MLS will hit point of diminishing returns if league doesn’t embrace change

MLS continues to pat itself on the back. And why shouldn’t it, many would ask? The 2018 season has seen MLS reach new heights in visibility and quality of play relative to a past when the league existed in a complete vacuum and the level of soccer on display was average by any truly objective standard.

But permanent growth is difficult in a closed-league, single-entity (MLS) or franchise-based (USL) structure. The American club game will hit a point of diminishing returns in the next few years unless serious reforms are undertaken.

Capturing the masses of American-based soccer fans who watch European and Latin American leagues should be a priority for MLS. These fans seek an authenticity in experience and a relevance in individual matches. Currently MLS doesn’t provide either in enough of a dose to satisfy critics and win over those watching other leagues.

The league still suffers from a general market indifference. No doubt, MLS has had sustained successes in die-hard fan bases such as Portland, Orlando and Kansas City but has struggled for consistent market penetration in the largest metropolitan areas in the nation such as New York and Los Angeles. On a larger scale, MLS is struggling to establish anything more than a niche position in the general sports landscape nationally and remains to a large extent a niche even among self-professed soccer fans in the United States.

In reality, MLS has probably reached the end of its rope for a closed league. In the coming months, the league will add three expansion fees at a high dollar value – $150 million, with the first FC Cincinnati announced earlier this week. These clubs will likely look to publicly finance gargantuan stadiums as a way of justifying the expense of joining a closed league that guarantees revenues from MLS’ marketing arm, Soccer United Marketing (SUM).

MLS has largely built its business off collecting expansion fees which then fuel an increase in existing club values. But this is a scheme that will not continue to yield results over time. Moreover, MLS will not be able to replace expansion revenue when expansion ends unless they open up the league structure, something that MLS Commissioner Don Garber seems unwilling to even contemplate. While valuations of existing clubs have increased in recent years due to expansion, those club values are likely to stagnate as the league hits its point of diminishing returns.

Investment in soccer at the lower division level has been difficult because of the closed league nature of the American game as well as the pro league standards which the USSF uses to determine sanctioning of professional leagues. While many owners come into buying or creating a lower division club with the requisite enthusiasm and spend with relatively big money initially, the enthusiasm and investment dries up within a few years unless a team moves to MLS by paying an exorbitant fee.

Lower division soccer can be economically viable if part of an open system is in place that organizes leagues regionally much like conference in college sports. This not only reduces travel costs but increases local relevance via regional rivalries. For example, fans in Tampa would be more inclined to support a club and travel to regional destinations like Jacksonville, Fort Lauderdale and Birmingham than to have to travel Ottawa or San Antonio or points further thanks to the USSF’s timezone requirement for second division leagues. This also will give a relevance and context for competition in lower divisions once an open system is implemented beyond simply fighting for promotion.

Despite expansion, MLS owners remain reliant on sponsorship and ticket sales for revenue as TV ratings continue to remain flat. The growth of interest in soccer generally has benefited the league but only to a certain extent. MLS still has trouble gaining a following among hardcore soccer fans in this country. While some of this can be attributed to snobbishness, much of it is due to MLS’ own competition format and calendar.

 

Earlier this month, Garber gave an interview to the Kansas City Star where he emphatically made it clear that he didn’t think either the competition format, which does not have promotion and relegation, or the calendar could be changed.

Regarding promotion and relegation, Garber said “Just because there is promotion/relegation in other leagues that were founded on different principles doesn’t mean that it would make sense in Major League Soccer. We have a vibrant No. 2 league in the USL. We have (Sporting KC principal owner) Cliff (Illig) and his partners that have just put $60 million of capital, along with the public, into this building. If all of a sudden they’re playing in a different division that doesn’t have national revenues — because the USL doesn’t have that — how does that make any sense? There’s no economic rationality to promotion/relegation whatsoever in the era that we’re in today.”

Garber’s comments are selectively interpreting what would happen in a truly open system where money would flow down the pyramid through media and sponsorship deals. USL’s lack of national revenues is a direct result of the league being designated as a “second division” by US Soccer in a closed system. If promotion and relegation was instituted, it is assumed MLS and USL or whatever the first and second divisions would be called, would pool some revenue, share some media rights and have joint-sponsorships. Moreover, the institution of parachute payments would inoculate clubs who are relegated. This is how leagues are structured throughout the world and how investments of those who put money into clubs are ultimately protected.

Promotion and relegation isn’t just a “cool” concept. It would drive interest in the entire league structure, creating an incentive to watch other clubs on television. It also would likely prompt the type of bottom-up investment that allows more integration in concepts like street soccer and futsal to develop players. If promotion and relegation were to be implemented long-term and solidarity payments were allowed in the United States, investment in the development structure from the bottom up could help drive down the costs to players and their families in the expensive “pay-to-play” system. Money invested in lower division teams would flow up the pyramid as we’ve seen in so many countries across the world, and this would also further inoculate investors to certain extent from the potential pitfalls of relegation.

Another persistent issue with MLS’ ability to attract fans is playing on an abnormal March to November calendar that also creates problems in attracting players because transfer windows aren’t aligned with the top European leagues. Garber conceded in his Kansas City Star interview that shifting the calendar might be ideal in some respects but claimed it was impossible due to weather considerations.

Garber said regarding potential calender shifts: “If we could align with the calendar, we would. Why wouldn’t we? It makes a lot easier for us to have the summer open so that we can take a break when our players are getting called into international competitions and capture some of the opportunities when international clubs wanna come here. But you guys know what the weather is like around the country. We’ve had snow and horrible weather in the beginning of our season in early March. There is no league in the world that plays across (four) time zones and three climate zones. We have to operate in an environment that is consistent with the norms and factors that exist in North America.”

The comments by Garber completely ignore the fact that a longer winter break and creative scheduling can be undertaken. Nobody is saying you must play through snow in January. What is being said is that lining up transfer windows is beneficial to everyone in the league. Moreover, it can be strongly argued that the quality of play suffers during the summer months and weather delays are as numerous as would be during the winter. In my final season with the NASL’s Fort Lauderdale Strikers in 2016, we had 17 out of our 30 league matches negatively impacted by weather in some manner, with almost ten matches suffering a weather-related delay. Even if matches aren’t delayed, the oppressive heat impacts the quality of play and the ability to train at a high level. Additionally, the excessive heat and thunderstorms which much of the country suffers through impacts player safety as much if not more than the cold weather Garber is referring to in his comments.

Instead of using conventional means established in world soccer to grow an audience or a product, Garber is hitching his wagon to sports betting as a potential way to increase fan interest.

“How do we build a fanbase? To be one of the top leagues in the world, we gotta grow our fan base,” said Garber. “We have to have more fans. We have to have higher television ratings. We have to engage with our fans. Maybe sports betting becomes one of those ways that we can build a fan base. We could work with some of the providers to be able to provide exposure to our players and have them engage more with our games.”

Perhaps another remedy for MLS will be unlimited, strategic franchise relocation. The potential relocation of the Columbus Crew SC, an original MLS club and one which has boasted a longer-term more passionate following than most is a test case. If MLS gets away with moving the Crew to Austin, several other potential relocation efforts could follow that hold taxpayers to ransom in multiple cities. This will allow the league to continue extorting public monies from citizens and create new buzz in existing markets, or new markets that seek a relocated franchise.

Instead of tackling the league’s long-term structural problems head-on, it appears that MLS officials prefer to live in a self-created fantasy world where positive PR spin from new expansion cities and the dreams of gambling being a cure-all will turn MLS into “one of the top leagues in the world.” Now more than ever, it’s time for MLS to get outside of its own bubble.