but yet every
            year I am told that you can’t predict a winner. Having a choice of
            the same 4 makes it easier, and you can usually narrow it down
            based on how much money is spent (you can throw Arsenal out as
            possible winners – now we are down to 3, my money is on Man U or
            Chelsea). I agree that the salary cap should be a little bit higher
            and can raise quicker, but why would anybody want to get rid of it?
            I have always said that this and playing soccer in the snow are the
            two dumbest ideas put forth by guys whose best argument is that
            “everyone else does it”. You can still increase competitiveness,
            attract stars, and build better players with a salary cap. Maybe
            the way MLS implements it is not the best, but far better than
            having teams buy titles. Yes, the playoffs do inject some parity,
            but not enough for soccer. Just look at the FA Cup finals or any
            other cup final as reference. Upsets happen more often than in the
            regular season, but its not even close to what you would call
            competitive. Outside of the one-off Portsmouth win, the same top 4
            sides have traded that title back and forth for the past 15 years.
            If one of you can come up with a better way to lift the salary cap
            without turning it into that for those of us that like competition,
            then I’ll listen. Until then, it always boils down to the same
            argument: EPL does it.

        2. What are you talking about ? You already gave the arguement for the
          salary cap yourself. NY can only have three players paid a lot
          because of a salary cap, so Columbus can still win
          it……………I think MLS should do away from DPs all together
          make it.completely far, but I understand that they need to attract
          the more casual fans too.

          1. I really like the DP rule, it really differentiates teams in the
            league because some teams can get them and some teams don’t. Years
            ago in the MLS (before your Seattle team was in the league), all
            the teams seemed the same and it was boring. Inequality breeds
            contempt and envy, and that breeds passion. _________________
            Having said that, I agree that most European leagues are too
            unequal, and predictable. And I also agree that worrying about
            Champions League, or international results, is not the basis to run
            a league. Give me a decent league week for my money week in and
            week out; and let the other stuff sort itself out.

    2. So, let me understand your argument. It is OK to have a couple of
      teams win every year (which they would eventually even with
      playoffs) because the domestic league is not what matters. It is
      CCL and Copa Libertadores that matter? I agree that they matter,
      but not at the expense of the domestic league. That goes for any
      league. A healthy domestic league should always be the top
      priority. Why would I care if LA win the Copa Libertadores
      regularly if they are just buying the domestic league championship?

  8. I read the articles and comments on this page for quite a while now
    (some years to be exact), and I especially enjoy the articles about
    all (organizational) structure topics. Salary cap (like pro/rel and
    the other big issues) has it’s pros and cons, but I just wanted to
    point out, that this one argument being stretched over and over
    again, in any of the topics mentioned above, is not valid. Having
    no salary cap and having pro/rel in the european leagues had and
    has only extremely little impact regarding the present (the gaps of
    relative strength have not always been as big as they are today in
    some leagues – and there has always been pro/rel and never been
    capped wages). The gaps come directly from the money a club can
    invest. There is one factor, that comes directly from the
    structure, that produces and manifests imparity in a way, that
    wasn’t known before – the invention of the CL and the money that
    came with it. One. There is the patron financing. Two. This is
    simply a matter of the rules that are given by the organizing
    entities. UEFA now implements financial fairplay – we will see how
    sharp this sword will be, but the idea is right. In Germany for
    example, a club isn’t allowed to sell the majority of itself, so
    it’s not very interesting for patrons – that works pretty
    effectively. There is the TV money. Three. In spain you see what
    happens, when TV-contract-marketing is not up to the league but to
    the clubs themselves. That really manifests imparity. Germany
    again: The big clubs waive a significant amount of money and stay
    to a central marketing of the TV rights, because they know, that a
    healthy and competitive league will in the long term pay off for
    everybody participating. In my view, these are the real crucial
    points regarding imparity. You can make this point meaningless by
    staying with a salary cap pretty easily, but then you have to take
    the bad things that come along with that decision, too. But you can
    influence every one of these points by the rules that are set by
    the organizing entities pretty directly, too. There is no direct
    link between “no salary cap” and “extreme imparity”, let alone with
    pro/rel. Coming up with that links as argument is nonsense. Sorry
    for the bad english!

    1. Runaway spending is the problem. The top clubs try to buy their way
      to championships. I would agree with you on pro/rel in general, but
      pro/rel often leads to inequality when implemented in a league
      dominated by big money. If everyone has a fair shot, I’d agree with
      you. I do think that you bring up some good points about the salary
      cap though, especially in regards to the Bundesliga, and would be
      open to any idea that brought about REAL financial fair play where
      the same 2-3 teams can’t buy their way to the championship every

    2. I disagree with what you are saying first of all: “UEFA now
      implements financial fairplay – we will see how sharp this sword
      will be, but the idea is right” means that teams making money, huge
      money due to CL like you said will dominate WAY more now. Having
      Man City come in with outside money provided the first excitement
      in the British leagues in many years. They are doing this to
      protect the big teams, who make them money, don’t be fooled by some
      stupid FAIR PLAY title. They want it the way it is, keep the power
      in power and keep them rich…………………………….”There
      is no direct link between “no salary cap” and “extreme imparity” ”
      Are you kidding me ? Wrong. Here read this if you like the topic:

    3. England shares their TV money too, btw. Although I don’t think it
      is 1/20 for every team. The big teams of course want it more like

  9. I think that a common misconception is that people that like parity
    want everything perfectly equal. That is false. It should be
    structured so that the league is competitive and every team has an
    honest shot at winning the championship. You can have some
    imbalance and still do this. That is why I advocate finding a good
    medium where teams can still afford to be competitive, but you can
    have everything that you just the passion that you mention.

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