Thanks to Dave Clark at <a href="http:\/\/www.sounderatheart.com/" target="_blank" rel="noopener">SounderAtHeart</a>, we have a better idea if MLS owners are actually losing money, a key part of a recent public relations effort (see <a href="http:\/\/www.latimes.com/sports/la-sp-mls-leiweke-20100316,0,611514.story" target="_blank" rel="noopener">Leiweke</a> and <a href="http:\/\/voices.washingtonpost.com/soccerinsider/2010/03/earthquakes_investor_speaks_ou.html#more" target="_blank" rel="noopener">Wolf</a>) to take the labor debate to the fans.
The idea that MLS is losing money is one of the key (if not the only) ideas that have some MLS fans on the owners’ side (though as we found out <a href="http:\/\/www.majorleaguesoccertalk.com/poll-who-do-you-support-mls-or-mls-players-union/8391">here</a>, there aren’t as many as the most vocal commenters might have you believe).
As Tim Leiweke told the Los Angeles Times yesterday, “There are only a couple of [MLS] teams that will make money this year.”
Such claims, as well as claims about free agency inherently increasing labor costs, deserve discussion, criticism.
According to Clark, who <a href="http:\/\/www.sounderatheart.com/2010/3/12/1370301/the-recession-killed-profits-in-mls" target="_blank" rel="noopener">took information</a> from a <a href="http:\/\/www.portlandonline.com/omf/index.cfm?a=231170&amp;c=49495" target="_blank" rel="noopener">Portland Timbers’ public disclosure</a> to update the <a href="http:\/\/www.forbes.com/2008/09/09/mls-soccer-beckham-biz-sports-cz_kb_0909mlsvalues.html" target="_blank" rel="noopener">2007 Forbes study</a>, we can be confident two teams made money (Seattle, Toronto). There are five other clubs who are within his margin for error (Real Salt Lake, FC Dallas, San Jose, Los Angeles, Houston).
There are a couple of caveats to Dave’s work. First, as he readily admits, it’s based off of incomplete information. The Portland disclosure was detailed but not the bottom line, and his work is dependent on it.
Second, the numbers don’t count the money clubs get from Soccer United Marketing. Dave points out that they are technically separate entities. In the interest of not confounding the data, he keeps the SUM disbursement out. If the $1.6 million was included, Chivas USA and New England may have also made money last year.
Finally, the numbers do not include disbursements from expansion fees. Seattle paid $30 million to come into the league. Each team in the league should have received $2 million from it. Merritt Paulson has said that the Portland fee was $40 million. Perhaps that fee and not Seattle’s should be counted on last year’s books.
Regardless, things look much better for MLS clubs if you consider these fees. With them and the SUM number, the potentially profitable clubs expands to include Colorado and Kansas City – 11 of the 15 clubs that played last season.
This is also within the context of an economic downturn, the premise of Dave’s column. If you buy into that premise, the 2009 numbers could be considered near the bottom of the range of outcomes for an otherwise growing league.
Dave’s work is not exhaustive, and the viability of including SUM and expansion fee revenues may not be strong. However, thanks to the Portland release, Dave’s legwork, and the foundation provided by the 2007 Forbes research, blind trust of the owner’s claims may be more naive than we had previously thought.
There are a few other concepts that need to be further explored.
Through the years I have been very skeptical of owners in professional sports claiming they’re losing money, particularly in the context of labor negotiations or bargaining for public stadia. There has always been a disturbing lack of transparency. Owners are not required to open their books – I don’t begrudge them for that. But when asking for public financing or posturing for fan support, there is a need to be transparent , if for no other reason than to establish trust.
Particularly in baseball and football, we’ve hear numerous “this market is not viable unless” arguments made as stadium initiatives approach ballots. It’s all part of the game. You can’t fault owners for doing what’s best for their business. However, we need to keep these motivations and the tricky world of corporate accounting in mind.
Until the owners can be more transparent, their claims of losses deserve a more critical discussion.
In the bigger picture, this profit argument has become a bit of a red herring. Sports franchises are as much about accruing equity as they are turning a profit. Two years ago, the Los Angeles Galaxy were valued by Forbes at $100 million, but a snap shot of a single-season’s balance sheet would make it seem the club is a bad investment. Yet, were AEG to sell the Galaxy at the end of 2008, they would have received a huge windfall. How do you reconcile that profitability except to see single-season balance sheets inadequately describing the viability of franchise ownership?
Like the SUM and expansion fee monies, the accrual of equity has to be mentioned in this conversation.
In the short team, it is in a franchise’s best interest to take losses in order to accrue this equity, or increase the franchise’s value. If you look at a single season’s ledger, you miss this effect. Daniel Snyder, owner of the Washington Redskins, bought the team in 1999 for an estimated $800 million. It is now worth $1.1 billion. FedEx Field had a lot to do with that, just as Home Depot Center has a lot to do with Los Angeles being MLS’s most valuable franchise.
These benefits matter, particularly when an ownership group seeks to borrow against the club to get financing for stadia and other infrastructure improvements.
Even if we cease looking deeper into these losses, there seem to be very few people asking why some teams are making money and some are not. Between two and 11 teams (depending on which numbers you want to look at, above) are close to or exceeding break even. Yet all franchises are playing by the same rules. How have some been able to make their situations work while others have not? It is possible that there are just some bad markets, inviable teams, or maybe some management groups that are not doing enough to compete (be it at the turnstile or in the points column)?
There is another, more esoteric debate: A sports teams even designed to make money? Are they possibly turning into the toys of the Mark Cubans, Paul Allens … Roman Abramovichs of the world? And if so, what does profitability matter if there are people willing to pay the price of ownership? All those owners do is threaten the owners who, for whatever reason, are not capable of similar levels of support.
Were the players asking for substantial increases in wages, we could perhaps overlook all the confusion regarding losses and profitability. But the players and owners had agreed to a 17.4 percent increase in the salary cap. Increased expenditures on wages was not the issue, no matter how much the owners now want to make the players out to be so off-base.
Owners have been intimating that free agency will increase costs. Common sense tells you that’s a difficult argument to make, given a salary cap. It will change how rosters are managed, and it might drive more mid-level talent to the NASL or Europe. But it won’t increase costs.
As part of their public face for this battle, Major League Soccer seems to be confounding increased costs with free agency in an attempt to keep control of the players. They want to be able to have the control to say “Well, Landon, we have this two year option we can exercise, or you can sign this longer contract and make more money. Either way, we have you.”
They want to be able to tell players, “Well, you can play at the first level of soccer in this country, but since you can only can only play for this team, you’ll have to take what their budget allows.”
They don’t want a player saying “but these other teams have money, so why can’t I go there.”
As teams compete with each other for player services, the price for that single player will increase, but overall costs won’t, thanks to the salary cap.
If the owner’s suggestion is true and free agency will send costs out-of-control, why bother with other cost-control measures like a salary cap?
It’s a hole in the owner’s public stance, a public stance that seems short on answers and transparency. Until the owners can reconcile some of these issues, it would be too trusting to believe their public face.
This is not to say the owners are misleading the fans, but just because they say something – be it about profits or the effects of free agency – does not mean its true.

MLS Profits in Light of Ownerships' Claims, Portland's Filing - World Soccer Talk

MLS Profits in Light of Ownerships' Claims, Portland's Filing

<a href="https:\/\/worldsoccertalk.cms.futbolsitesnetwork.com/wp-content/uploads/2014/07/landon-donovan-soccer-world-cup-qualifier-mexico-usa-e1409266801341.jpg"></a><div><figure class="image"><a href="https:\/\/worldsoccertalk.cms.futbolsitesnetwork.com/wp-content/uploads/2014/07/landon-donovan-soccer-world-cup-qualifier-mexico-usa-e1409266801341.jpg"><img loading="lazy" src="https:\/\/ds-images.bolavip.com/news/image?src=https:\/\/images.worldsoccertalk.com/webp/WST_20100301_WST_67733_landon-donovan-soccer-world-cup-qualifier-mexico-usa-600x399.webp&amp;width=600&amp;height=399" alt="Soccer: World Cup Qualifier-Mexico at USA" width="600" height="399" class="alignnone size-large wp-image-108444"></a></figure></div>
Landon Donovan has impressed David Moyes and the Everton FC brass enough to justify a purchase, though the Toffees’ gaffer is resigned to losing the American star when the player’s loan expires this month.
Once the Galaxy star returns stateside, the precarious labor situation could put Donovan’s Liverpool future on hold indefinitely, regardless of whether Everton is willing to meet Major League Soccer’s demands.
When Donovan comes back, he is unlikely to be sold back to Everton before the beginning of the next Premier League season. There is, after all, a reason MLS wanted their second most marketable player back to train before the start of the season. However, with their apparent intent to continue using Donovan as a marketing tool – at least for the start of the 2010 season – the timing of a future move becomes precarious in light of labor uncertainties.
In my opinion, the odds of MLS and the MLSPU making it until August or September without a collective bargaining agreement or work stoppage is pretty low. If the players were willing to let the terms of the old bargaining agreement dictate their employment for an entire season, we would probably have some sort of a deal in place. Also, player leverage because incredibly high if they can use the potential World Cup-boon as well as the months before the start of football to their advantage.
If a work stoppage were to happen over the summer, would Donovan be able to complete a move to Everton (a move that is starting to look move inevitable)? Better still, how would the mechanics of such a sale work?
While a second loan deal seems like something the two sides could come together to allow, the options surrounding a permanent sale are muddied by labor uncertainty.
Landon Donovan is not only under contract to Major League Soccer, but the league holds his registration – a very important detail when it comes to soccer players. While a strike would typically mean a worker could be employed elsewhere while no agreement was in place, that does not mean Donovan’s registration would be released by Major League Soccer.
Without this release from MLS, Everton would not be able to complete a Donovan acquisition, even if the attacker and club wanted to complete a deal. Just because the CBA governing Donovan’s contract loses relevance when a work stoppage is enacted, MLS is not obligated to release the player’s registration.
Whether FIFA would step-in and allow the move: that’s an open question. This idea of “strike” or “lock-out” is pretty new to international soccer. There is not a lot of precedent for such transactions.
And this registration issue is not unique to Landon Donovan. We have no idea whether the governing bodies will respect MLS’s registrations in the face of a player’s attempt to move to another league.
Even if Major League Soccer wanted to complete a deal – perhaps use some of the rumored-to-be £7 million offer (about $10.5 million U.S.) to augment loses from a strike – would the Union acquiesce and allow a sale? Even if it is in the best interest of Donovan, it would not be in the best interest of the remaining players to line the owners’ pockets at a time when the players are walking a picket line.
The easy solution, should there be a work stoppage, would have Donovan go to Everton for a second loan stint. Whether that would be amenable to the Toffees is uncertain. They may have other buying opportunities in the summer, and without the option to buy their preferred player, they may opt for the security of acquiring a second choice permanently rather than wait-out the turmoil in MLS.
And all this assumes Major League Soccer would even consider letting Donovan go. If a work stoppage happens and MLS needs to engage in a new marketing blitz to regain some of the league’s lost market share, it’s difficult to image a better fulcrum to that campaign than Landon Donovan.
It is reasonable to think that Donovan and Everton want to make the deal happen. In quotes, each have been respectful of MLS’s rights, but neither have refrained from exulting their mutual admiration. And Donovan, of course, spent much of last season’s second-half openly discussing a potential move back to Europe, alluding to a confluence of factors (performance, contract, personal life, point in career) that made this the right time.
However, Major League Soccer has its own set of motivations.
Donovan signed a new contract with the league this offseason, but few fail to remember that the league held the option on him for 2010 (and 2011). Given the option of fighting (the perceived) good fight or taking a pay raise and some security, Donovan made the logical choice, signed the deal, but again handed his future over to MLS, who had all the leverage in the negotiations: “You can sign this new offer, or we can keep you here until you’re almost 30 but just not pay you as much.”
But now Donovan is about to come face-to-face with the downside to that money. Whether he wants the deal to happen has become irrelevant. Major League Soccer now needs inducement to let him go, and while $10.5 million is more than a fair price objectively, objectivity is pointless here. Major League Soccer has to look out for itself. As such, they will exert their control over Donovan however suits them best – which is their right.
Though there are few other players who are in Donovan’s situation, the core issues that could inhibit a move to Everton – a move that could cement his career’s legacy – are the same. Major League Soccer has set-up an entity that seeks to keep stability through controlling labor. The players union sees rights granted to domestic athletes and foreign soccer players and wants a step toward equality.
Even when the acclaimed best player of a generation has a chance to embark on a small piece of U.S. soccer history, Major League Soccer will be able to exercise that control.
The need for control (or, conversely, the need for more freedom) is the heart of this struggle, and caught up in it is the future of the generation’s iconic player.
It’s March 1st. &nbsp;There’s no collective bargaining agreement, and Landon Donovan is about to return to Los Angeles with questions surrounding his season and career.
Another angle on the current state of negotiations (and how it affects the upcoming season) is provided by my partner Jeff Kassouf at <a href="http:\/\/www.setpieceanalysts.com/" target="_blank">Set Piece Analysts</a> (though you may know him from <a href="http:\/\/www.equalizersoccer.com/">Equalizer Soccer</a>): &nbsp;<a href="http:\/\/www.setpieceanalysts.com/20100226/mls-cba-negotiations-playing-through-hard-times/" target="_blank">What mindset can the blue-collar players be in</a> as they prepare for the season, given the uncertainties surrounding an expired CBA?
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ALL POSTS TAGGED "collective bargaining"

Leagues: MLS

MLS Profits in Light of Ownerships' Claims, Portland's Filing

Everton

Landon Donovan's Future and the Heart of Labor's Discontent